Jessica Jackley is the CEO of ProFounder, an online crowdfunding (or community-funding as she likes to call it) platform for entrepreneurs to raise their investment capital from their friends, family and community. You may know Jessica as the co-founder of Kiva.org, the world-renowned microlending website that lets you and I make a small, interest-free loan to entrepreneurs all over the world! Her new company ProFounder, who she founded with partner Dana Mauriello, works with U.S.-based entrepreneurs like Bronson Chang, co-founder of Uncle Clay’s House of Pure Aloha, a Hawaiian treat shop funded by the community for the community with a vision of one world ohana (family).
Jessica, even though you have probably done this a million times, what is your elevator pitch for ProFounder?
Well, I’m really glad you asked, Bronson! ProFounder is a platform for entrepreneurs in the U.S. who want to raise start-up capital or growth capital to allow their friends, families, and communities to invest in their businesses. We make it easy for everyday entrepreneurs and everyday investors to work together to champion businesses that they love.
Just to give our readers an idea of how ProFounder works, can you briefly walk us through the process of raising money on the platform?
Absolutely! Well, for example – you [Bronson] and your company, Uncle Clay’s House of Pure Aloha, raised an amazing $54,000 from 19 investors as start-up money. It worked for those investors the way it works for all of our entrepreneurs. Basically, entrepreneurs come to the platform and create a profile and an online pitch, including basic business information, their story of how the business began, where they want to go with it, what their vision is – all that good qualitative stuff. Entrepreneurs also provide projected financials and information about what the raise will be like: how much they’d like to raise and what the terms will be for investors. For example, if it’s based on revenue share, they decide the amount of revenue they’d like to share over the coming years. Or if it’s equity, they choose how much of their company they’re making available in terms of shares of stock and the price of that stock.
After creating this profile and online pitch, entrepreneurs publish their raise. Once they’ve published, they invite investors: their friends, families, community members. These may include customers, colleagues – anyone with whom they have a significant, pre-existing relationship. Those investors can then transact online and pledge their money to the entrepreneurs. ProFounder also helps after the money is raised by giving entrepreneurs tools and reminders to follow through on their commitments to investors; that means everything from reminding people to sign their term sheets online to offering tools and resources to make future payouts very easy. So, for example, if you’ve agreed to a 3% revenue share over five years with your investors, we’ll remind you when the quarter is up to look at your quarterly revenues and pay your investors: we provide a calculator that determines how much 3% is and how much pro rata that means for each investor depending on the amount.
Another critical piece is compliance. ProFounder is built around Rule 504 of Regulation D of the U.S. Securities Act of 1933 of the Securities and Exchange Commission (SEC), a regulation that allows for the maximum number of unaccredited and unsophisticated investors to get involved.
I know you and ProFounder really like candy shops (especially Hawaiian ones!). What other kinds of businesses can and do use ProFounder?
One example is Prosperity Candle, a social enterprise that raised $10,000 from 32 investors – they’re amazing! They empower women in Haiti, Iraq, Rwanda, and elsewhere and allow these women to start their own businesses, making candles from their homes. Another one of our superstars is Bucketfee, a company selling artist-decorated canvas shoes: they raised their first round of $60,000 from 37 investors. We’ve also had a motorcycle company and a textile design company, among others, so it really runs the gamut.
First Kiva, now ProFounder. What lessons have you learned from Kiva and applied into building ProFounder?
That’s a really great question! In short, I feel like the lessons I learned with Kiva were around the power of telling stories and of telling, in particular, the story of an entrepreneurial journey. When you do that, people are compelled to get involved and be a part of that story, to help write the next chapter together. Whether or not they are entrepreneurial themselves or just want to be a part of something exciting, I think that is a really powerful way to engage people.
A second lesson is about how it’s often not just about the money. It may seem obvious now, but at the time when we were starting Kiva over five years ago, we got a lot of pushback about offering something that didn’t have an obvious financial benefit; it wasn’t even a donation that you could write off on your taxes, and it wasn’t an interest-bearing loan – it was just 0%. But we thought that people would simply enjoy the experience of being able to connect with an entrepreneur and follow in his journey. With ProFounder, of course, there is a financial incentive as well, so we get the best of both worlds, a social and financial return to engage people in a way that really does make sense and is the right fit financially for exciting, growing small businesses in the U.S.
The other lessons fall into a third category, which are lessons that have really just convinced me that it’s possible to create positive change in the world, and that I, too, can be an entrepreneur. It took me going all the way around the world and meeting goat herders and seamstresses and farmers and all sorts of people in very different circumstances than my own to realize, “Oh, I can be like that.” I consider them my heroes and my role models in this journey.
Why do you think ProFounder is particularly relevant today, especially in the currently challenging economic climate?
On the one hand, I think this has been needed for a very long time, and on the other hand I think that right now there is absolutely more of a need than ever. Most recently, we are potentially looking at a government shutdown; if that happens, there are some serious consequences for access to SBA loans, for example, to the – oh I don’t know – 99.9% of all companies in the country that are small businesses! That is one of many examples, including access to credit being more and more difficult to get, as well as the obstacles to getting angel funding and VC (venture capitalist) funding — 70% of VC funding goes to 3 states: California, Massachessetts and New York. Across the country, another option is needed. The vast majority of transactions that are happening right now in the U.S. to fund small businesses are actually coming from friends and families investing and lending. What we can do with ProFounder is to put these transactions online and go so much farther and wider with it. We often hear from other entrepreneurs or financial institutions, “Oh, we looked into that, but it was just too difficult… intimidating… complicated…” So I’m really proud of our team for taking a year to figure out all of that complicated stuff and offer a very straightforward and rewarding option for people.
From my experience with Uncle Clay, I know how valuable and rewarding it is to have the right business partner. Can you tell me a little bit about your partner and co-founder, Dana?
As an entrepreneur, one of the most important things you can do is find the right partner. To have a partner, both in business and in life, who can say, “I believe in you more than you believe in yourself right now; I know that we can do this great thing together.” With Dana, not only is she like that, more than almost anybody I’ve ever met (I think she rivals only my dad in this category!), she also, by the way, can get things done like nobody’s business, which is kind of a nice bonus.
What is ProFounder’s vision?
ProFounder believes that all people are empowered to pursue their dreams through entrepreneurship. We seek to ensure all entrepreneurs have access to the resources they need to succeed through the engagement of robust, supportive communities.
How can Daily BR!NK readers help contribute to ProFounder?
There are many ways! First, everyone should go to the site and sign up! There you can: 1) Raise money for your business. 2) If you’re not a business owner right now, tell a business you love about ProFounder or recommend a business that could use ProFounder. You can actually nominate a business you love on our website. 3) Become a Group Advisor. These are people who step up to lead movements in their communities around entrepreneurship. They come in all shapes and sizes: they are students at universities that really want to galvanize their campus; they are people who are part of official entrepreneurial incubators or organizations that want to serve as a resource for local entrepreneurs; they are people who just believe in the power of small business and entrepreneurship. ProFounder provides our Group Advisors with a number of resources like education, special invitations for community members to join ProFounder, event support, and that sort of thing. These are all great ways to get involved and champion entrepreneurship in your community!