While many fin-tech entrepreneurs cite a personal experience with the problem they are trying to solve as playing a pivotal role in the founding of their company, Brian Smith’s is more personal than most.
Mr. Smith is a cofounder of equity crowdfunding platform RedCrow, one that focuses on stringent curation of investment opportunities.
RedCrow’s first vertical in health care is not by accident. In 2003 his child was born at 24 weeks and passed away.
“After that I supported the March of Dimes and anyone working with premature births,” Mr. Smith said.
Mr. Smith was a wealth manager with many medical professionals in his client base, some of whom would develop products that had great potential to save lives, if only they had the money. Venture capitalists and investment banks paid little attention to early stage companies so many of these entrepreneurs asked Mr. Smith for help.
In 2010, Mr. Smith took a business development position with MindChild Medical, a company developing non-invasive fetal monitoring technologies. He also had an investor relations role and learned there was a whole universe of high net worth investors looking to invest in early stage companies.
Following the 2012 introduction of the JOBS Act, Mr. Smith began to watch Kickstarter and Indiegogo, envisioning a day when a similar model for equity crowdfunding would become feasible.
He would eventually move to the West Coast, and through friends in the band Live met Jerry Harrison, a former member of the Talking Heads and Modern Lovers, who became a successful entrepreneur. Mr. Harrison cofounded internet music resource Garageband.com, an early crowdsourcing adopter.
“When I started thinking about crowdfunding, I wanted to bring Jerry in as an advisor,” Mr. Smith said.
Mr. Harrison would become much more than that.
While a student at Harvard in the 1970’s, Mr. Harrison joined the Modern Lovers for three years, playing on their debut album. He returned to Harvard to work on a Master of Architecture in software in 1976, before leaving to join the Talking Heads in 1977.
“When I was out of college in the early 1970s, music defined the culture,” Mr. Harrison began. “For many people, Bob Dylan was bigger than JFK.”
People sensed things were changing and they were excited. Music literally recorded that change.
The current startup culture and its disintermediation of commerce has a similar vibe, Mr. Harrison suggested. New companies are bringing new opportunities and democratizing investment platforms will play key roles in allowing these companies to flourish.
RedCrow is initially targeting medical professionals who will be able to invest in businesses they will understand. By the time they get to see those companies, they can be assured those companies have been thoroughly vetted. RedCrow has developed a network of strategic sourcing partners, each with a proven deal selection background. Once approved by RedCrow’s investment committee, the companies can receive investments.
Companies can also be identified by RedCrow’s Discovery process, one which provides important exposure to early stage companies, Mr. Smith said. Companies present on RedCrow and refine their plans based on feedback and questions from the crowd.
Because many early stage companies do not have lengthy paperwork histories to be reviewed by potential investors, vetting has to consider other factors, Mr. Harrison explained.
“At that stage it’s people investing in people. We look at the quality of the leadership teams.
“We also look at what can happen if they get to the next level in the marketplace. Is it a game changer? What is the social impact?”
Institutional investment philosophies are undergoing change, Mr. Harrison and Mr. Smith both explained. In the past some family offices had their “getting to heaven money” which was devoted to worthy causes with less concern about financial return. Now more family offices are concerned about returns so their future generations are cared for.
Yet this is happening at a time when $30 trillion in assets are beginning to be transferred to millennials, a generation more concerned with doing good than their predecessors.
“Eighty-seven percent of millennials are giving to charity, more than any other to date,” Mr. Harrison said. “We feel we’ll resonate with millennials.”