Now emerging is a new brand of celebrity that has access to a highly effective marketing engine, but not enough funds to start their own venture capital firm.
That’s according to Peter Sweeney and Matt McGeagh, the co-founders at ALAO Invest, short for Act Like An Owner, a New York-based firm that’s looking to monetize on this trend and connect fast-growing companies with celebrity investors and their audiences.
Here’s the story of ALAO and the impact its founders are trying to make.
How It All Began: While at Goldman Sachs Group Inc (NYSE:GS), after attending the Wharton School of the University of Pennsylvania, the two founders noticed a few trends.
The first was that many companies “going public had mega-celebrities on their cap table from earlier fundraising rounds,” as Sweeney put it, likely to “diversify away from the traditional cash endorsement deal model” which drives little incentive to prolong conversion.
Second, many more pre-public companies, through Directed Share Programs (DSPs), are offering customers, vendors, and employees equity, boosting community and word-of-mouth marketing.
And lastly, there was an emerging celebrity class, with highly engaged audiences, that lacked access to the capital to engage in venture investing at a significant size.
“That’s what prompted us to start working on ALAO,” Sweeney said. “Now, we’re connecting young, high-growth companies with celebrities or influencers, so they can invest … alongside their audiences, too.”
The Differentiator: In comparison to traditional equity crowdfunding players, ALAO is far more targeted in the businesses and generation of investors it is catering.
It’s the case, according to Sweeney, that tomorrow’s leading consumer companies are those which need “brand ambassadors, funding, and community,” now.
Likewise, McGeagh adds that the focus has to be on Millennials and Generation Z since they “will be a powerful consumer base for the next 20 years.”
Through ALAO’s app-based platform, brands can decrease their cost to acquire investors, easily engaging with those ambassadors who better align with their missions and can move the needle on engagement.
Accordingly, since ambassadors, their communities, and brands are better aligned, feedback is far more impactful, too.
“You’ll have a couple hundred thousand people on your cap table who you know are supporters of the brand,” Sweeney explained.
“If you’re a shoe company and have three different designs that you want to test out, you can push it to your investors, have them vote, and it feels like your customers are having a say in where the company goes, but you are getting high-quality user feedback.”
How Do Users Make Money: The typical holding period for venture capital investments sits at around 4 to 7 years.
Events like acquisitions and public offerings usually mark periods when investors can monetize, but those are not guaranteed to happen.
Notwithstanding, those periods are set to shorten, a bit, particularly with efforts to commercialize private markets and make them more liquid, best exemplified by the London Stock Exchange’s introduction of a pre-IPO trading platform, the two founders said.
“Though it is a bit of a legal minefield, we’re interested in building out our own secondary trading platform to enable faster monetization,” McGeagh said. “We could, though, piggyback onto one of these other trading platforms, also.”
Separately, when it comes to gauging the value of what users own, there will be metrics to do so on the platform.
“Companies will have to update their revenue progress and, … as they continue to do future fundraising, users will be able to track the progress of valuations,” McGeagh added.
Going Forward: Though the founders have done a great job of soliciting interest from investors and raising funds to build ALAO, they are concerned about further fundraising and the impact the market drop may have on retail sentiment around investing.
To continue bolstering initiatives around technology and compliance, the two will build out an education platform, leverage alumni networks to hire talent, and launch new businesses like Plug, a hangover remedy drink that’s growing about 500% a year.
Interested in meeting the founders of companies like ALAO, as well as poking the heads of the likes of Kevin O’Leary and Anthony Scaramucci, check out Benzinga’s two-day crypto and fintech event, December 7-8, 2022.
