Republic is again making news. In April, the crowdfunding platform brought on Fig and added video game deals to their selection. And just last month they acquired Compound in order to form Republic Real Estate and add crowdfunded real estate deals.
Now they’ve announced that on July 16th they are going to offer the Republic Note to investors. It’s a crypto token that will entitle holders to a portion of the profits that Republic receives whenever any company that has raised via Republic (either privately through Republic Private Capital or publicly through Republic Crowd-Invest) is acquired or goes public. This is a pretty big deal for a few reasons.
Part of what makes the Republic Note so intriguing is how different it is from other offerings. In principle, the idea of contributing a small amount of money to a large pool of investments and receiving returns based on the performance of those investments is nothing new. Various funds operate on this model. But the Republic Note isn’t that. It doesn’t base the distributions on a small number of investments that are chosen according to pre-defined criteria or a manager’s decision. Instead, Notes are tied to every single investment that Republic has. And because so many companies raise through Republic, there are a lot of investments.
So how does that reduce risk for you? Well, the Republic Note directly aligns Republic’s success with investors’ interests. Republic wants to succeed, to be profitable. That means the companies they choose to work with need to have a good chance of success as well. By tying the distributions from their Notes to the performance of those companies, Republic is doubling down on their decisions. They carry the majority of the risk rather than the Note holder.
Another great thing about the Republic Note is that it brings instant diversification to investors. Companies of all kinds raise through Republic, from fintech firms like Carta to advanced medical testing companies like Delee. And the Note gives investors access to pieces from all those various profit streams. The size of those pieces varies based on whether the company raised publicly or privately. With publicly crowdfunded companies, Republic Crowd-Invest earns a 2% commission. If the company successfully exits later on, all of that 2% is paid to Republic Core who then divvies part of it out to Note holders. The numbers are a little different on the private side. “Republic’s private capital platform earns between 1% and 16% carried interest from syndicated investments it helps raise capital for.” A successful exit would result in 25% of those proceeds going to Republic Core and then being partially distributed to investors.
Benefits Beyond Distributions
For dedicated crowdfunders and investors, this last benefit may be one of the most exciting. Republic has linked its Notes with its raising platforms to give investors extra non-monetary boons. Although the platform has not provided any specifics on the number of Notes needed for these rewards, some of the possibilities include being on a priority waitlist when deals exceed their raise limit and access to exclusive events/conversations with notable VCs in Republic’s ecosystem.
It is also gamifying Notes by allowing users to earn Notes through activities on the Republic site. Some of the examples provided in their whitepaper included earning Notes when a user refers a friend to Republic or when they have invested in 5 startups on the site. This additional method of Note acquisition allows users who may miss the initial sale of Republic Notes to still gain the crypto token. It also encourages a certain amount of user dedication, since being active on the platform would yield access to an additional form of wealth generation.
How to get Republic Notes
The development of the Note has been in the works for the past few years, according to the whitepaper. Republic created a phased approach that they have been gradually executing. With the upcoming public event, they are entering Phase 3 of their efforts (check out the whitepaper for info on the previous phases). Here’s what that means for you.
All interested investors can pre-register for the official sale of Notes on July 16th. However, only accredited investors will actually be able to buy Notes on that day. Each Note is valued at $0.12, and Republic will be releasing over 66 million Notes for sale. This event is Phase 3 of their plan.
Phase 4 is when non-accredited investors will be given access to Republic Notes. There is no official date for that event yet. However, all interested non-accredited investors should pre-register for the July 16th event. By pre-registering, they “will have their expressions of interest reserved at the same price as accredited investors in [Phase 3] until such time as we are able to qualify a Regulation A offering of Republic Notes with the SEC.” Again, it is expected that over 66 million Notes will be released for sale when that event occurs.
To register, go the Republic Note page and click on the button that says “Pre-register to invest.”
With the creation and sale of this crypto token, Republic is again disrupting the crowdfunding ecosystem and setting themselves apart. The success of the Note will depend on the successful exits of companies raising through Republic. That could take five or more years for the publicly crowdfunded ones. However, private companies are much more likely to see exits in the next one to two years (though nothing is guaranteed). Right now, it’s not clear if Notes will see their value increase from the current $0.12. But it’s certainly an intriguing offering from Republic and yet another exciting innovation in the startup investing world.