Republic’s founders include alums from both Uber and AngelList, bringing strong startup credibility and experience to the table. Republic is distinguishing themselves among Title III funding portals with a standout social user interface, including neat features like investment groups, as well as ultra-low minimums (as low as $10 for some investments), which is quite low even among crowdfunding portals.
Since launching in 2016, Republic has continuously added new features and investment offerings, and now stands out as one of the best, especially for non-accredited investors. Republic has also taken visible steps to include minority-founded startups in their offerings, and even to publish a report showing the dearth of funding opportunities for minority founders in the traditional venture capital ecosystem.
You can invest in Republic using a Self-Directed IRA or 401(k) like the ones offered by our friends at Rocket Dollar.
Types of investments Republic offers
Investments on Republic are typically for early-stage (also known as “seed-stage”) investments in startups. In some cases, companies offer additional perks based on higher investment levels (eg product samples, meetings with executives). In 2019, Republic acquired SheWorx, a platform focused on female founders, then in April 2020 they acquired video-game funding platform Fig, and in June 2020 they acquired fractional real estate platform Compound to now offer investments in real estate (right now primarily condos in major metro areas) for as little as $100.
Republic also offers what they call “autopilot” which lets investors automatically direct recurring investment dollars into startups that meet specific (and adjustable) criteria.
What do you get when investing with Republic?
Most startup investments on Republic use a variation of what’s known as a Simple Agreement for Future Equity (SAFE), which has a bit in common with a convertible note, but is not actually a debt instrument. Republic has a standout investor eduction section with details about their “CrowdSAFE” and how it works.
Investors in the real estate offerings receive membership interests (similar to shares) in an LLC. This is a very common structure among real estate investment platforms, though note that instead of a K-1, investors will receive a form 1099-DIV, because the LLC is structured as a REIT.
How does Republic make money?
Republic charges offering companies a 6% commission on the total amount raised, and also retains 2% of the securities themselves (this is also true of the real estate investments). So in the case of the maximum $1M annual raise under Reg CF, Republic collects $50,000 in commission, and receives SAFEs with a nominal value of $20,000.
Potential returns and cashflow
Investments on Republic are high-risk angel investments in startups. There are no interest or dividend payments from a SAFE, and except under very limited circumstances, the investment must be held for at least 12 months, with minimal expectation of any market for the SAFE after that period. Most startup investments lose some or all of their value.
Investments through Republic Real Estate may include dividends representing a prorated share of the rental income from the property, though Republic says most of the gain from their real estate offerings should be expected in the form of appreciation when the property is sold in 3-5 years.
Breadth of offerings on Republic
Republic has ramped up their dealflow considerably over the past several years, and as of this writing there are 52 companies raising on Republic. There are also 3 real estate investment offerings available.
Unlike some other equity crowdfunding platforms that perform minimal screening on offering companies, Republic performs their own rigorous due diligence (they claim less than 5% of companies that apply are listed on the platform). You can read more about their screening process on the Republic website.
Regulatory framework and due diligence expectations
Republic is an SEC registered Title III Funding Portal, which means they are subject to a range of rules and obligations around investor education and due diligence. All companies offering investments on Republic will have been through background checks of key officers and owners, and there are clear links provided to the relevant SEC filings made by the offering company. Prospective investors also have access to online forums to talk with other investors, and an online channel for asking questions of the company raising funds (and viewing answers of prior questions from others).
Republic is also a registered broker-dealer. Broker-dealers are subject to specific due-diligence requirements to ensure an investment is “suitable” for their registered customers, or they can face fines and civil action. (That does not of course provide any guarantees about investment return or performance!)