ValueSetters recently launched a new series on our YouTube channel where we interview angel investors, entrepreneurs, private market experts, and more about the startup ecosystem. Last week, in our first Ask the CEO video, our CMO Kathy Kraysler was joined by Chris Lustrino, CEO and founder of KingsCrowd. Kathy spoke to Chris about what it takes to be a successful business leader, how to determine whether raising capital online is the best fit for your business, and what he wishes he had known about being an entrepreneur prior to becoming one. You can watch the full interview or read an edited version below.
WATCH NOW: Ask the CEO | KingsCrowd CEO Chris Lustrino
KingsCrowd, a ValueSetters portfolio company, is unique: it’s the first and only ratings and analytics platform for online private market opportunities. KingsCrowd analyzes and aggregates data from online platforms for private market offerings, such as ValueSetters partner Netcapital.
Before founding KingsCrowd, Chris Lustrino served as a Consultant at L.E.K. Consulting, where he focused on private equity due diligence. He also previously ran finance ops at Freebird, a travel tech startup. Chris is also an experienced entrepreneur, as he founded Simple.Innovative.Change, a Fintech publication focused on alternative investments and lending, which was eventually acquired.
Chris Lustrino, KingsCrowd Founder and CEO
From my own perspective and experience, there are two major ways that you can raise capital when you’re starting a company. That’s either through venture capital or these new online private markets.
When you think about the venture capital path, typically what you’re talking about is hoping to get one or two yeses that could lead to large sums of money. In the early days that could be $250,000 - $500,000 and in slightly later stages it could be in the millions of dollars. Now, what you give up for that is a large chunk of your company, typically not really decided by you ... [The venture firm also typically takes] a board seat, which means that while you still have control of the company ... that is another voice that you’re going to have to deal with and think about how to manage. The great thing about it is you can get a quick effective sum of money into the door.
If you go over to the online private markets, what are you getting instead? Well, you can still go and pursue that same level of investment in your company but you can decide the terms. You can decide exactly how much you want to raise for [the] certain scenario that you’re [in]. Whatever stage you’re at, you can decide how much money you need to get to the next level. But in exchange for not giving up a board seat, in exchange for owning more of the company, you do give up transparency. You have to put out your financials, and you have to file forms that go to the SEC. You’re putting a lot more out there and you’re being a bit more vulnerable as an organization.
Basically, when you’re considering your avenues, it’s — do you want more control, in exchange for transparency, or do you want that quicker dollar sum in exchange for giving up control of the organization and not having to give up that transparency? I think those are kind of the major differences when thinking about what options you have. Personally, I decided to go the online private market route, and fortunately have raised over $1.2 million dollars from 2,100 individual investors over the past 2 years as an organization.
Interested in learning more about online private market opportunities and if it may be right for your company? Download our Ebook Complete Guide to Equity Crowdfunding
So this is something that I factually knew, but I didn’t fully, intrinsically understand. And that’s the idea that it’s going to be ten times harder and take ten times longer than you think to get where you want to be. While every entrepreneur that you talk to will tell you that, you can never actually fully understand it until you’re going through the process. And I think that kind of sums up all of the challenges and things that you’ll face along the way as an entrepreneur ...You never have enough capital, you never have enough resources, you’re always up against the wall, trying to convince someone that your idea matters, what you’re working on is the right thing … it is incredibly, incredibly challenging.
To live that, and go through the experience of getting tons of no's from investors, getting no's from partners, getting no's from potential customers — all of these things you’re always having to deal with as a founder, while also managing expectations and recognizing that you’re having success … that can be a really hard thing to do. It’s not an easy journey, it’s not one for those who don’t have a strong stomach and it’s going to be really, really hard, but it’s also one of the most rewarding things I’ve ever done in my life.
We look at it two ways, at KingsCrowd. From a quantified measure basis, we think it’s really important that a founder has relevant industry experience. The other [thing] that is sometimes an indicator of success is having relevant founding experience ... [A founder with previous experience] is not just going to run away when the going gets tough, because they’ve been through it before ... And they also know the right people. Once you start working with amazing people ... with your CTO, or your CMO, or whoever it is, if you have a great experience working together, being able to bring that collaborative group back together that’s already worked together is so incredibly powerful and valuable ... The other quantifiable measure we look at is do you have any exits in your past? [That’s] an indicator that you’ve been there, you’ve done that, and you’ve been able to succeed before.
Those are the quantified measures, but then there’s the qualitative factors. Those things that make the founder exceptional. I often say that starting a company is a lot like rowing a boat… you get out in the sea and you’re rowing that boat and there’s no one rowing it for you, so as soon as you stop the waves are going to take you back to shore and you’re going to be washed ashore. It’s really, really hard to start a company and those who make it are the ones who just keep grinding and keep fighting, who keep making things happen, no matter how hard it gets. You can tell when someone is so immensely passionate, is putting their whole being into that company — that’s when you get really excited.
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Paige is the Content Marketing Associate at Netcapital Advisors. She is a graduate of Wellesley College, with a double major in American Studies and East Asian Languages and Cultures. Outside of her work at ValueSetters, Paige pursues creative writing and keeps up with the latest cultural news.