Finding early-stage investments for budding companies can be difficult, but Jason Frishman, the founder and CEO of private fundraising company Netcapital, has built one solution.
"There's lots of different options for early-stage company financing, but it's really hard. And so what we do is we allow you to raise money from anybody. Not just the general partners in Boston, New York and San Francisco, where 80 percent of venture capital is invested, but from your friends, from your family, from your customers, from your fans, from your followers," he told "Mad Money" host Jim Cramer on Thursday. "We're really turning this on its head and making it so that you can leverage the power of your popularity to accomplish your fundraising goals."
On the surface, Netcapital is another private equity and venture capital firm, but its differences lie not only in that it broadens the fundraising effort for entrepreneurs, but also that it makes it easier and more accessible for the average home-gamer, Frishman said.
"You can invest between $100 and $100,000 right now from the comfort of your couch. You can go to Netcapital.com, you can invest in anything from a drone company to a Pokémon-Go-style mobile game company to a family fun park to a virtual reality company," he told Cramer. "They're non-accredited investors, for the first time ever."
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Normally, only accredited investors — in other words, investors with a high net worth and expanded financial access — are given opportunities to invest large sums of money with private companies.
Given the slowdown in initial public offerings in the stock market, Frishman founded Netcapital to offer average investors both a solution for, and more awareness about, investing in private names.
"How do I create returns when all market value is being created in the private markets before the IPO? The era of the small company IPO is dead," the CEO said. "Netcapital solves that problem, and there are really two things that we have to do. No. 1 is we have to generate access — we have to allow you to get access to these hot new deals or exciting, innovative ideas that entrepreneurs have. And then No. 2 is we have to lower that minimum investment down so you can invest $99."
With an average amount of $150,000 raised per company, Netcapital is still in its early stages. Frishman said a typical market capitalization for its clients is between $2 million and $10 million.
But Frishman is just getting started, and Netcapital investors already fall in a wide range of demographics, from college students to older retired individuals.
"Not only is Netcapital a solution to help entrepreneurs raise capital, but it's also a solution for anybody get involved in investing in this early-stage asset class," the CEO said.
And while Netcapital is not yet looking forward to its own IPO, the company's disruptive quality seems to suggest it has much more room to run.
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