FundingFuel: Turning Consumers into Investors
During his time working at a venture firm, Pedro Moore had seen plenty of people gain stakes in various businesses, and he wanted something like that for himself.
There was only one problem.
“I didn’t have the bank account to do it,” he says.
Moore figured there were people out there like him with the desire to own portions of businesses but not the ability to make sizeable investments, so he and a partner started FundingFuel, an “equity crowdfunding” company that allows people to make modest investments in portfolios of franchises and earn income in the short and long terms.
The beauty of it is that investors can get a piece of a franchise for only $1,000. Even better: it is done entirely online. Just as many financial transactions have moved from in-person to the computer and phone, so does FundingFuel permit people to join up digitally.
“Mobile computing has changed many different things for the consumer,” says John Collins, one of the founders of the First State FinTech Lab. “People want things at their fingertips more than ever before. They don’t even want to go to a portal on a computer.”
Moore started laying the foundation for FundingFuel in 2018 with the initial goal of allowing everyday people to invest in franchises. Since the fees for franchisees can be steep, there aren’t many people with the wherewithal to own them completely. Those who have some money and interest can augment their income by participating.
Moore reports there are some conditions that must be met in order to be considered an “accredited investor” for FundingFuel. Individuals must have $1 million net worth, excluding their primary residence. Or, they can have an annual income of $200-250,000. It swells to $300,000 for married couples. Franchisees benefit because those who invest in their businesses can provide needed capital for improvements.
“Investors can cherry-pick what kind of franchises they invest in,” Moore says.
FundingFuel is using Amazon’s AWS as a platform. “It’s one of the preferred choices when building a startup,” Moore says. Eventually, he wants the company to use technology that allows participants to be able to transfer money directly from their bank to a fund. The goal is to make the entire process quick and smooth. If it’s possible to apply — and gain approval — for a credit card in five minutes, and mortgage applications have been streamlined considerably, making this kind of investment for those qualified should be easy also.
The returns on investments can vary. Some people can gain an equity stake, while others are able to reap a guaranteed annual return on their investment over a certain period of time. It depends on the type of franchise involved — hotel, restaurant, etc. — and what the individual is looking for. The flexibility, combined with the ease of operation, will provide opportunities for a personalized experience.
“We wanted to create something for people who wanted to invest in a franchise but didn’t want to go out and find opportunities,” Moore says. “Time is a precious commodity. It would be amazing if someone could log in, browse through companies, and if they saw something they liked, they could lock it in.” —Michael Bradley