Adam Torres and Sean Levine discuss crowdfunding.
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Show Notes:
The crowdfunding landscape is changing. In this episode, Adam Torres and Sean Levine, Managing Director at Entoro Capital, explore crowdfunding and what investors need to know.
About Sean Levine
Investment banker, attorney, securities analyst, entrepreneur and consultant with a focus on private placements, financial publishing, energy markets, fundamental and technical equity and commodity analysis, trading system development and policy intelligence. Substantial experience supporting issuer clients through the Regulation A+ exempt securities offering process. Led a team focused on design, development and optimization of unconventional/innovative trading systems. Also wrote and published newsletters and reports on the oil and gas industry, private and public companies in multiple sectors, economic and geopolitical dynamics. Hold Series 7, 63, 24, 86, and 87 securities licenses. I analyze problems from a variety of perspectives. Strong planning, analytical, writing, collaboration, negotiation, and mediation skills.
About Entoro
Entoro Capital, LLC (Entoro) is a technology-enabled investment bank and advisory group that elevates traditional banking services with the efficiency of modern technology. They leverage their OfferBoard® marketplace technology to connect Investors and Investment opportunities. The versatility and flexibility of the platform streamline the capital formation process and delivers secure and qualified investment opportunities to potential Investors worldwide.
The Entoro team combines finance and technology with global strategic advisory, capital formation expertise and in-depth industry knowledge to support our clients and accredited Investors throughout the investing process. They will help you efficiently capitalize on opportunities and mitigate risks.
Full Unedited Transcript
Hey, I’d like to welcome you to another episode of Mission Matters. My name is Adam Torres, and if you’d like to apply to be a guest in the show, just head on over to missionmatters. com and click on be our guest to apply. All right. So today’s guest is Sean Levine and he’s managing director over at Entoro Capital.
Sean, welcome to the show. Hey, Adam, glad to be here. All right. happy to have you here. And I know that you were sent over to us from the deal flow events, guys Charlie and Philip over there, they do great work and I know you’re going to be participating in the, reg a and crowdfunding conference, which we’ve been covering coming up later on this month.
We’re in June recording this, and This will definitely be released before the event itself. I guess just to get us kicked off here. So , the conference, are you excited? Have you been to one of these before? Yeah. Yeah, am. I went last year was my first one. And it was good.
And this, it sounds like talking to Charlie and those guys like , they expanded this year it was just reg a and they pulled it over to crowdfunding as well, or reg CF. And it sounds like the number of issuers and potential, , folks who want to use this, , it’s jumped nicely year on year.
So I’m, yeah, I’m excited. , what keeps you coming back to these conferences? Like, and always like to bring this up because , I’m a conference goer man. I feel like good things always happen whenever I go to them. I make I make, I do business. I mean, , what keeps you going back to these conferences?
Yeah, no, I, , that’s a good, love them too. And , first, you know, , you got to get out there, right? Like it’s what this is too. You got to make people, we’re kind of a boutique shop where we’re active in the space and have been for several years, , we have a broker dealer arm.
, we help a subject matter expert on all this stuff, the crowdfunding and reggae and everything. And but because , we don’t aggressively market , so we take on the clients. We want to take on really, we’re pretty selective. And so it’s good to get out there and talk about what we do and make sure people know who we are and , how we’re different and add value.
And then also like, , think about, , especially after COVID everybody just kind of buttoned up and got even less social than before. But , even before , you gotta get face to face with people. That’s how you build relationships. And those Into long term partnerships and client relationships and all that stuff.
And there’s only so much you can do remotely via email. And, you know, so that’s, that’s part of it too. Yeah, that, that, to me, I mean, I, I still like the in person and I feel like there’s been a resurgence of events and other things like after COVID and now when you go, I feel like people are always just so approachable.
Some things have changed. It’s like, everybody’s like, Oh, there’s people, they’re in person. Ah, what’s going on? We’re not, we’re not on a Zoom call. So many of us work remotely now, too, and that’s different, so to actually get in front of people, like, before it was just like, you know, it was fine, you eat your drinks, see your friends, but now it’s like, oh, cool, yeah, this is, this is what I needed.
So, how did you like how’d you get involved in the crowds funding space? Like, why, , , what drew you in? Yeah, it was a weird, weird path kind of circuitous, , , I’m a lawyer. I don’t practice, but I went, I have JD and I did practice for a while and I, then I got into markets, financial markets and got , five securities licenses you know, analyst and principal and all that stuff.
Then after a while I ended up rolling over into I was an equity analyst and I became a commodity analyst, oil and gas and all that. And then at some point I met this really interesting guy who was part of another niche industry, financial publishing industry. It’s like stock picking newsletters and things like that.
For retail, like non accredited regular investors subscribe to these things. And , they want to hear about, , undiscovered opportunities and little, , , not just , go buy Apple or whatnot, that there’s anything wrong with Apple, but , like stuff that everybody talks about.
It’s kind of people that have enough money to know that they need to manage it and get some help. But maybe not affluent enough to go have a an investment advisor or something like that. So there’s this donut hole of opportunity. And so , they come to these newsletters and he had, he was the editor in chief of this pretty good sized publishing house, had a bunch of different newsletters.
And we talked, , we ended up teaming up at some point. It was an interesting idea. To come over and do oil gas. My buddy was a coal and steel analyst from Wood Mackenzie. He was ready for a change. So we teamed up and went over there and didn’t end up it, , we had a decent run, but , they weren’t quite able to sell that very well, but it ended up revolving over and then I became head of research at this publishing house to, and testing.
Theses and doing fundamental and technical analysis and all this stuff While I was there like a lot of these people are just very salesy like they know how to sell they know how to relate To the regular investor, , not the affluent folks who are going to read all the disclosures and everything to get people excited about an idea and people have a relationship with people that they’re investing in and things like that and So toward the end of the 2010s they For the first time, , the jobs that acted past and it took a few years for this stuff to mature, this crowded crowd investing stuff.
And it finally kind of reached a critical mass in the late 2010s. And , our editor and she was very forward looking and he saw, Hey, this is a whole new potential market for us. Things for us to talk about that nobody’s talking about. So they launched new, the other newsletters were like micro cap and options trading and stuff like that.
Well, they launched one, one of the first ones focusing on reg A and CF crowdfunding stuff. And the response from , the subscriber base, the regular investment community was not, , they subscribed hand over fist. They were extremely receptive whenever a recommendation would come out. I’d hear secondhand from some of these issuers, like they were thanking us and they are, they loved us because it’d be like, Oh, you know, 15 million came in over a month because you guys recommended it and they, and they weren’t charging.
Like that’s the, it was earned media. They, they made their money from their subscribers who wanted this service and wanted these recommendations. So they didn’t charge it. It was like the perfect storm for these issuers who were fortunate enough to get coverage because , we’ll get into this in a minute, but there’s a lot of marketing costs that go into this often, and they didn’t have to pay all that, and they got a huge win out of it most of the time when they got recommended.
So, I saw all this, and I had recently affiliated with Enturo as, , not really my day job, but just to say, know, I had securities licenses, and if you don’t keep them with a brokerage, at some point they expire, and I was starting to get some deal, some deal flow and things that made sense for me to do that, so I did it.
So i’m like the only guy over in publishing land who’s also licensed with regulated brokerage So I go over to our managing partner jim rao and I said hey I know we aren’t , a lot of little we were nickel bd, A smaller private place and kind of focused broker dealer and I said, you know I understand why everybody all the other nickel everybody sees that this is a new space and there could be opportunity but Those kind of groups, they don’t have a Rolodex of millions of retail investors.
They have affluent, you know, they’re trying to fill private placements. They have affluent institutions, things like that, cutting hundreds of thousands of dollar checks, not 500 or 1, 000 checks. And there’s no human economics there and they don’t have the connection. So said, look, I think I figured out a path.
I found the distribution, how we try to plug into it is one. You know, we got to figure that out, do it the right way and everything, but it’s there and I know where it is. And I kind of got to jump on the industry with knowing that everybody didn’t. It was a new development. So, because I was in it, saw it.
So , I went over, , I, you know, when it leaned into in Toro and we started, we stood up we did all the research we needed to do and. Got stood up first. We did reg a and done that for a while. And, more recently the reg CF, which is a smaller reg a, you can, you can be an issuer and raise up to 75 million selling to retail investors.
Reg CF, you can raise up to 5 million also selling to retail investors, but you, it’s a lot more streamlined and because you’re not. Trying to do as much in terms of the overall market, they, the regulators, it’s faster process, cheaper process. So I had been recommending over the past several years, all , these clients, I’m, I’m a straight shooter and I’m trying to, I’m not just trying to generate onboarding fees.
I want to work on deals that are going to work and that are affordable for clients and make sense. So a lot of times I ended up saying like, you know, really, you guys should do a CF at the stage you’re at so on. So. Rather than just referring those deals over to other shops that we’re doing. I’m like, there’s no reason.
So we started doing them as well. So that’s been a newer offering for us, but that’s, yeah. So that’s how I got into it and how I got where I am. Yeah, it makes total sense, by the way. And I see that to me, like the landscape in general, like, it’s just getting bigger and bigger. And as more of these platforms come online for the marketing side of this which I do want to talk a little bit about that jumping around a bit here.
, like, for the issuers trying to get in front of potential investors, , like, what are you seeing? Yeah this gets into, you know, things have been changing. So , there’s really call it three ways. And it’s really two with an asterisk getting it to me kind of the three pillars of getting folks to engage and get come into these deals and to make them really succeed for the issuers trying to do it.
One. Is if you’re a consumer facing company in some way, if you have a consumer product good or service or even if you’re like a step removed, where maybe , it’s more, you know, B2B, but it’s something that people can see, , the end user or consumer of what you’re doing is still a, a consumer person and to, they’re going to see it and be aware of it so that they can maybe appreciate it if you have something like that, then , those, and especially if you’ve already been doing it for a while, so that you’ve got a community, if you’ve got a following in an audience.
You’re already, kind of ideal for doing a crowd round and not that other companies, other types of companies and other industries can’t do it, but they just have a kind of steeper hill to climb to make it work. With you, if you’re that consumer facing company, you just go file and you, you come up with your, your marketing, which you probably already got marketing material because you’ve been building a community anyway.
And you tweak it to talk more about an offering, but you’ve got a built in audience already of maybe however many hundreds of thousands of people that you go push this content to, and they, and plus they already like you, they already like your product, they’re part of your community anyway, so selling them, they’re already aware of what you do, and they already like it, so they’re about the warmest leaves you could want, and you see some companies that do this really well they’ll go leverage their own existing community.
So that’s the first one that easy. So it’s also, again, it’s not expensive cause you’ve already built it. And , the second is, well, if you don’t have it, you got to get it. And this is very much like you know, if you were starting in business and wanted people to become aware of your product or service.
You’re going to run ads, you’re going to , market, you’re going to create awareness through those various channels that people use to, social and , maybe emails and other things. So you go out and you find shops that can help you with that. And we know this is tricky too, because there are a lot of, , especially as the industry was brand new, but even now, like , some of the ones that are less effective have been weeded out, but there’s still folks, you know, if you don’t know.
If you’re not, a veteran of the space, like we know , who’s been really successful and maybe who’s had some trouble or hasn’t been as successful, , and so we help our clients partner up with the ideal, , groups for them and for their deal. But , that’s part of it.
, you don’t have a community, you’re often going to need some kind of an ad budget. , and people can,, if you think about return on ad spend. And then you, which is, , the typical metric , for an ad campaign. And you try and convert that over the cost of capital, which is the typical metric for raising funds, , , there’s can be some sticker shock there.
Cause people don’t think of, , what you’d be willing to pay to succeed in an ad campaign might be a lot more than what you’d normally be willing to pay to raise money. But but. That’s kind of what it is. And so if you, but if you’ve got a bud, and look, there’s two different buckets there too.
There’s what you need out of pocket at the beginning to start one of these ad campaigns and marketing efforts. And then what you might spend over the entire course of the campaign, because just like a normal ad campaign, you’re going to reserve, we strongly recommend that our clients reserve a portion of the proceeds that they raise to say, use the proceeds.
We’re going to roll a portion of this back into the marketing and keep, you know, spinning the wheel. So that it keeps working. So it’s not, if you just think about it in terms of the out of pocket cost, it can be manageable for at least a lot of companies that already have existing business and revenues or a robust investor base that get what they’re trying to do and are willing to support that launch.
The third, the little asterisk is what I alluded to. As far as the publishers and it’s really been amazing those of us who are insiders on this space and know who’s getting covered by who and things like that Like you could look at two companies that look very similar and one may have raised millions of dollars One may have raised 20 grand and people outside are going why why did that one work and that one got picked up?
They got covered. And so those are those are the three kind of schools. The, the thing that’s changed is the publishers have, there are one or two who are still doing it, but they’ve largely pulled back from doing it. , there was an issue with one of the larger publishers.
There was a guy, like a middle, a mid level guy. Who did some stuff he shouldn’t have done and got in trouble. And it kind of, this fear ripple effect went through the space. And so there are plenty of other like good publications that weren’t doing anything wrong. And they understood that the company itself, then the company itself didn’t get in trouble, just the guy in the middle, but they all kind of like flipped out and so they’ve pulled back.
So there’s one or two options that are there, but it’s that much harder to get that free earned media coverage. So now the good thing for me and how we’re differentiated is I’ve spent Years, you know be soaking in that space and that publication space and there are folks out there who who can be hired That can create that kind of content So you get back into the spend bucket again But it’s a whole different way of reaching people and it can be really effective like what I compare that newsletter kind of action and response to Even though these guys were not a newsletter if you think about Remember the Wall Street Vets thing that happened with GameStop and all that where they beat the shorts?
And that was not a newsletter, but that level of engagement for those communities between those publications and their communities , it’s that aggressive. It’s that, , game changing potentially. So , when you have folks who, yeah, they might be for hire now, but they still use some of the same trappings and the approach and the guys who write the content that’s engaging and exciting and gets people,, enthused about these deals, it’s the same kind of content.
So. Rather than just doing or maybe you start with the social media digital marketing, you know Which is kind of the old reliable, especially if you have something more visually compelling about your company But then maybe you go. All right, we’re gonna now that we’ve got this going Let’s go hit some of these lists because these guys have lists of hundreds of thousands of people That like news they subscribe to newsletters and they want it they want to market To this kind of content to them as well.
They want they call it ir. It’s not really ir But their their industry vernacular it’s the ir side of their business and they want to shop early stage deals to their lists as well and they convert pretty well So we we’ve got that whole universe Ready to go too So it’s like multiple pronged attack lots of different ways to reach people and get that community and get those funds It’s amazing Well sean this has been a lot of fun and i’ll tell everybody else a couple different ways to keep on learning more from me From Sean, he’s number one, , that deal flow event.
So , the reg a and crowdfunding conference definitely can attend that. , and you’re, I know you’re going to be speaking on a panel there, as we mentioned, and if somebody , wants to keep the conversation up and connect with you and your team over at, and Toro capital how do they do that?
Yeah. , best way is probably email you can drop me a line at, at S Levine at intoro. com. It’s S L E V I N E. Toro is E. N. T. O. R. O. dot com. And you can also find me on LinkedIn. It’s S E. A. N. Levine, L. E. V. I. N. E. And if you see in Toro in connection with the name, that’s me. Amazing. And for everybody listening, just so you know, we’ll put all that information in the show notes so that you can just head right on over and connect with Sean and speaking of the audience, if this is your first time with mission matters and you haven’t done it yet, hit that subscribe button, this is a daily show each and every day, we’re bringing you new guests.
New content new ideas and new things that are going to help you in your investing journey. So if that sounds interesting to you again, hit that subscribe button, because we sure do appreciate it. And Sean, again, thank you so much for coming on the show. Been a real pleasure. Thanks for having me, Adam.