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Interview with Wil Schroter, Fundable

If you're a startup business owner, how do you get to the next step, and build your first product? One way is getting funding from your potential customers. That's the idea behind a new startup, Fundable, headed by serial entrepreneur Wil Schroter, which allows you to use rewards -- product, company schwag, an even equity -- as a tool to get your startup to the next stage. Wil--who has previously been involved in such starutps as Affordit, GotCast, GoBig Network, and several others--sat down with us to talk about his new startup.

What's Fundable?

Wil Schroter: We're a crowd-funding platform for startups. We allow startups to raise money, both based on equity, as well as rewards. The equity component is probably the most obvious, and what you get in exchange for that. The rewards component is based on offering a copy of the product, or something special from the company's founders, such as company swag.

Why did you decide to launch Fundable?

Wil Schroter: We had been in the startup space for a long time, watching lots and lots of companies--my own included--try to get funded. The issue with most companies that I saw, is that they are outside of technology, and they just don't have access to the traditional funding sources like angels and venture capitalists. You and I live in the startup, angel, and venture capital world, but most companies have nothing to do with the traditional angel or venture capital ecosystem. If you start an apparel company, there's no YCombinator, no Sequoia Capital for that. This is for everyone else, the ninety five percent of other startups, who need a more efficient way to raise capital. All of those companies already raise capital, they just don't use the traditional venture capital and angel ecosystem. They're raising money from friends, family, customers, equity from strategic partners, and former colleagues. It's just nowhere as efficient as it is in technology. The idea is to solve the problem which is holding them back from accessing a larger audience. We're allowing people to look at those businesses, ability to make them public, and put it in context of where people want the idea. You saw the first glimmer of this on Kickstarter, with projects, and then at the same time, we saw the JOBS Act come about equity. That's not what Kickstarter is about, but it's the intersection of two trends, a large base of people coming together spurred by rewards, and also a mechanism where the JOBS Act can help people back stuff for equity. There's a powerful paradigm shift happening in the middle of that.

Are you limited by pace of the JOBS Act and how long it will take to put that into practical use?

Wil Schroter: We're a little different in what we're doing, versus other platforms which are getting into equity. We believe that there is more than one way to crowd fund a company. The best way is through customers, the other way is through equity. Our focus is more about getting an idea in front of people who would be interested in it, and then secondarily, providing multiple ways to do crowd-funding. That might be product, offering awards, offering equity, what is the best method for an entrepreneur which supports them best.

The JOBS Act just was approved, and you just launched. How did you manage to time the launch of your company so quickly with the laws?

Wil Schroter: I would love to tell you that we had great timing, but we did not predict that the JOBS Act would happen. We knew we were going to do a combination of rewards and equity when we first started working on this in summer of last year. Initially, our main focus was just around getting the idea out there. We figured initially that people would use reward-based funding, particularly for things like products like iPhone accessories. The JOBS Act did two important things. First, which is the most important and gets least reported on, is lots of people can now publicly say they're raising money, and on what terms. It removed the ban on venture solicitation. That's the most important part of the JOBS Act. You know this, but before, you couldn't just put an ad on socalTECH saying that you're raising money, and you certainly couldn't say what terms, such as you were raising 2 million on a 10 million post money valuation.

So can people list companies yet on your site?

Wil Schroter: Yes, companies can launch and list on there. It's mostly reward based raises, and in the not too distant future, we'll have equity raises as well.

Does this compete with GoBig at all?

Wil Schroter: There's some overlap, certainly. We started building GoBig in 2004, and it was one of the first online fundraising platforms. It's been in that space for a very long time, and there have been 330,000 companies who have joined GoBig in the last eight years. The sweet spot for GoBig is actually traditionally businesses, although there are some web startups and things like that, but there are lots of companies looking for $15,000 to start and scale their business, or might be looking for a million to buy some property. There are not just equity based deals there, but also debt deals. If you look at those, a fair amount of those would be great candidates for crowd-funding, and some aren't. If it's a company looking for $50,000 to buy a Subway franchise, that's something that won't be crowd-fundable any time soon.

What is the ideal company that you think would be crowd-fundable?

Wil Schroter: One would be a company that has a mass market product, and just needs some cash to get out the door. Pebblewatch is a great example of a company, which had a need for customer capital, and not venture capital. For example, we've got a company on Fundable which is developing a clipless pedal that cyclists can use. It creates a flat surface so you can just use your regular street shoes. That's something that is not venture fundable at all, and probably not even a bank or debt deal. They've got nothing to collateralize. However, it's an idea with a prototype, and a great customer capital deal. When they meet their goal of $25,000 on that raise, they'll be able to produce their mold and first round of products to ship to clients. That's all they need. The other style is equity, and that's starting to get interesting. Right now, equity tends to fall to the very high net worth and professional investors. What is about to change, is not only can we go much broader with equity investments, there are lots of people who can invest very small amounts of money, thinking minimum bite size of a thousand dollars. The market will prove otherwise, but we think that as a point of reference, that will be the minimum threshold. In that case, there will be lots of people, who would never be considered equity investors, who will become equity investors in things they love. For example, maybe there's a regular restaurant you go to which wants to open up on the Promenade, and they need $200,000. They can open up 200 units at $1000 apiece, and you'll be able to tap into a couple of hundred people who you'd never have identified as angel investors. I think that's pretty exciting.

Thanks!