Talking Angel Investing Opportunities and the New Reg CF Rules with Anthony Franco
M.C. Squares founder, Anthony Franco, talks about rapid growth, angel investing for as little as $100, and collaborating with Shark Kevin O’Leary on his new Reg CF raise.
On March 15th, M.C. Squares became the first company to launch a crowdfunded investor raise under new financial regulations called Reg CF (Regulation Crowdfunding). The new rules raise the previous funding cap almost fivefold from $1.07 million to $5 million. We’ve been working closely with equity crowdfunding platform StartEngine, along with our Shark Tank investor Kevin O’Leary, to capitalize on the opportunity. Our founder, Anthony Franco, sat down for this interview a week before we launched the campaign.
Why is the M.C. Squares Reg CF campaign such an exciting opportunity for investors?
Simply put, it’s an opportunity to become an early angel investor in a rapidly growing company for as little as $100. For the first time, these new Reg CF rules make it possible for everyday investors to become part-owners in early-stage startups. Until recently, only venture capitalists had access to this sort of opportunity.
And it’s an exciting moment to invest in M.C. Squares. We’re raising this capital to fuel our continued 400% year-over-year growth and capitalize on an emerging market (one that we are creating). We offer 40 radically simple products that our customers love and are easy to invest in. I like to say we’re leading a dry-erase renaissance (in my head I hear it as “dry-eraissance”).
Finally, it’s a chance to invest in a startup focused on sustainable manufacturing and quality products that reduce waste. We’re deeply committed to the impact we have on our world. Not only do we plant a tree for every customer order, but our entire manufacturing facility runs on wind power.
“Essentially, you get to follow us along on the journey. You're a partner in growing this company.”
How does a raise work under these new Reg CF rules?
Let's go back to the state of investment opportunities before Reg CF. Startups like M.C. Squares would essentially have only a couple of channels for raising growth capital.
One was angel investors. Before Reg CF, angel investors were individuals that met specific wealth criteria - a minimum net worth or a certain amount of income to qualify as an accredited investor. The vast majority of American investors were excluded, and many wanted the same opportunities to be part of the American dream and partner with exciting startup companies.
The other option for startups like ours is venture capital. It’s hard to get, and the terms are often not favorable to startups. During his administration, Obama signed into law the JOBS Act (Jumpstart Our Business Startups Act) that made room for non-accredited investors. Now almost anybody can become an angel investor in these high-growth startup opportunities.
The authors of the JOBS act wanted to protect inexperienced investors, essentially, from snake oil salesmen raising capital. So, it put rules in place about where you can raise money, how you can advertise the raise, what kind of company you need to be, and what forms you need to file with the SEC. Since the initial rules went into effect, Reg CF has been a good way of raising capital from all investors with some protections in place for consumers.
With a Reg CF investment, you're actually buying ownership or the right to own a piece of the company. Theoretically, as the company does well, your investment grows. When the company sells or exits, the amount of growth the company has seen, you see back in your investment. The most significant change to raising capital under these new Reg CF rules is that a company can now raise up to $5 million instead of being capped at $1.07 million.
Why be the first company to raise under these new rules?
Actually, the timing was perfect. We’ve seen tremendous growth over the last three years, and we needed to raise capital to fuel that. But we were also at a point where the initial Reg CF rules didn’t allow for a large enough raise to take full advantage of this growth. So when we heard lawmakers were adjusting the guidelines and raising the cap to $5 million, we wanted to take advantage of the opportunity on day one.
Kevin O'Leary drove it, too. I was on a webinar with Kevin back in September, and he mentioned his excitement for the new rules coming out. So, I reached out to StartEngine directly and said, "We want to be the first. Can you help us with that?" We're excited about the new regulations—both for our investors and for us.
To be honest, we knew this Reg CF raise would be an exciting opportunity the media wanted to cover, and we saw it as a chance to tell our story. We make fantastic products, we have amazing traction, we’re inventing an emerging market, and we’re focused on sustainability. It’s a story we’re proud of, and we want everyone to know it.
“For the first time, investors like you have an opportunity to become part-owner of a young, exciting startup like M.C. Squares for as little as $100.”
How many people have already invested in M.C. Squares?
Almost 1,600 people have invested in M.C. Squares before this raise. A capitalization table is basically a list of all a company's investors. Our cap table lists people who have invested a hundred dollars and people who have invested hundreds of thousands of dollars. We have venture capital funds, individual millionaires, and thousands of everyday investors invested in the company.
How is the experience of an angel investor in M.C. Squares different from other opportunities?
Our angel investors get a lot of perks: access to prototypes and the ability to provide feedback on product development. You get early access to limited-run collaborations and deep product discounts. You gain access to me and the leadership team through quarterly live updates and monthly investor updates through our investor portal. Essentially, you get to follow us along on the journey. You're a partner in growing this company.
Here's another way to put it: if you're too busy for a side hustle, why not put some money to work in somebody else's growing company and be a part of that?
How is angel investing different than buying a stock in a company?
A retail investor is somebody that gets an E-Trade account and day-trades or buys long-term stock in companies that are on the stock exchanges. This campaign is different. Those investments are in companies that are very large.
With Reg CF investing, you're making the bet that your startup picks will perform as well or better than the stock market. They're a higher risk for sure, but your experience is different. You’re getting a front-row seat to the American dream with a product you believe in, and you’re making a little bet that they're going to grow faster than what you can buy on the stock exchange. Your early investment in the company is an exciting new member of your portfolio.
Imagine getting into Uber before it went public or into Beyond Burger or other large companies that have just gone public. Reg CF is a way of getting in before a company does that.
To be clear, not all companies you invest in under Reg CF will make it that big (or make it at all), but I feel a few investments in startups helps to balance your portfolio. Angel investing opportunities are longer-term and higher risk, but you're betting that it's a higher reward, and you have closer access to the company than you would in a public company.
How would you compare investment attitudes between more traditional investors vs. younger investors?
I don't want to pretend that I know younger investors' attitudes or offer any millennial investing advice, but I think this opportunity is an exciting way to diversify your portfolio. It also gives you access to invest in younger companies bringing products you love and believe in to market.
Not only do you get to buy the products that you love, but you also now get to participate in that company's success if they continue to grow.
It's a common approach to investing. Many successful professional investors invest in a company whose product they don’t personally like. Heck, just watch Shark Tank a couple of times and you’ll see any one of the Sharks bow out of a great company because they can’t see themselves using the product personally. The common advice: invest in something where you can wrap your head around the product. You can literally have ownership in the company and have the product sitting on your desk. You can see why it has value in the world.
“We have venture capital funds, individual millionaires, and thousands of everyday investors invested in the company.”
Why do people love using M.C. Squares' products so much?
M.C. Squares makes ingenious whiteboarding tools that help people conquer the chaos in their lives - and do it with style. They have 40 great products, including Stickies reusable sticky notes, desktop whiteboard Surfaces, and portable dry-erase Tiles. The Daily Beast called them “an arsenal of mini whiteboards that can go practically anywhere.” These radically simple products are revolutionizing how people organize their homes, collaborate at work, manage projects, and think visually.
Ideas meet the real world when they start with the mark of a hand. M.C. Squares makes that connection between your brain and the outside world faster, easier, and more accessible. There's more flow. People love M.C. Squares because it's a blank canvas, and they can put down anything. It also helps people connect some dots. We hear it all the time from our customers: "It's such a great idea. Why didn't I think of that?"
One of the benefits our customers value most is our positive impact on the world. Our manufacturing plant in Denver runs entirely on wind power. We plant a new tree for every customer order. And our reusable Stickies have kept over 1.5 billion paper sticky notes out of our landfills.
How is Kevin O’Leary’s investment in M.C. Squares making your Reg CF raise attractive to other investors?
Kevin is a PR machine that creates visibility for our products, both on and off Shark Tank. For us, this includes his recent press tour evangelizing our products to national publications and broadcasts. His social media posts drive enormous traffic to our website, and his ongoing references to M.C. Squares on Shark Tank are incremental e-commerce wins for us. Even now that we've already aired, he mentions us as part of evaluating other companies.
We’re a startup company experiencing phenomenal growth for the last three years, and we’re capitalizing on an emerging market. It’s been essential to have Kevin’s entrepreneurial experience, financial success, and trusted advice on our advisory team. And when we need him to, his team makes introductions to vendors and partners. Overall, his presence is a fantastic asset for us.
How do you plan to use the money that you raise?
Growth. Lots of growth. Our most significant limit to accelerating our growth is capital. We have demand and know how to capture sales. We need more inventory to go to more places, to continue to grow at the rate that we have been. That's what this capital is designed to do. If we did NOT raise capital, we could continue to grow, but at a much slower pace. That would squander the current opportunity to convert sales and expand the brand.
Is there anything else about this StartEngine campaign you'd like to share with potential investors?
M.C. Squares is growing like crazy, and that's exciting. We have an ever-expanding product lineup, so not only are we selling more of each product, but we're also broadening the number of products that we offer. We’re working with Amazon to grow our reach into huge overseas markets. We’re expanding our product lines to develop targeted, niche applications like training first responders. And there still remains deep, untapped domestic growth.
Our recent rebranding is generating interest and momentum outside our initial target markets of office supplies and educational tools. More and more, consumers are starting to understand our products as parts of their lifestyle, not just for work or school. Whether it’s a dry-erase planner to keep your family on track for the week or a washable coloring kit to spark a young imagination, our products fit seamlessly into our customers’ lives.
We also have a lot of control over our supply chain because we make our products ourselves, here in the United States. The result is a smaller carbon footprint and fewer constraints on our growth than most product companies do. Our portfolio of intellectual property is expanding, too. We have seven patents issued and seven more pending.
All of these aspects combined create the current explosive growth we’ve been experiencing. For the first time, investors like you have an opportunity to become part-owner of a young, exciting startup like M.C. Squares for as little as $100. For more details, head over to our Reg CF campaign on StartEngine and become an angel investor today.