Democratizing Investments in CPG Companies

The world is moving toward being decentralized in every area from the internet to big business. What that means is that the way we do things will change, and in some cases, those things are already vastly different than the norm we all have grown accustomed to.

Funding and investments are one aspect of the business world that for a long time have operated in silos. But the tide is shifting, and David Koifman is helping to democratize the world of investment through his work at Kickfurther.

Kickfurther is an investment platform that uses the power of crowdfunding to help CPG companies fund their inventory and production runs. Most of the deals on Kickfurther are fully funded and closed within minutes, which proves there is an appetite for this kind of investment in the general market. On this episode of Up Next in Commerce, David explains the model and its benefits to both businesses and investors, and he explains how crowdfunding will continue to make an impact on ecommerce companies in the decentralized future. 

Main Takeaways:

• Democratizing Investment: For too long, companies have been at the mercy of financial institutions to help fund early production runs or other operational costs. And while that solution works for some, we think that new solutions are still needed. Opening up investment opportunities to the general public is a peek into where the world of funding is heading
• Keep Proving Yourself: When a company gets a bank loan and pays it off, the business is seen as more successful and its credit rises. A similar thing happens when a company uses crowdfunding for inventory: by delivering the inventory the crowd has purchased and then opening up a new round of funding, a business is building credibility with a consumer and broad investor audience that it otherwise would not have been able to reach.

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

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Transcript:

Stephanie:

Welcome back to Up Next in Commerce. This is Stephanie Postles. And today we're talking to David Koifman, the head of growth at Kickfurther. David, welcome to the show.

David:

Hey Stephanie. Great to be on the show.

Stephanie:

I'm glad to have you. So I was looking through your background and I was hoping we could start there because I saw that you've been in sales and partnerships and business development, and it seems like you've had a wide ranging career. So I wanted to hear a little bit about what you did before Kickfurther, and what brought you here.

David:

Before Kickfurther? I was in marketing right out of college. And then I went into the world of startups in financial technology. I began as a sales rep and grew within a small organization to a much larger organization, led the team, and basically built out sales account management partnerships. And then we were getting to a stage of growth where I wasn't feeling the excitement that I initially felt and joined the team at Kickfurther to do it all over again. So I've been here three and a half years. It's been awesome. We've grown tremendously, and I'm very excited about the next few years to see where it will go.

Stephanie:

Awesome. So you've always, always had the startup bug, where you're looking for that crazy hectic environment, fast growth.

David:

Yeah. It's like I see myself as a sales guy who doesn't like just selling. What I like is building the sales process, building the team, understanding the customer. So a little bit more beyond just knowing individual customers and building a book of business.

Stephanie:

Yep. Got it. So tell me a bit about what Kickfurther does.

David:

So Kickfurther solves a unique problem that every consumer goods business faces in their early stages of growth. You'll see a lot of companies are funding on platforms like Kickstarter, Indiegogo. These are crowdfunding platforms where businesses raise money to fund their first production run. Production run is when a business is producing inventory. Inventory is the product that they sell. So as that business completes their crowdfunding campaign or determines that they have product market fit, they will need to come back and order more product. Sometimes, they're buying that product from a supplier, maybe a manufacturer in China or here in the U.S., somebody that produces a finished product, and then they receive it in their warehouse and they sell through it. Sometimes they're buying a bunch of raw materials and making a product themselves. Usually that's the case in food or some health and beauty applications.

David:

But the bottom line is that costs a lot of money, and the faster the business grows, the more they have to invest into inventory upfront. You have to pay for that inventory, it takes months to produce, and then you get it into a warehouse and then you start selling it to customers. And then your customers start paying you. So there could be a long amount of time from when you need to outlay that cash to produce the inventory until you're able to recoup that revenue and put it into the next production run. So as businesses grow, they encounter this cash flow pinch, and Kickfurther solves that pinch. We have developed a marketplace on kickfurther.com, where we will vet companies and structure deals. And then a community of users will come to those deals and participate in purchasing the inventory for that business. The business will then produce the inventory, sell it, and pay back Kickfurther and the users who participated in the deal; we'll make some money and get to do it all over again.

Stephanie:

Yeah. Very cool. It reminded me of, I saw quite a few real estate investment platforms like this too, where you get the fund, the next three or whatever it may be. So it seems like they're popping up in different ways to have a Kickstarter approach, but also getting people in the market who have the funds to be able to fund this inventory or investments or whatever it may be. So is that the main way that Kickfurther is different, where it's sourcing investment from the community instead of traditional lenders or actual investors?

David:

Yeah. So I mean, what we're doing is using the power of crowds rather than financial institutions. There's a lot of solutions out there that take money. They borrow money from banks and other financial institutions, and then present it to businesses and take a cut. And what we're doing is creating that opportunity for any individual on the internet, somebody who has money sitting in their bank account, and they want to use that money to make money by participating in a purchase of inventory for a consumer goods business. And so what we do is, it's not a loan. It's not an investment, it's actually a consignment agreement. So what we're doing is purchasing inventory for a business and consigning it to them to sell on our behalf. And as the business sells that inventory, then that triggers the consignment, and then we invoice them for it and they buy it back plus their cost of funding.

Stephanie:

Got it. Okay. So how do you make sure that you're bringing on companies onto your platform that won't make you nervous, where it's like, are you actually going to sell all this inventory? Because I'm not trying to cover that cost.

David:

Yeah. Well, there's a pretty thorough diligence process that we go through for every business that goes on the platform. We evaluate everything from their revenues to their supply chain, to how they distribute that product. And it's all verified through documentation. So it's not like anybody can come to us and say, Hey, we need money," and then just go up on the platform. There's a diligence process, just like there would be going to a bank or any other financial institution. I would say our uniqueness is we look at supply chain and distribution, and we assess risk in a very specific way. It's different from a bank. So some of our customers, everybody wants to go to a bank. Bank money is the cheapest. You want to go to a bank and get a line of credit and fund your business that way.

David:

However, if you're a small business, whether you're a restaurant or a clothing store, the bank looks at you the same. They say, how long have you been in business? Are you profitable? How much have you sold? Whereas we're looking at a very specific sector of small businesses that are consumer goods, businesses with supply chains. And we understand the intricacies of that supply chain and then how they get that product to their warehouse, get that product from the warehouse to the customers, and collect that money through their distribution channels. And so we use that information to determine who has access to capital on Kickfurther.

Stephanie:

Got it. Yeah, what's cool is that you guys are acting as like the trusted so