By Roger Aitken for Forbes
Angel investor and ‘Rock & Roll’ hall of famer Jerry Harrison, most widely known for his work with the Talking Heads, is set to launch equity crowd funding portal Red Crow this November, which will initially target ‘social impact’ and healthcare/medtech sectors. There are also plans to expand into other verticals including cyber security, virtual reality, machine learning and potentially “environmentally focussed” investments.
The Milwaukee-born serial entrepreneur, an inductee into Rock and Roll Hall of Fame back in 2002 with fellow Talking Heads’ musicians David Byrne, Tina Weymouth and Chris Frantz, is behind San Francisco-based Red Crow’s equity crowd funding portal launch that touts “exclusive and professionally-vetted investment opportunities” for both accredited (under ‘Title II’ designation) and non-accredited investors (‘Title III’).
Red Crow, which was founded last year, is setting out on a mission to enable investors to discover privately held, “early stage” companies in the healthcare/medtech and social impact sectors that require funding to grow their business, whilst aiding innovative companies to find investors.
‘Quality Not Quantity’ Investments
It’s worth keeping in mind that this is not a platform where one will find hundreds of investment deals. Instead the rationale is more about “quality over quantity” as the founders stress with Harrison’s motto “Invest in what you know”.
That said, in the space that Red Crow will start to target – medical device companies – the start-ups have the potential for “world changing breakthroughs”. Add to that security start-ups are projected to be poised to dominate a $170 billion market.
Panel Of Experts
By focusing on deals in these specific verticals and by performing a “higher level of due diligence” with a panel of industry experts including Dr Stephen Shaya, Managing Director of J & B Medical and a Red Crow board director, Harrison asserts that it offers a “safer alternative to other crowd funding platforms” currently available.
A roster of experts will share their knowledge of each of the featured companies and their potential for success with the crowd and in effect “curating” the investments. Specifically, Dr Shaya will act as the strategic advisor for the healthcare vertical.
The company’s philosophy is to provide investment opportunities to those fully in the space, with marketing initially aimed towards doctors, scientists, researchers, and other health care professionals. It will also offer access to the same deals to both traditional accredited investors and the unaccredited crowd, which will include Millennials and potentially the beginning of so-called ‘Generation Z’
As Red Crow’s chairman, Harrison, together with Red Crow founder and CEO, Brian A. Smith, a leader in the equity crowd funding space focused on specialized markets such as healthcare and social impact investments and former wealth manager at Morgan Stanley, claims that there is a “gigantic distinction” between Red Crow and other crowdfund platforms.
The pair contends that these latter platforms often function as “anything goes” markets with little or no level of professional vetting. With Red Crow matters will be different.
Joining them on the Red Crow board is Amanda Welch, a marketing expert with a Ph.D. in linguistics from Harvard University, who is currently Manager of Partner Programs at Nielsen in the San Francisco Bay area. Prior to Red Crow, Welch served as
a media research scientist (2012-2013) at Google in Mountain View, CA, and before that as President/COO of Garageband.com, which MySpace acquired.
The first featured deals include Stretch, a communications platform for based in Austin, Texas, that allows all family members from baby boomers to millennials to communicate with each other and discuss important family issues including health; Ixcela, a platform aimed at helping individuals measure and improve internal fitness; and, MiRTLE Medical, a company located in Boston, MA., that has developed MRI-based procedures to allow doctors to perform medical procedures that have never happened before through non-invasive monitoring.
Led by biochemist Dr. Erika Ebbel Angle who serves as CEO, and Dr. Wayne Matson, the company’s co-founder, Chief Scientist and considered a ‘father of modern metabolics’, Ixcela’s offerings are touted as helping to improve, track and maintain an individual’s internal fitness – enhancing gut microbiome health.
After analyzing your ‘Internal Fitness’ test results, Ixcela formulates a customized natural supplement program to optimize internal fitness. They despatch a new test kit every three months to measure progress and your profile page, making adjustments to the body’s changing needs.
Headed up by Jim Robertson, President & CEO, MiRTLE’s product is a custom designed diagnostic-grade 12-lead electrocardiogram (ECG) for use during MRI. It cuts down absorbed energy, thus eliminating any heating of electrodes, and deploys Magnetic resonance (MR), a non-invasive three-dimensional imaging technique.
The first customer for the device was John Hopkins Hospital, which bought a prototype for $40,000 and installed it this June for research into MRI-based arrhythmia procedures. Subsequently it was demonstrated an improvement in outcome from a 30% success rate to 80%.
In terms of the MRI compatible 12-lead ECG market, the company has interest and letters of support from major MRI suppliers including GE Healthcare and Siemens Medical. And, according to a 2016 estimate from Frost & Sullivan the US MRI installed base has been put at 20,000 units with a 3-5% CAGR.
Speaking from New York, Harrison, a founding partner in the VenEarthGroup, a venture capital group devoted to climate mitigation focussing on sustainable agriculture and solar technologies, asked whether he saw himself as an ethical or socially responsible capitalist said: “Yes, I would concur with that. I know a fair amount about the environmental space.”
The Harvard graduate, who studied architecture, also sits on the board of directors of Carbon Gold, a bio char company based in Bristol, UK, and has contacts with the Social Association in Britain and Patrick Holden, the Sustainable Food Trust’s founding director who Harrison is a good friend of.
As an environmentally conscious technology investor, Harrison added: “Biochar is an important component in trying to deal with climate mitigation. And, one of the things that I learned in trying understand Biochar, a charcoal produced from plant matter and stored in the soil as a means of removing carbon dioxide from the atmosphere, was that if one put less than half an inch of it on the land we could take out all the excess carbon since the beginning of the industrial revolution.”
While acknowledging that initiatives for climate mitigation will require both state and private action, he is very much believes that the “private market is essential to actually finding opportunities where people can both make money and also do something that is going to save the planet.”
California-based Smith, who prior to founding Red Crow served as an independent financial advisor from 2010-2015, worked with Registered Independent Advisors located in Massachusetts, California, and Connecticut.
With a foundation in marketing having gained a BA in Marketing from Franklin Pierce University, Smith joined a division of Abbott Labs as a pharmaceutical sales representative, marketing one of the best-selling pharmaceuticals in the US and winning recognition as a top performer in his sales region.
In terms of the minimum investment for Red Crow’s portal, Smith indicates that it could be in the range of $5,000-$10,000 for Title-2 accredited investors. However, he acknowledged that outside this space a figure of around “$25,000 is a sweet spot”.
Under Title II, companies seeking to raise money through the sale of securities must either register the securities offering with the SEC, or rely on an exemption from registration. Most exemptions from registration prohibit the general solicitation such as advertising in the newspaper, on the internet, etc.
However, Title II permits a company to employ ‘general solicitation’ to market securities offerings as long as they follow the rules and guidelines of Rule 506 of Regulation D. And, under this exemption the Internet or other mediums can be used to advertise security offerings. This gives a company the chance to attract a large number of new investors in a short period of time, but restricts the type of investors.
Red Crow’s CEO Smith explains here that: “When companies achieve success in Title II (accredited investors), they can then position themselves to initiate a Title III campaign, which does a few important things.”
“First, it of all gives Title III (non-accredited investors) the confidence to invest alongside accredited investors who have the capacity to their own diligence,” he adds. “Furthermore, Title III of the JOBS Act is a great opportunity for new investors entering the Private Equity world to invest with some direction, as opposed to going into it blindly.”
For the entrepreneurs, Title III, which took effect May 16 2016 serves two purposes: (1) It allows additional funds to be raised, up to $1m in 12 months; and, (2) More importantly it exposes their product or service to a much larger audience, helping with customer acquisition.
Smith points out: “Red Crow’s Discovery component was built for this, providing a spotlight on companies in early stages while positioning them to have the most success when entering either a Title II or III fund raise.”
Red Crow’s platform is set to launch officially on November 1 2016.
First appeared at Forbes