How We Raised $1.5M And Launched An Equity Crowdfunding Platform
Hello, I’m Luis Barrios, founder of Arkangeles, the easiest way to invest in Latam startups. We are an equity crowdfunding platform that recently received an official license from regulators in Mexico.
We have tools that help you create your investment thesis, manage your portfolio and create your private angel groups among your friends.
Arkangeles was created in 2017 for the entrepreneurial and investor community in Mexico and Latam. With the mission of mobilizing capital to unstoppable entrepreneurs who solve real needs with products and services that generate abundance and progress in our society, at the same time democratize investments in startups.
We have created a great impact in our 3 years of operations. We have been honored to take more than 85companies to their next phase of growth, which in turn has impacted millions of people.
That is why all the people involved feel successful: because of the impact we have achieved. Success is measured by everyone and is non-transferable or measurable by anyone else but by the creators behind it.
We have a 10,000+ & growing community of investors with a shared mindset to invest differently and promote innovation and impact in Latam. Additionally, we have more than 2,000 active students in our investment academy (Arkeducation) which teaches you the basics of Angel Investing, and more than 30 allies with our Juntos con Arkangeles including Banks, Accelerators, Influencers, and more, where together we are accelerating to convert more members of their communities to angel investors in Latam through education and Private Angel Clubs with our ArkGroups feature within the platform. Join us and let's accelerate more investors TOGETHER.
What's your backstory and how did you come up with the idea?
Before Arkangeles, I founded a company called ThePool in 2013, one of the first coworking spaces and entrepreneurial centers in downtown Mexico City. Our goal was to gather like-minded people in one place to create new companies, jobs, and solutions to huge inefficiencies in Mexico at the time.
We have grown to more than six locations in Mexico City to continue fostering entrepreneurship in Mexico. But to become more regional in 2016, I founded ArkFund, a two-time Angel-Seed Fund investing in top Startups in Latam.
We intend to forge long-term relationships with like-minded LPs & co-investors who bring capital/collective knowledge and entrepreneurs who work that capital for a higher purpose, but beyond this, becoming long-life friends and a trusted network.
VC, for me, is more than investments - it’s a never-ending learning adventure as the world is constantly changing, and entrepreneurs show us the way to new things and new solutions. It’s a constant apprenticeship towards creating a better, progressive Latam.
This is why we decided to build Arkangeles.
Arkangeles has been a natural path in my career to expand my contribution with a few investors in the Fund to “anybody can invest.” Through Arkangeles, we have been able to accelerate and increase our impact to mobilize capital with thousands of entrepreneurs around the world who are solving real problems entre Latam.
All investments we make through the fund are shared with hundreds of investors already part of our community of co-investors at Arkangeles.com where now anybody can include this incredible asset class in their portfolios and increase their wealth.
Take us through the process of designing and launching your MVP
Creating a product that satisfies your unique customers’ needs is never easy. And in a regulated market such as fintech, this is even harder since you have to balance out creativity & innovation with compliance constraints. How can you keep your entrepreneurial spirit and simplify products and services while still keeping rigid l processes in place?
Validating our product
We started in a pre-regulated market, so for us, it was much easier to validate. Usually, an entrepreneur builds a business where he has some or full domain expertise in the industry looking to solve a huge problem.
In my case, being involved in entrepreneurship, ecosystem building, and angel investors was easy for me as an entry-level to have access to a key component of your product: great startups raising funds wanting to work with us. This gave us a huge advantage.
Keep it simple until your customers start to need more features. Validate your core product and feel comfortable with the results
Then, we tested the market with a concierge MVP using existing SaaS platforms out there: Mailchimp and Typeform. With these tools combined, I sent Investment Memos and Deal Offerings to my database built through the years in ThePool. The goal was to get my network to fill out a survey about the deal and their potential commitment as investors.
From this research, we discovered that there were many people interested in investing in startups, but they didn’t have access to a minimum viable portfolio. I realized that traditional on-site demo days were not necessary and that a simple invitation from a trusted source would suffice.
So we went on and raise capital for 4 startups like this before building any piece of software or even a website. Our startup costs were around $120USD.
Building the MVP & Establishing our business
After this, we decided to establish and incorporate a company and build our first version of the platform. In mid-2018, the National Banking and Exchange Commission published a new law for crowdfunding, opening the market to innovators and pioneers in Latam like us to share deals massively to the retail market and went through the process.
This elevated our costs in legal and consulting fees and human capital to sustain a regulated operation but also has closed significantly the barriers of entry cause obtaining this type of license doesn’t come easily.
Our product continues to evolve, and new features have been deployed, some of them a bit earlier than necessary, causing us distractions and frustrations which are part of the process. My advice is to keep it simple until your customers start to need more features.
Validate your core product and try to feel comfortable with the results. Build a “happy-customer” factory that continues to come back and is willing to bring their friends over. Until then, you are not ready to scale.
Take us through the process of raising funds for your business
As explained briefly before, our launch to market came with a small concierge MVP using existing technologies. This gave us a lot of insights that validated our hypothesis: people would engage in an online invitation to invest without even knowing anything about the deal itself.
I concluded it would be much harder to raise capital from people who don’t know you. It sounds counter-intuitive based on what most VCs tell you to do, but as VC myself, I understood the hardship that comes with raising a VC fund from high-net-worth individuals. Our strategy has paid off well - we don’t have thousands of active customers, but instead we have hundreds that come back every month or so to re-invest and diversify their risk through a portfolio.
At that point, we worked with 40 active investors who continue to invest in Arkangeles.com today. With the new fintech regulations kicking in, we decided to hold all marketing expenses and go all in on content marketing, SEO, and organic growth while we revamped the whole platform.
For us, raising funds has never been easy. Sounds ironic being a VC ourselves, right? The reason is that it is a model very similar to venture capital, it is a fintech in the highest level of sophistication for the retail market since it involves their savings and investments, which most don’t understand and have huge fears and insecurities around the matter and type of asset class: private capital, where most of them have never been included before out of discrimination of wealth.
We did manage to raise around USD 1.5M through some angels, family offices, and VCs funds. This helped us get our official license in April of 2022 and allowed us to partner up with a huge Brazilian wealth-tech company and top 10 crypto exchange in the world focused on the future of finance: Defi, Blockchain, and Web3 financial products to continue our growth as an alternative investment platform for all generations to come. To help Latinos invest differently.
Since launch, what has worked to attract and retain customers?
It has been a constant iteration and learnings to optimize stickiness. Our customer acquisition has been slow as we explained earlier that we were more focused on recurrence rather than an acquisition to make sure that if we survived, we had a strong and sticky product delivering value consistently to our customers.
“Know Your Customer” Process
So what has worked so far has been definitively simplifying the “Know Your Customer” process to get accredited due to regulation and explaining to them that is something they need to do. We’ve done a lot of drip marketing using automated emails in different touchpoints and actions from our customers within the platform, combined with constant content marketing and product marketing. This helps remind them how our tools can help them grow and become unstoppable investors.
After they invest what they are most persistent and impatient about is portfolio reporting, it's obvious since you just took their money to allocate it to a Company that has huge risks at least they want to be informed in a timely and transparent way, good or bad news but informed. This increases the level of trust and entices them to re-invest.
Social Media:
In terms of the promotion mix, we do simple social media on Facebook, Instagram, LinkedIn, and Twitter. Most other channels are not that effective for the customer type we are looking for. We did a year of Content and Product led SEO to increase our rankings within the Google algorithms which still increases in traffic on a monthly basis.
Our advice focus on this earlier than later. If we had done that 2 years ago, in 2022 our traffic would have been exponential vs. what we see today. It doesn’t cost much as SEM or paid media.
This brings us organic leads on a monthly basis but the hard part is conversion at this point from the top funnel and mid-funnels. Naturally, we do organic PR with our content, guest blogging, and participating in panels, webinars, and events in the industry as part of our brand positioning and social proof for Arkangeles.com.
Whatsapp + Email Marketing
Inside our ecosystem, we have different strategies but mainly drip marketing, email marketing, webinars, portfolio reporting, and WhatsApp communications.
WhatsApp is showing great conversion rates since it becomes more personal and immediate and accessible than newsletters but beware of spamming. It has to be permissive and more of a pull than a push approach where the customer always pulls the need when they reach out.
Sometimes you can push but it has to be an accurate, value-adding message for them to thank you rather than cut you off. Because of this, we are testing on a chatbot that can help us automate in different channels the drip marketing we have been doing through email.
How are you doing today and what does the future look like?
As we continue to grow we are not profitable today but have a clear path to profitability which we feel is around the corner but still need a more critical mass of investors/monthly transactions to become break even.
For this, we need now to optimize our top/mid funnels and squeeze inefficiencies while improving our customer success efforts with accurate engagements to convert faster and better. There we have a huge opportunity without having to spend more on customer acquisition or increasing traffic through paid media.
We have invested in 73 startups with 62 companies still active, many just raised, several have raised their series A, a couple in the Bs and one has raised their Series C. Our current performance is 33% IRR and 2.4x MOIC and looking to raise ArkFund 3 to continue with our mission of mobilizing capital to bold entrepreneurs in Latam at their youngest, most vulnerable phase and help them take it to the next level of impact.
Our current LTV/CAC ratio is around 8x and we can improve that by optimizing the funnels and converting more leads into investors within the same month at the same time we bring more deal offerings to the platform on a monthly basis that can accelerate re-investments from existing clients.
We plan to keep growing in Mexico while we attract more regional investors. We have a good positioning around core Spanish-speaking Latam countries so we plan to focus on attracting more investors from those countries since many of our Startups that raise funds with our community come from those countries as well, so there is a natural affinity.
Eventually, we think of expanding our scope into other asset classes such as real estate, collectibles, nfts, art, you name it! Alternative assets that have appreciation year by year give better yields than what a traditional financial institution can offer you.
Through starting the business, have you learned anything particularly helpful or advantageous?
As an entrepreneur, you will always make mistakes. All of them can give you a learning moment if you know how to read between the lines. I have made poor decisions in hiring fast instead of slow and firing slowly instead of fast. In the past, this has cost me time and money, very valuable resources when starting up.
So the learning here is that you as a founder can never delegate early hirings and always be very accurate on what the Company needs and non-negotiable traits the candidate should have so you can assemble a precise team to what you need for your next stage of growth. Execution is king always.
On the other hand, we have always operated with very little capital which has limited our growth, but we focused more on building trust among our customers than acquiring customers massively. When you build a new startup it's all about balance and rhythm.
If you are deciding to start a business just jump! Don’t overthink it, that stress of being insecure around starting is much harder than the stress of actually building a business.
It’s hard to find your own pace to fulfill the expectations of your customers, your employees, your shareholders, and also your own. It is frustrating when you have a missing piece and your limited budget is constraining your operational capabilities or your team is not as experienced so all goes much slower. This is the main issue we have had for the past 2 years.
Now, not all has been slow, we have had several tailwinds behind accelerating our growth on other fronts like being early adopters of the Fintech Law now this has given us a huge advantage and barriers to entry of new entrants to our market. We have a good 12-month window at this moment to accelerate customer acquisition while we have less than 3 direct competitors on the market, so spending time and resources on this front has given us huge leverage and advantage in a more intangible way.
This combined with our relationships throughout Latam with top Startup Community leaders, VC funds, Accelerators, Non for profit entrepreneurial orgs, and others also strengthens our position and defensibility vs. new entrants or other competitors since building networks and communities is not easy nor fast.
So to conclude, when you see our growth it's not all about customers or growing at all costs, it's about balance and tempo. So, set up your pace and win your race.
What platform/tools do you use for your business?
There are many things to integrate within a tech platform to be metrics oriented and understand what happens through our different customer journeys.
We use AutopilotHQ to create infinite customer journeys with drip marketing sending bits of content or communications depending on their activities within our platform in a more automated way. We also use Segment to “segment” your customer's data in different buckets to communicate accordingly and personalize their experience.
The usual suspects such as google analytics, mailchimp, typeform, etc are used to keep up with customer success and customer acquisition. Now we are integrating a social commerce platform to communicate over WhatsApp to our clients since we have proven a great and effective conversion channel through chatbots.
Even better than email marketing, which at this point is still a very effective communication channel but saturated with too much content whereas WhatsApp is more of a “tweet-like” approach to be even more concise and effective in communicating with your customers.
What have been the most influential books, podcasts, or other resources?
A great book we read a couple of years back that was key to improving our UX/UI in our platform is “Don’t make me think”… it was written in the 1990s or early 2000s and you might think this is so obsolete, well no!
Yes, design has changed over the years, and products and services change all the time, but what never will change is human behavior and the human brain and how it reacts under stress, and fearful circumstances.
A bad website creates huge friction and drains extra cognitive energy on the human brain only reacts to a runaway decision and moves on to another website. Read and you’ll understand. The High Growth Handbook, is a beautiful book written by Elad Gil, a simple but great book with profound advice on how to build your startup from all angles.
A podcast I enjoy is Alt Goes Mainstream hosted by Michael Sidgmore who interviews pioneering leaders in the alternative assets and investment space, helping its audiences understand the revolution happening around many alternatives assets such as wine, real estate, collectibles, collectors cars, agriculture, startups, people, among others that now become an investable product or asset class for the masses through crowdfunding.
Other books inspired me as a leader such as Leaders it at Last by Simon Sinek, Essentialism by Greg McKeown, The Cold Start Problem by Andrew Chen, Play Bigger by Al Ramadan, No Room For Small Dreams by Shimon Peres, Mindset by Carol Dweck, Product Led Seo by Eli Schwartz and Range by David Epstein, Bold/Abundance by Peter Diamandis to name a few.
Advice for other entrepreneurs who want to get started or are just starting out?
If you are deciding to start a business just jump! Don’t overthink it, that stress of being insecure around starting is much harder than the stress of actually building a business. That doesn’t mean you will be successful but at least you did something about it.
As Peter Thiel says in his book: the most difficult step in anything in life is going from Zero to One. Always be patient in building a business and never rush into things out of growth pressure. Hedge your options and go full force into a few initiatives that can bring the most impact in the least amount of time with the least amount of resources, that way you will dilute less in your cap table.
As an investor and founder, I have seen a couple of mistakes often entrepreneurs make. Starting first by not establishing correctly aligned expectations with their co-founders. This usually stumbles the company into vulnerable stages creating unnecessary friction among them and damaging the culture they started with while provoking a viral negative effect downwards the Company which in turn becomes a very challenging situation to overcome for the founders that stayed in business.
So my advice is to establish the correct founder's agreement at the earliest possible, this way you know since day 1 the rules of engagement if friction or founder abandonment on how to distribute the equity.
Another main mistake I see, is most founders overestimate their fundraising capacities. It’s a very hard process that needs full-time commitment from one of the founders while others continue growing the business.
It means you are always raising and have to develop continuous relationships with hundreds of investors all the time, so when opening a round, you have many potential investors who already know you potentially interested in working with you. Remember they want to see a profit too with their investments so definitely you have to convince them you will be able to sell the company or create liquidity for them in the mid-term without sacrificing exponential growth.
Raising funds is a full-time job and it's not for everyone. As an entrepreneur do a deep reflection about getting into the venture capital treadmill, and what it implies to raise capital from VCs in terms of aligned expectations if you want that for your Company. Or, if you have been fostering relationships and building a network of potential investors many months or years before fundraising. Don’t overestimate and always be humble.
Keep very near your months-runway and don’t let it go below 6 months before you start fundraising again. Your only job as a CEO or founder of a startup is always to provide: cultural, human, operational, financial, and intellectual capital to your business.
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
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Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
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