In this episode of the AlchemistX Innovators Inside, Ian Bergman, Layne Fawns and Sherwood “Woody” Neiss, author of Investomers,  break down how the JOBS Act and investment crowdfunding changed the way founders raise money — and how customers, communities, and experts are becoming the new investors powering early-stage innovation.

Here are the five key takeaways from their conversation:

1. Customers Can Now Become Investors

The biggest shift: your users can fund your company.
The JOBS Act opened the door for everyday people — not just accredited investors — to invest in startups they believe in.

Why it matters:

• Your best customers can also be your biggest advocates
• Stronger alignment between product, feedback, and capital
• Early believers get to share in your upside
  
  

2. Crowdfunding Is No Longer “Last Resort” Capital

The stigma is gone.
Today, most companies raising online are post-revenue, many earning over $1M annually.

Why it matters:

• Credible companies are using crowdfunding to scale
• Founders keep more control
• It’s a real alternative to traditional VC — not a fallback

3. Democratized Funding Is Helping More Founders Succeed

Crowdfunding is driving capital to founders who traditionally struggle to get VC attention.
Key stat: ~50% of companies raising online are led by women or minority founders.

Why it matters:

• More founders get funded
• Capital flows into 2,300+ cities, not just Silicon Valley
• Local communities benefit as that money gets spent locally
  
  

4.  Experts Are Investing in the Tools They Use

A major trend: doctors, scientists, and operators investing directly in health tech and biotech companies they understand.

Why it matters:

• Investors are also product users
• They bring credibility, feedback, and adoption
• Companies in niche markets can build strong, aligned investor bases

5. Data, AI, and Lean Discipline Are Shaping Smarter Funding

Neiss and his team collect millions of data points from crowdfunding platforms to identify signals of success.
What this means for founders:

• Realistic valuations and transparency matter
• Clear communication = investor confidence
• Lean, focused raises outperform “big for the sake of big”

Startups are returning to minimum viable capital and accountable growth, which ultimately leads to healthier companies.

If you’re a founder, operator, or investor, this episode is a clear look at how community, transparency, and data are reshaping the future of startup funding.

Have a question for a future guest? Email us at innovators@alchemistaccelerator.com to get in touch! 

Timestamps

👋 00:00 – Meet Sherwood “Woody” Neiss and the story behind the JOBS Act

🧾 06:02 – Writing a new exemption: from Reg D to equity crowdfunding

🏦 11:09 – Why crowdfunding is just a new way to do an old thing

🚀 15:31 – Making the bull case for investment crowdfunding (beyond “last resort” money)

👩🏽‍💼 18:56 – Democratizing capital: women and minority founders at 50% of raises

🧬 20:36 – Why health tech, life sciences, and biotech are suddenly #1 in crowdfunding

📖 22:45 – Inside INVESTOMERS: a manifesto on early-stage finance and Web3/AI

🌍 24:09 – Building crowdfunding ecosystems in 43 countries with the World Bank

🤖 27:17 – AI everywhere: from animated Sasquatch to drones in agriculture

📈 33:17 – D3VC and Capital Pulse: using data and ML to find the best deals

⚠️ 36:42 – The two biggest reasons crowdfunding raises fail

📉 38:13 – Great tech, no customers: hard lessons from a failed portfolio company

🔁 40:09 – Tighter loops: customer feedback, investment, and product iteration

Full Transcript 

00:00:00:02 - 00:00:25:24
Layne Fawns
Do you ever wish that your best customers could also be your investors, maybe even your loudest advocates? Well, today on innovators Inside, we're sitting down with Woody Neese. Entrepreneur, venture capitalist and one of the architects of the Jobs act that unlocked investment crowdfunding in the U.S.. This conversation is a playbook for builders in a fast changing world. We're going to look at the rise of the customer investor.

00:00:26:02 - 00:00:51:08
Layne Fawns
The operators, scientists and doctors, to name a few that are investing in the solutions. They'll actually be using. If you're a founder, operator, or investor looking for signal in the noise and maybe a faster path from community to capital, then this episode is one that you don't want to miss. Welcome to innovators inside.

00:00:51:10 - 00:01:19:19
Ian Bergman
I am just so pleased to welcome Woody, niece to Innovators inside. Woody. We've been chatting for a minute, but and it's been a lot of fun, but I think we should introduce you to the audience. For folks who may not be familiar with you as a household name. You are a venture capitalist in entrepreneur. One of the architects of the Jobs act, which was landmark legislation that legalized investment crowdfunding in the United States.

00:01:19:22 - 00:01:31:01
Ian Bergman
And you are an author of a new book, investors. And I want to talk to you about all of that. So, welcome to innovators Inside. Thanks for joining me. And, Lane.

00:01:31:04 - 00:01:44:11
Sherwood Neiss
It is very, very exciting to be here. I love the energy in this room. I can already tell that we are going to get to the things that really, the three of us in this entire audience care about. So let's do it.

00:01:44:13 - 00:02:09:18
Ian Bergman
Well, let's do it. And let's let's talk. We've been chatting, a little bit before the pod, a little bit on the pod, about a lot of changes going on in the in the world. We've been talking about this idea that you can just do it right. And look, I, I, I'm a little fearful, but I'm also kind of loving this fast changing world where you can put anything out there where you don't know what's going to show up on TikTok.

00:02:09:18 - 00:02:33:28
Ian Bergman
And I might be dating this episode, to be perfectly honest, because these things change quickly. But my social feed right now is filled with, animated bigfoots getting themselves into funny situations which would not have been possible a year ago. Because you have small creators using advanced AI tools to create photorealistic little montages and then throwing them out into the ether.

00:02:34:00 - 00:02:39:14
Ian Bergman
And, like, that kind of sums up the world we're in right now. There's so much that would not have been possible a year ago.

00:02:39:17 - 00:02:45:25
Sherwood Neiss
Oh, yeah. I mean, there's too many shenanigans happening on my field. I don't know. I'm like.

00:02:45:27 - 00:02:56:01
Ian Bergman
Can we create something else that's, like, more interesting than right? Well, and actually, that's a good point. And it's all hyper personalized. Lane, what's showing up on your socials?

00:02:56:03 - 00:03:01:22
Layne Fawns
What are those little dolls called the the booboos or the booboo?

00:03:01:24 - 00:03:02:25
Sherwood Neiss
Yeah. Yeah.

00:03:02:26 - 00:03:22:10
Layne Fawns
Yeah. I have people dressing them in little outfits. And it's funny because you see trends like this all the time happening, like with kids, but this is an adult only trend, and I'm kind of fascinated by it from like, like it's taken off like Beanie Babies for adults. So that's.

00:03:22:13 - 00:03:31:18
Sherwood Neiss
Yeah, I just got back from Japan. They were, you know, the boobies from Japan. So we were all about it. My daughter wanted one and we tried to get it but didn't.

00:03:31:20 - 00:03:57:04
Ian Bergman
It's incredible. I haven't even heard of this. We're all living in our own hyper personalized world. So, what do you want to talk a bit about? How we got here? A lot has changed in the last, let's call it decade, the last few years in the enabling ecosystem for entrepreneurship, for innovation. Can you just talk a little bit about crowdfunding and how that played a role?

00:03:57:05 - 00:04:18:07
Ian Bergman
Right. Like we all, you know, sure. We all think about like, I can go crowdfund some artists to go create a piece or I can get, you know, I can do crowdfunded little trinket that's going to show up, but it's become a lot more fundamental. So can you just describe what it is and why you think it has been important to help us achieve the world we're in today?

00:04:18:09 - 00:04:37:03
Sherwood Neiss
Yeah, sure. Let me tell you a story about how it all came to be, because that story relates to why we're living the world that we live today. I had started I started my career on Wall Street, went to Silicon Valley, worked for a company there, learned all about, you know, VC funded success for companies. Got a second and I got to remember this stuff.

00:04:37:06 - 00:04:58:00
Sherwood Neiss
Then started my own health care technology company called sleep r x. We flavored medicines for children. So the more compliant and every time a child took their medicine where that child wasn't taking it, before a mother would call and be like, you have no idea what struggle it was. Get my kid, take the medicine. You know he or she's taking it.

00:04:58:00 - 00:05:16:26
Sherwood Neiss
Now, how do I invest in your company? And I'd be like, oh, I would love to take your money. But these laws that were written in 1933 preclude you from investing in my startup. Unless you're an accredited aka rich investor, which most of them were just, you know, normal mothers, you know, just looking to get in on a great idea.

00:05:16:28 - 00:05:38:07
Sherwood Neiss
And I kept on saying to our lawyers, I was like, these laws are ridiculous. Like, if I could get 1000 of these mothers to become brand advocates for me, as investors that have a vested interest in this company, I'm going to become a public company in a year. And they're like, it's not happening way, you know, this these laws are there to protect them.

00:05:38:10 - 00:06:02:07
Sherwood Neiss
And I was like, this is stupid. So after we sold flavor X because of Sarbanes-Oxley, which is a totally different story, but we decided not to go public. We were able to grow it through venture money that, came into us because we were hypergrowth and cash flow positive. I, said to two of my friends in Silicon Valley, I said, guys, it's 2008.

00:06:02:10 - 00:06:20:03
Sherwood Neiss
We've had this great recession. Washington is looking for jobs, looking for solutions, looking the how do we stimulate our economy? I was just like, we've all and these are two friends of mine that were running businesses that were venture funded as well. And I was like, we know how to build successful businesses. We know how to hire people.

00:06:20:09 - 00:06:40:01
Sherwood Neiss
We know how to scale them. And we've all had exits. And so we know about wealth creation, too, not only for the investors, but really for ourselves. We need, you know, now is the time to change this. So we sat down with a blank sheet of paper. We, you know, when you raise capital, you do it under these exemptions from public, you know, offerings.

00:06:40:04 - 00:06:59:28
Sherwood Neiss
And so a typical one's a regulation D. And so we like well what does it mean. Right. The exemption. And you know we said let's see if we can build a new exemption that takes the best of these exemptions that currently exist with this new phenomenon that's taking place, Kiva was allowing people to invest in entrepreneurs in developing countries at the time in the United States.

00:07:00:00 - 00:07:20:24
Sherwood Neiss
And I was just like, and we're, you know, putting money into people with like, great ideas and Kickstarter and Indiegogo, but we don't have equity interest in it. You're just giving it to them or you're pre-ordering a ticket. I was like, if we can merge the principles of all these together, we could come up with this new way of funding startups where everyone, retail and accredited investors have a vested interest.

00:07:20:25 - 00:07:43:09
Sherwood Neiss
And so we wrote that framework for it and went to our friends on Sandhill Road and in California, the venture, you know, that's where venture capital is. And we said, okay, guys, this is our idea for allowing retail investors to become mini VCs. At what point will we be stepping on your toes? And I've got thousands of these little stories about how this legislation came to be, and all the different parts of it.

00:07:43:12 - 00:08:02:03
Sherwood Neiss
And we're like, you know, what happens if we go out with $10 million cap, like you could raise a year? And the VCs that we knew were like, no, that's our territory. And like 5 million. And they're like, no, it's due to high. We're like, what about 1 million? They're like, okay, you can do 1 million. And so we decided, okay, you can go out and raise $1 million a year.

00:08:02:09 - 00:08:24:19
Sherwood Neiss
It's now five, by the way. Raise from your friends and family. And we're like, let's keep it a very simple eight bullet point framework. And that's why we went to Washington, DC with that's what we went to Capitol Hill with. Patrick McHenry, who's a Republican from North Carolina, was our first and main champion. And he took that and crafted it into an eight page bill.

00:08:24:21 - 00:08:32:18
Sherwood Neiss
And we did all the lobbying for it in the House. And the Senate turned out to be 485 pages. When the SEC was done with the rulemaking.

00:08:32:21 - 00:08:36:00
Ian Bergman
That's unreal. Eight bullets to 485 pages.

00:08:36:07 - 00:08:55:02
Sherwood Neiss
Yeah. But it really enabled and legalized now for the first time in history, retail Americans to allow them to invest in any startup or small business that they like, know, have a relationship with. It's in their local community, or just be found on one of these investment crowdfunding platforms.

00:08:55:05 - 00:09:17:16
Ian Bergman
Yeah. Well, and and I don't want to relitigate all of the old conversations that I'm sure you went through about, kind of like nanny state versus freedom and, and all of this other stuff. But I do want to draw a thread to the world we're in now, a world where, at least from where I'm sitting and kind of, you know, the Silicon Valley view of the world, they're like, there is resurgent American dynamism.

00:09:17:16 - 00:09:36:23
Ian Bergman
There's a resurgent optimism around the possibility of technology. And there is a world of unprecedented access to the tools and resources it takes to build a company. Can you help me, like draw a thread like, could, could we have gotten to this world without the notion of crowdfunding?

00:09:36:26 - 00:10:07:03
Sherwood Neiss
I don't know, you know, we and it'll be very interesting for us to look at this in ten years and have a conversation. But I think the technology has enabled everything. It's enabled, social media. It's enabled, capital to move very quickly. It's it's helped us, move policy in Washington, because we now can actually attach results to what's happening.

00:10:07:06 - 00:10:29:27
Sherwood Neiss
So I think if we did not have these advances that took place, you wouldn't have this evolution that we're having in the private capital markets. Because keep in mind, if there's one thing that we know about people, and power is those that have power want to hold on to it and, venture. The venture world loves their power.

00:10:30:00 - 00:10:42:01
Sherwood Neiss
They love to be able to tell people not like we are the ones, and we are the smartest ones. We will put our money behind the best companies. And the rest of you, you know, good luck. The dynamics.

00:10:42:07 - 00:10:44:15
Ian Bergman
But how often are we right when we say that?

00:10:44:17 - 00:10:46:05
Sherwood Neiss
No, I mean.

00:10:46:07 - 00:10:47:20
Ian Bergman
That's a different conversation.

00:10:47:22 - 00:11:01:27
Sherwood Neiss
Some of them have great track records. Other ones, you know, it's. But it's really, you know, at the end of the day, it's it's not only about the investment. If they have a lot of capital, they can do great things. But we've also seen companies that have had a lot of capital just fail. It's really a team.

00:11:01:29 - 00:11:09:13
Sherwood Neiss
It's the people that have to execute on that so that that never changes to. But to your point, you know, none of this would have been there if it weren't for technology.

00:11:09:16 - 00:11:28:19
Ian Bergman
Yeah. Well, and I think I think it is, you know, it is a world where individuals have access to more resource and and the less it more frictionless resource. And we've had no has and that is like really exciting. Like I think back to what would I have done when I was founding my first company, coming right out of undergrad?

00:11:28:19 - 00:11:48:09
Ian Bergman
You if I'd had the resources today and like, things probably would have gone very, very differently. Right? We built a successful company. It became my co-founders life's work. But boy was it a grind, right? And we didn't even understand capitalization that at this point we were like calling up friends and family and being like, hey, can we have 50 bucks?

00:11:48:09 - 00:11:58:15
Ian Bergman
Can we give a thousand bucks or whatever without actually having any concept of how to take that money? And, and then like having this regulation in place just makes life easier for so many.

00:11:58:17 - 00:12:19:23
Sherwood Neiss
It makes it easier. But the fact that and I tell people all the time, investment crowdfunding is just an and a new way to do an old thing. Okay. This whole friends and family financing, it's been happening for centuries. You know, that's how community banks were in the 1800s in the United States. You know, the Statue of Liberty was crowdfunded.

00:12:19:25 - 00:12:39:16
Sherwood Neiss
It's been there forever. We just now have the technology that sort of allows us to get to the people that have the money. Let's get our message to them. Let's collect the capital allows us to hold that money in an escrow account until you hit a goal like this. Great safeguards in this whole thing that couldn't exist before.

00:12:39:18 - 00:13:05:01
Sherwood Neiss
That now we have. So that if you don't hit your funding target, it goes back to the investors. Like how amazing that you know so and then, you know, the ability to share information like once you're when you're raising capital, you can share all the information about your offering, your disclosures. You know, you debate people on these offering pages in the comment section about, you know, why your company's so great, why your valuation is where it is, and defend it.

00:13:05:03 - 00:13:25:14
Sherwood Neiss
Or you fail at defending it and most likely fail at your offering. Yeah. But this transparency never existed before it. And, you know, that's a fundamental shift that's happening, but it's allowed us to reach more people. It's allowed us to be a lot more accountable, in this sort of framework. And we did it in a law.

00:13:25:17 - 00:13:44:06
Sherwood Neiss
So this is a regulated process. So it's not like, you know, anyone can go out there and say, hey, I'm just raising money for my company. Just send me a check. Now, you have to do this on investment platforms that are registered with the SEC, overseen by Finra. You have to file forms with the SEC. So this is not an easy task.

00:13:44:09 - 00:14:11:09
Sherwood Neiss
You know, there's a lot of work that goes into it. Quite frankly. I personally believe if you're going to be raising money from investors, you should be held to a higher standard and you have to have arguments. You needed to be prepare them. You know, people should look at your financials other than you, and, you know, that allows them to, you know, pull this all the best of everything together so that people are comfortable and confident when they give you their money because they're like, I've, I've had access to this information.

00:14:11:12 - 00:14:27:01
Sherwood Neiss
I've made an informed decision. Here's my money. And your job now is both not only to achieve these goals that you set out to do, but tell me how, do you tell me how you're doing? You know, you need to report back to me on an annual basis and say, this is what we told you we're going to do.

00:14:27:01 - 00:14:44:12
Sherwood Neiss
This is what we did. This is what where we failed. This is what we'll try and do better. But nobody cares anymore. Like, the whole point is, is we don't need to hide things, you know, we need to be like, listen, I am struggling in this area. Maybe, you know, just in time. Inventory. And I don't.

00:14:44:17 - 00:14:48:24
Sherwood Neiss
Can you come in and help me with that? You know, that's the world equity market.

00:14:48:27 - 00:15:17:06
Ian Bergman
And let's talk about that a bit more, because, look, I like I'll be honest, I think there's a, there's still a bit of a hangover meme around crowdfunding that is often, you know, it goes something like it's the alternative that you turn to if you can't raise the right institutional capital. Right. But but, you know, earlier we were talking about the notion that your investors can be your best advocates, your investors have a vested interest in your success and bring their own expertise.

00:15:17:08 - 00:15:31:09
Ian Bergman
So can you help me make the bull case for founders going after crowdfunding? Make the pitch and make the case for why it's often a competitive or a better path. And why is that changing? Yeah.

00:15:31:11 - 00:15:46:04
Sherwood Neiss
Such a great question. So, you know, when this law first came out, even though we had friends on Sandhill Road that were like, this is what you're doing is very fascinating. We don't think it'll be successful, by the way, if you give it a shot.

00:15:46:06 - 00:15:47:15
Ian Bergman
I mean, that's the thing.

00:15:47:18 - 00:16:01:09
Sherwood Neiss
Then it was that power thing that I was telling you about, like, well, we control the powers of the kingdom, so we don't necessarily want to give it up. And so a lot of people were using that argument that adverse selection, the worst company, is going to go online and raise money. And I was just like, okay, fine.

00:16:01:09 - 00:16:23:13
Sherwood Neiss
But you know what? People that live here in Denver, where I live don't have access to Silicon Valley, so why should you know? We have to fly to Silicon Valley to get money. That's just not fair. And we don't live in this world where we have to do that anymore. And to their point, when this industry launched, 65% of the companies that were coming online to raise money were pre-revenue startups.

00:16:23:13 - 00:16:44:21
Sherwood Neiss
And so a startup is a company less than three years old. Pre-Revenue it's just pretty revenue. If we go we're almost ten years into this right now, over 65% of the companies that are raising money now are post revenue established companies over three years old. Average revenues are $1 million. So my pitch to companies that are looking to raise money is this is not an adverse selection pool.

00:16:44:22 - 00:17:05:02
Sherwood Neiss
You sure you could be a pre-revenue startup that's looking at raising money. But the fact of the matter is, is the market has shown us that if you've built your company and you're generating revenue and you're having a challenge getting the capital that you need to scale that operation, we now have a solution for you in terms of capital formation.

00:17:05:09 - 00:17:25:02
Sherwood Neiss
It's investment crowdfunding, and you can go online and online and raise money from your community, your friends, your family, anyone that knows you and why you should do that is very different from what existed even ten years ago when we were talking about this, ten years ago, when we were talking about this, we were like, we want to help create innovation in America.

00:17:25:02 - 00:17:46:15
Sherwood Neiss
We want to help create jobs. Now, what we're talking about when we're talking to people in Washington, DC about this is, you know, it's been ten years later, over $3 billion has gone into, thousands of startups. Okay. There's been over 8400 companies that have used this to raise capital. They've done 10,000 rounds of financing. Okay, fine. Fine.

00:17:46:15 - 00:18:05:01
Sherwood Neiss
About 3 billion. But you know what? All these companies are doing other than hiring people, they are spending all that money that they raise. Okay. And you know where they're spending it. They're not spending it in Silicon Valley or in New York. Most companies are based there. But these these companies are based in 2300 cities across the United States.

00:18:05:03 - 00:18:25:03
Sherwood Neiss
All of that money is being spent locally. And what do local government officials love more than anything else? Economic activity. Okay, so if you can create jobs and show them how these businesses are going to be pumping money into local economies by buying products and services, buying a sandwich for lunchtime, you know, your AC broke, you got to bring service people in.

00:18:25:06 - 00:18:29:27
Sherwood Neiss
All of this is what people love at a local level, because that's what we need.

00:18:30:00 - 00:18:55:28
Ian Bergman
And have you seen this planting the seeds of a new type of entrepreneurship at the local level? Like, I mean, we know that entrepreneurs are everywhere, like entrepreneurs are equally distributed. Access to resources, maybe less so. But like entrepreneurship is everywhere. It's in every one of these cities, but has has the money cycle and the access to capital cycle changed anything in your in your view about how entrepreneurship is viewed in these cities?

00:18:56:01 - 00:19:20:01
Sherwood Neiss
The biggest, change that I've seen, and we're actually working on a report about this right now. But right now, 50% of the people that are raising money online each month are either a women or a woman or minority founder. Okay, you go to Silicon Valley as a woman or a minority. Good luck. The data shows that only 2% of them get funded.

00:19:20:03 - 00:19:37:03
Sherwood Neiss
They get funded with a lot less capital, of course, because there's fewer of them. But in the investment crowdfunding, the biases are gone. Like the people that are investing in these entrepreneurs look like the entrepreneurs. They are other women. They are other minorities. And they're like, I don't care what your skin color is or what your gender is.

00:19:37:06 - 00:20:01:25
Sherwood Neiss
I just don't, you know, believe that if you can pull this off and I know you, I'll invest to you. And so that's a fundamental change that we're seeing in there that has really democratized access to capital to people that couldn't get it before. But the shift that we also have seen in this is, you know, so we built this data set that tracks off these companies, 150 data points in every company.

00:20:01:25 - 00:20:22:25
Sherwood Neiss
We've got over 5 million data points all together in this database. But we assign an industry a classification. We got, 23 of them and and makes code to every company. And so we've been watching what's been happening. And even when I was in testifying in front of Congress, I was just like, yeah, I really think, like, software companies will probably be the biggest beneficiaries.

00:20:22:27 - 00:20:36:27
Sherwood Neiss
And software companies were, but you know, what's happened in the last 18 months? Health care, technology, life sciences, biotech number one, issuers by far. Number one, I get the biggest check.

00:20:36:27 - 00:20:38:14
Ian Bergman
That's interesting.

00:20:38:16 - 00:20:38:27
Sherwood Neiss
Right.

00:20:38:28 - 00:20:40:15
Ian Bergman
So what's going on there?

00:20:40:17 - 00:21:01:01
Sherwood Neiss
Well look at what's happening in the entire marketplace. You know, the government is pulling out of funding. A lot of these companies, they too you just said it. The ideas don't disappear. They're still there and they're great ideas. They still need capital. So you have to go where the capital is available. VC is they've sort of exited late stage okay.

00:21:01:02 - 00:21:21:11
Sherwood Neiss
They moved upstream. They're sitting on billions, probably trillions of dollars of capital, which isn't fair. We all need it. But you know, you know, you know, let's figure out how we can get capital. So these entrepreneurs are coming online and they're raising money from their friends and the family. But, you know, we're raising money from from doctors, from scientists and we the.

00:21:21:11 - 00:21:24:01
Ian Bergman
Professionals who need the solution.

00:21:24:03 - 00:21:42:26
Sherwood Neiss
Right? So when you go and you look at the comment section, you see these doctors going, this is the area that I focus on. This is the technology that I need. And then you've got other ones going. I've already invested in the company. I'm getting other doctors to buy the product. Like you're just seeing it happen in real time.

00:21:42:26 - 00:21:45:17
Sherwood Neiss
You're like, yes, this is exactly what I'm talking about.

00:21:45:19 - 00:22:05:01
Ian Bergman
So these are just fascinating secular trends that are going on. Right? You are with like, there's a lot of VC capital that is starting to look a lot more like traditional institutional capital and even moving into public markets, getting more inaccessible. You made the point. There's a lot of concern about federal funding being pulled back in all kinds of places.

00:22:05:01 - 00:22:32:19
Ian Bergman
Right. And so you have this idea that there is a new source of capital through crowdfunding available to entrepreneurs. But there's something else going on that I think you've been exploring. And I'd love to hear about it. Right. And that is the idea that these doctors, these lawyers, these scientists, these people who are investors are also the customers, the advocates, the people who need the technology.

00:22:32:26 - 00:22:45:25
Ian Bergman
And I think you're you wrote a book about this. So I kind of want to use this as a jumping off point to have you kind of hold it up and talk about what is this trend, what is this rise of the customer investor.

00:22:45:27 - 00:23:17:14
Sherwood Neiss
Right. So this book right here, investors, it's all about how customers and investors are shaping the future of early stage finance. Okay. And this just 400 page and I want to put you to sleep quite a bit. Book is essentially a manifesto on investment crowdfunding. And, after we wrote the law, widely publishers, called us and widely used the publisher for dummies guide, and they said, you know, we want you to write the dummies book on investment crowdfunding.

00:23:17:14 - 00:23:30:28
Sherwood Neiss
And so we wrote that and I said, I'll be honest with you guys, the rules haven't come out. So until this industry is goes live, this book is really useless. And they're like, we don't care. We want to get it done now. So the book came out, and it didn't really go anywhere because there were no rules yet.

00:23:31:00 - 00:23:51:02
Sherwood Neiss
So when the industry went live and I said, well, the rules are out now, we need to update it while it's like, well, there's been no really big purchase in the book. And I went, I told you there wouldn't be. But I always said, well, someone needs to write the how to guide this. But then at the same time, the world Bank reached out to us and said, you guys have started something that we think is going to be a global phenomenon.

00:23:51:04 - 00:24:09:26
Sherwood Neiss
And United States had a ton of capital, but the developing world really needs this money. So we want to hire you to write the world Bank report on the crowdfunding potential for the developing world. And then we worked with the world Bank and the State Department, and we traveled to, believe it or not, 43 countries around the world.

00:24:09:28 - 00:24:33:13
Sherwood Neiss
And we helped governments, regulators, policy makers. We created crowdfunding ecosystems from Mexico to Chile to Saudi Arabia. I worked in Saudi Arabia for a whole year, flying back and forth when my son was just born, creating these ecosystems for this. And so I, you know, having that lens of what is this doing on a global level for the, the world.

00:24:33:16 - 00:24:56:08
Sherwood Neiss
And then what are best practices? And then we have this database that we built and in the data I can just in the data, I just see what's happening. And data doesn't lie. That's what the best part of it is. And I was just like, and this is everyone that I spoke to about the data sets, and you're sitting on gold like no one's had transparency into the private capital markets the way that you do.

00:24:56:11 - 00:25:12:22
Sherwood Neiss
No one's ever been able to see across industries, across sectors. What's happening? Like VCs know what's happening in their own little pool, but they don't know what's happening in the whole ecosystem. And they or they try to, you know, try to become experts in it, and we just collect the data that allows us to do all the analysis on it.

00:25:12:25 - 00:25:30:24
Sherwood Neiss
And so the book itself was just like, I need to take the, the why this industry can't, you know, what was here, what the world Bank was all about, how you have how you I learned it by working in different cultures. You know, you got to take what happens in America and apply it all around the world.

00:25:30:27 - 00:25:51:25
Sherwood Neiss
You have to understand what their cultural circumstances are and apply that to capital formation. And so we did all these amazing exercises. And so we came up with frameworks for that. And then there's the whole best practices, of crowdfunding the book itself, the dummies guide rewritten now and and then I was just like, and we're still going.

00:25:51:27 - 00:26:18:00
Sherwood Neiss
So the book concentrates on, you know, how it is I intersect with this, how it is this whole token and blockchain area going to intersect with this. How is that going to shape what's happening? So it was my brain going off. I'm where do I think the future of investment crowdfunding is going. And so if you really want to, go to sleep or if you just love what I'm talking about, investors might be the right book for you.

00:26:18:07 - 00:26:41:02
Ian Bergman
We're going to we're going to hype this a bit more. If you really want to understand the intersection of Web3, investment, I and you know how a new wave of advocates are going to be, you know, driving and propelling the entrepreneurs that are powering the products they love, then get investors how to do that?

00:26:41:03 - 00:26:43:24
Sherwood Neiss
It's amazing to me. Yes.

00:26:43:26 - 00:26:46:00
Layne Fawns
I'm touched. Oh go ahead.

00:26:46:03 - 00:26:47:19
Ian Bergman
No, no, Lin. Jump in.

00:26:47:21 - 00:27:17:23
Layne Fawns
Well, I was gonna say you touched on something interesting about, like, what the future is through crowdfunding. And I'm seeing a couple things. One is an explosion of ecosystems all over the world, and two is the speed at which things are innovating. Because I think part of the reason why we're seeing animated Sasquatch on our, you know, AI algorithms, and it's come so far in that last year because the investment that's been put into AI, and there's been this really big focus on that.

00:27:17:23 - 00:27:48:23
Layne Fawns
And so it's AI in biotech or it's AI in this software or it's, you know, these chat bots or whatever. And there's just been this focus on it. So what if crowdfunding enables people to focus, you know, on, like you said, these doctors having direct access to this technology or these solutions. And I see everything, not just I know, but everything can kind of evolve and and grow at a much greater speed than it has in the past.

00:27:48:26 - 00:28:09:02
Sherwood Neiss
Oh, absolutely. And it's not just, you know, the AI intersects with everything here. Okay. To what you're talking about. It's, companies are using AI in new ways. You've got, you know, one of the companies that we just looked at for our venture fund, is a drone company, and they are in agriculture for, drones, for agriculture.

00:28:09:04 - 00:28:28:27
Sherwood Neiss
But they are emerging AI with the, you know, agricultural technology so that they know where to send the drones. Okay. So it's not just someone, you know, the drones measuring. It's all happening because AI is sort of telling it. This is where we need to send it. And it's doing a much better job than an individual just driving machine.

00:28:29:00 - 00:28:51:27
Sherwood Neiss
But that type of, you know, intersection is what these people that are scientists that are back in these companies going, that's exactly what we need. And so they're benefiting from that sort of AI intersection there, because we've got the ability to raise capital online. And these companies can actually go to these platforms and get their message out there, which they couldn't do before.

00:28:51:27 - 00:29:17:07
Ian Bergman
Do you think that the ability to do this risks? Risks isn't the right word, but do you think there's a likely result where we end up with actually a more fragmented solution ecosystem, more smaller point solutions that are highly tailored to a smaller market? And maybe the whole way that we think about venture returns and the amount of market ownership that a company needs to have is going to change.

00:29:17:12 - 00:29:44:03
Sherwood Neiss
I don't know, that's like a really good question. I mean, we're so used to the, the, you know, the folks owning the majority of whatever happens and controlling those outcomes. The only reason why I think it might be challenging to change it is everybody's driving for the same outcome, which is an exit. Okay. So if you, you know, you only invest if you think you're going to get your money back.

00:29:44:10 - 00:29:44:21
Ian Bergman
That's right.

00:29:44:21 - 00:30:13:09
Sherwood Neiss
Yeah, that's the whole point. So, you know, if we've got too many of these small little touch points that don't add up to something great, then I think it's going to backfire. So the goal has to be that you can have this, distributed, innovation distributed, you know, access to capital. But at the end of the day, it needs to like I keep on telling people all the time, I'm not trying to replace venture capital.

00:30:13:12 - 00:30:18:08
Sherwood Neiss
I'm just trying to deliver to VCs. Better deal. For now.

00:30:18:10 - 00:30:18:27
Ian Bergman
Yep.

00:30:18:29 - 00:30:51:02
Sherwood Neiss
I'm trying to tell them that there's new signals there. Number of checks, total amount written. These include, investors, these influencers that are investors and companies that are out there on social media. You need to be tracking them because they are the ones that are going to influence outcomes. And so if we can get those companies all those variables and then go to LCS and be like, these are the ten companies you should be looking at now, you know, allow those companies get that venture capital because, you know, right now you can raise 5 million through rates.

00:30:51:02 - 00:31:06:29
Sherwood Neiss
Yes, you can do a parallel offering that allows you to really raise an unlimited amount from accredited investors. But at the end of the day, you're not going to be raising $100 million to invest in crowdfunding. You know, if you've got a unicorn type company, you need to go get out of investment crowdfunding to institute all type of capital.

00:31:07:06 - 00:31:11:06
Sherwood Neiss
And all I want to do with this is bring institutional capital the best deal. Well.

00:31:11:09 - 00:31:33:07
Ian Bergman
You know, I've got this thesis and I don't think this is a rocket science. You know, a bit of analysis here, but I do see a lot more founders taking on kind of minimum viable capital to build out a business that we you know, I think sometimes we use this word disparagingly. I'll call it a lifestyle business, but I it's actually wonderful, right?

00:31:33:07 - 00:31:56:03
Ian Bergman
Wonderful economic returns for the founders, etc., but a very different return profile for investors, to your point. And I think, you know, one of the things that I'm always one and one, by the way, and I encourage founders to do that, which is sometimes a mistake, is an investor. Like if you don't need to build a public market exit company and you don't want to, don't force yourself.

00:31:56:05 - 00:32:36:03
Ian Bergman
So you have the tools and equipment to build these really compelling, niche businesses that can give you a wonderful lifestyle, perhaps better, actually, than your typical, successful exit through acquisition or summit. But I think we're seeing a lot more of this, and I think we're going to see a lot more fragmentation and startups. And I think one of the things that you just said is something that's got me thinking in a world where you get much more noise in the system of all of these high quality companies, you know, solving point solutions as a VC, as a VC, looking for the sort of returns that the VC profile has to look for, how do

00:32:36:03 - 00:32:57:16
Ian Bergman
you get signal from noise? And that's kind of how I've been interpreting what you're saying about this. These include faster signals like data points that maybe we should be tracking, that we aren't any, we aren't otherwise tracking that are going to separate a many multiple return from a really nice business that might pay some dividends. Does that ring true to you?

00:32:57:18 - 00:33:17:29
Sherwood Neiss
Oh, absolutely. I think the you know, so just to your point about all of this, these all of these variables, all these signals is what we did with D3, VC, which is our venture arm. You know, I sat down with three data science PhDs and I said, listen, you know, I've got a pretty decent background. I started on Wall Street, you know, I started my own healthcare technology.

00:33:17:29 - 00:33:35:21
Sherwood Neiss
I did have an exit. So I sort of see what success looks like there in my brain. I have this database for all these thousands of companies, and I can see the ones that have gone on for venture funding eating them have gone public. So there's clearly signals in all of this along the way. I get the annual reports are all of these companies.

00:33:35:21 - 00:33:55:18
Sherwood Neiss
So I can see the ones that are really performing well and look at the signals in there. I said, help me take this entire data set and build a machine learning AI algorithm that will help us with we'll come up with the keys, the points of success. And then let's come up with a weekly scorecard for all the companies that are out there.

00:33:55:20 - 00:34:15:18
Sherwood Neiss
And then we'll do what algorithms can't do, which is human diligence. You know, you really have to dig into the founders. Like, tell me about your experience, your background. And the algorithm is not really going to pick that stuff up. So it's the qualitative type of things that you still need the human side for. And so we get a reading from all of these signals on a weekly basis.

00:34:15:20 - 00:34:25:21
Sherwood Neiss
We actually publish that, so if people want access to Capital Pulse report, anyone can get it at the top 15 companies from our algorithm on a weekly basis. And.

00:34:25:21 - 00:34:28:01
Ian Bergman
We're putting that in the show notes for sure.

00:34:28:04 - 00:34:50:14
Sherwood Neiss
But, the, we use it for our own decision making process. And then we, we look at these companies and we, you know, decide is, is, you know, do they have the IP, do they have the patents to protect it? Do they have the market that is scalable, like have they proven through their revenues that they're actually able to scale this company?

00:34:50:16 - 00:35:11:03
Sherwood Neiss
You know, those are the type of things that we dig in on. And then we make our decision, you know, do we want to invest? Do we want to pass, should we want to sit and wait? And that's another thing because to your point, there are companies, you know, it used to be and I missed this, this, this when I was in business school getting my MBA, it was the Lean Startup methodology.

00:35:11:03 - 00:35:12:12
Sherwood Neiss
Do you remember that?

00:35:12:15 - 00:35:13:14
Ian Bergman
100%.

00:35:13:14 - 00:35:32:26
Sherwood Neiss
Yeah. You you it's MVP. You raise as much as you need for that mSRP. You go out there, you you build it, you execute on some goals, then you go up for a round of financing. Okay. Then in the you know, the past, you know, before the collapse, VCs are like, here's $100 million here. You know, you know, there's seed throwing money.

00:35:32:26 - 00:36:00:10
Sherwood Neiss
And so everyone got used to just having a ton of money. And that whole lean Startup methodology went out the door. Well, now that VCs have disappeared since 2022, we're back to this whole Lean Startup sort of methodology. And it's been great because it forces entrepreneurs to be very strategic in why they need capital. It forces them because in investment crowdfunding, you actually tell people what you're going to do with the money that you're going to raise and people for that.

00:36:00:10 - 00:36:19:17
Sherwood Neiss
By the way. And so it allows you to put out there a blueprint for why you need money, and then you go and raise money and you know, what you have to do after that. You actually actually have to do what you say you're going to do, because if you don't, you're not going to get that follow on round because you only raise as much as you needed to accomplish those goals.

00:36:19:19 - 00:36:42:00
Sherwood Neiss
So it's an it's still what I think is better entrepreneurial behavior because we're only raising as much as we need. We're setting our valuations appropriately, by the way. I'll tell you right now, the number one reason why. But there's two reasons why, issuers fail in their offerings. One is they set these valuations that are completely unrealistic.

00:36:42:02 - 00:37:04:01
Sherwood Neiss
You really have to have a valuation that is in line with your revenues are and that the days of big valuations for ideas are gone. And the other thing is, is communication on these offering pages. If you are not responsive in the comment section, if someone asks you a question and you ignore it, that is a signal that you will ignore them.

00:37:04:05 - 00:37:13:26
Sherwood Neiss
After that, companies fund it and that. And so you as an entrepreneur need to pay attention. If someone asks you a question, you better answer that question and you better, because this is.

00:37:14:02 - 00:37:39:17
Ian Bergman
I mean, this well, it's fast and it's activating market forces. This is activating market force dynamics, right? Like like liquidity may not be trades. Is liquidity in communication. Right. But that gets to something of a market consensus. So I've got one kind of a hard question for you okay. Right. Maybe it's a hard question, but I think there's a common and fairly data backed sentiment.

00:37:39:17 - 00:38:09:00
Ian Bergman
Right. That says that the more the more signals you have around market data, the more of a true market price you're going to achieve, right? And then you get things like Poly Market trying to do something similar. On prediction markets. Does this work in crowdfunding? Is there a enough signal to get a more accurate true or a view of either valuation or, likely outcomes?

00:38:09:02 - 00:38:13:10
Ian Bergman
And what have you learned about that question.

00:38:13:13 - 00:38:51:05
Sherwood Neiss
So wow, that's a phenomenal question. And it is right where people need to be thinking, okay. Because the at the end of the day, we want returns. Okay. And so when I look at what we've done in our venture fund, we've we've had companies that and what I love about what happens here is most venture funds, you know, you price your your mic your multiple on, invested capital based on the last round of financing and, you know, in startups, typically if it's a venture funded, it might be 18 months, if not longer before a round of financing in regulation longer.

00:38:51:08 - 00:39:15:12
Sherwood Neiss
Exactly. But in regulation crowdfunding, it's usually, you know, ten months to, you know, 15 months. And so you've got these wee valuations happening in less than a year. So in our fund, we can already see companies going out for a round of financing at a higher valuation. But we are not perfect either. And we've had one company in our data set that failed.

00:39:15:15 - 00:39:45:07
Sherwood Neiss
And, they sent out a letter saying that they just have not been able to get the customer acquisition that they thought they were going to get. And it was an amazing technology company. That was super cool. You, you could have a, you know, in 1984, you know, Toyota and they would install this, device that would allow you to, communicate with the car so you can be driving and all that stuff and talk to, an AI avatar.

00:39:45:09 - 00:40:07:18
Sherwood Neiss
And it would be great for directions. It'd be great for different applications, but it was meant for all the cars that were not up to, you know, code or up to the latest technology. But they couldn't get the customer acquisition, so you might have a great idea. But at the end of the day, if you don't have the customers that are willing to buy it, it's not going to be there.

00:40:07:21 - 00:40:09:23
Sherwood Neiss
So you have to balance all that.

00:40:09:26 - 00:40:35:20
Ian Bergman
Well, and that's a I mean, that's a classic entrepreneurial problem, but I think it also really ties into some of your thesis and investors. Right. Like the the tighter loop you can draw. Okay. Oh my gosh. My brain's exploding here. So we talk often about in kind of lean and lean startup, and customer discovery. The idea that the tighter loop you can have between your customer discovery and your product iteration, the better you're going to be, right?

00:40:35:20 - 00:40:50:20
Ian Bergman
I mean, that's part of why, as alchemists, we invest in technical founders, primarily. But this notion of a really tight loop between, customer feedback and willingness to invest, I think, is that same notion. It's really fascinating.

00:40:50:22 - 00:40:52:00
Sherwood Neiss
Absolutely.

00:40:52:02 - 00:41:18:16
Ian Bergman
Yeah. Yeah. Well, what a this has been, just a fascinating conversation, for all of our audience. I'm so glad that we've had Sherwood Nielsen here, for this conversation for folks in the audience who want to stay in touch with you, who, you know, besides going out and scrambling to buy the book, which everybody should do, what's the best way to follow what you're doing?

00:41:18:16 - 00:41:25:06
Ian Bergman
Should they follow you through the the VC and through MarketWatch? Should they follow you on LinkedIn. How do they stay in touch.

00:41:25:08 - 00:41:49:24
Sherwood Neiss
So I've got too many websites companies products books. So I created one landing page called Investors Booking.com. And if you just go to investors book.com, you will be able to get that Capital Pulse report that I was talking about. You'll be able to get the book investors that link to that. We have a 200 page and report on the state of the industry.

00:41:49:24 - 00:41:58:19
Sherwood Neiss
By the way, when we first started it, the first year is eight pages. So that just goes to show you how much analysis has gone into this industry. All of it's there.

00:41:58:22 - 00:42:13:29
Ian Bergman
Well, incredible. So for all of our audience, we're going to link in the show notes. We're going to get you to investors Booking.com and what do you need? Thank you for joining us on Innovators Insight. It has been an absolute pleasure to have you today.

00:42:14:02 - 00:42:18:27
Sherwood Neiss
Thank you. It was really, really fun and exciting to be here with you guys. So I appreciate it.

00:42:18:29 - 00:42:19:29
Ian Bergman
Have a good one.

00:42:20:02 - 00:42:20:12
Sherwood Neiss
You too.