In early 2018, a New York startup called Roomi opened itself up to the type of investors known by Wall Street traders as “mom-and-pop investors,” although an IPO was nowhere in sight. The company, which links roommates for short-term rentals, remains too young (founded in 2013) and too small (valuation of $55 million) to pass muster for listing on any exchange. But for the 1,080 people who otherwise would have been shut out of owning a piece of the startup—lacking the wealth or credentials to invest in a privately held company—the impact was similar. When a company like Roomi launches on the crowdfunding platform Republic, all of a sudden anyone with some spare cash can ride the highs and lows of its future performance.

Until recently, the only way in for mom-and-pop investors was to wait for the first offering of a publicly traded corporation, as the right to buy into privately held firms was limited to high-net-worth individuals or other businesses. Federal regulators have now opened up a world between the two categories, creating a new asset class in which “non-accredited investors” can purchase small shares in early-stage companies.

Every week, a handful of new companies open themselves up to the public through Republic’s platform, where it often takes just $25 and a credit card to buy in. (In Roomi’s case, the minimum investment on Republic was $50.) The result is a lively new marketplace for startups willing to embrace the loose, transparent spirit of Kickstarter with the rigors of Securities and Exchange Commission oversight.

The world of so-called equity crowdfunding holds the promise of democratizing both ends of the earlystage investment game, its advocates argue. It enables mom-and-pop investors to participate in the frenzy of picking winners in the world of tech innovation, and in so doing it could also boost companies unlikely to otherwise get backing from the largely Bay Area–based venture capital firms that serve as gatekeepers between startups and the money they need to grow.

“We don’t see ourselves as a venture capital firm, and we don’t want to,” says Republic COO Caroline Hofmann (MBA 2011). “We look for credible opportunities that can generate returns for our investors. We don’t necessarily take the lens that every opportunity needs to be the next Amazon.”

When Hofmann joined Republic in early 2017, the company was not yet a year old. It had launched just as key provisions from the 2012 Jumpstart Our Business Startups (JOBS) Act took effect, opening opportunities for companies to raise a total of just over $1 million from non-accredited investors, with caps designed to limit any individual’s exposure to risk. Those people with income and net worth under $107,000 can invest either $2,200 or 5 percent of their income (whichever is lower) in such companies over a given year; wealthier individuals can invest up to 10 percent of their income or wealth annually.

“Investing in startups is risky, but it’s more productive than minimal return gambles such as lotteries, which drained some $70 billion from Main Street America’s pockets in 2014 alone,” Republic cofounder and CEO Kendrick Nguyen wrote in an inaugural manifesto. “If Americans directed a portion of the staggering $119 billion in annual [2013] gambling losses toward funding entrepreneurship and innovation, what change—and economic value—might be achieved?”

Among the equity-crowdfunding platforms now jockeying for listings and the attention of would-be investors, Republic has aggressively defined itself around the politics of inclusion. Today, 44 percent of its companies have a female founder, more than three times the VC world’s share. Looking to the crowd liberates companies from having to navigate an oftennoxious power dynamic between male investors and female entrepreneurs seeking their funding, Hofmann says. “We hear this a lot from founders in underserved communities. You don’t have to be networked on the West Coast to get an application to us.”

Similar logic applies to racial and ethnic diversity. In May, Republic published a report demonstrating that a quarter of the founders of companies for which it raised funds were people of color, 25 times the share backed by traditional venture capitalists. Republic now makes inclusion part of every pitch: Company listings are assigned tags such as Female Founders, Veteran Founders, and Immigrant Founders.

Not only is the leadership profile for Republic-listed companies different, but the platform is also selling products and services less likely to resonate with what Hofmann calls the “traditional white-male VC.” She holds up the example of the black-owned startup theCut, an app developed to facilitate barbershop bookings. It raised $93,853 from 421 investors earlier this year largely by pitching the investment to its existing user base. “It’s hard to do due diligence on a private company,” says Hofmann. “If you’re a user you’re probably already convinced of the value it’s adding to your life.”

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