Updated: Aug 18, 2021
- The Journey of Darylle Johnson (Equity Crowdfunding Series)
As a business owner, equity crowdfunding can be your answer to support and grow your business. On the flip side, have you ever thought about investing in other businesses? If you're willing to shell out $250 for dinner, why not put that money toward stimulating a for-good business or supporting a founder you believe in? This is precisely how our guest Darylle got into the world of private equity investment.
In this episode, Darylle Johnson joins us to talk about private equity investment. She tells us how she screens businesses to find out if they're a good investment opportunity. She notes that specific characteristics can make a business stand out and have high returns. However, investing is risky. Darylle's here to share her experiences so that you can learn from them.
If you are interested to know more about private equity investment, then this episode is for you!
Here are three reasons why you should listen to the full episode:
Discover what Darylle looks for in a business before investing.
Learn how Darylle approached investing and minimized risk.
Understand that you will make mistakes and learn how to bounce back.
Visit Christina Sjahli’s website for more insights on raising capital through equity crowdfunding on the Her CEO Journey podcast series.
Chat with Christina and set up a time here!
Her CEO Journey Equity Crowdfunding Series:
Creating Successful Marketing Campaign to Raise Capital - The Journey of Trieste Reading
Raising Capital with FrontFundr: Due Diligence and Managing Finances - The Journey of Jaime McNally
Making Your Way Through the Legal Side of Raising Capital - The Journey of Julie Bogle
Create Your Financial Story Before Raising Capital - The Journey of Vivian Riley
Pushing Boundaries as a Woman of Colour and Empowering Women Entrepreneurs with Financial Knowledge - The Journey of Stacey Martin
Download this Action Guide to help you understand more about private equity investment.
Investment platform: FrontFundr
[08:08] How Darylle Got into Private Equity Investment
A lot of people think that private equity investment is risky and not possible. But that’s far from the truth, and more women need to know this too.
“And that's one of the big differences with private equity to, you know, public investments is that you put your money and you can't just take it out, like you're giving it to them and agreeing that they can use it as they need to, to expand their company.”
Darylle shares that her family used to be poor growing up, but she wanted to change and never wanted to experience it again.
Her drive led her to open a dance studio of her own. The business grew and blossomed until the pandemic forced it to close.
Realizing that the business may make her bankrupt, Darylle started learning about e-commerce, publishing and investing.
Investing can lead to great returns. Darylle details her first investing experience in the full episode!
[18:12] What to Consider Before a Private Equity Investment
It’s good to know about the work that the company does before investing in it.
Remember, don’t let your emotions and biases be the deciding factor of your decisions.
“I think it's important to have your hands within an industry that you're investing in, just so that you know the nuances to look out for. But it certainly shouldn't be the emotional deciding factor of what you decide to buy.”
Equity crowdfunding is risky. Make sure that your investment is something you’re ready to lose.
“Equity crowdfunding is risky, and anybody going into it should be prepared to never see their money again. That's obviously not the goal, but it's something that could happen. So that's kind of the mindset I had since day one, that I'm gonna put this money in: I might never see it again.”
[22:10] Risks in Private Equity Investment
The company you invest in can go bankrupt. As an equity crowd funder, you’re not getting your money back.
The company you invest in might remain a mom-and-pop shop.
If so, you’re not going to get dividends, especially if it’s not in the agreement.
[22:47] SAFE: Stay Away or Do It?
The first thing you have to look out for is a SAFE or Simple Agreement for Future Equity.
SAFE is an agreement that you will be getting future shares.
SAFEs are meant to be simple agreements, but it has become complicated over time.
Before investing in anything, make sure you understand the terms and agreements.
Listen to the full episode to learn why investment platforms need to educate users on SAFE.
[26:04] Understand the Investment Return
Don’t invest in just anything; you need to know if it will be worth the investment.
Even if you can't predict the future, look for indicators that can lead to a potentially high ROI.
One good indicator is when companies have a moat or competitive advantage.
These advantages include having a new idea, innovations, or notable founding members.
[27:07] Know the Characteristics of the Business
You also need to look at the scalability of the business.
When looking at scalability, take note of cultural barriers that may hinder or help the business growth.
Even if a business seems scalable, check if the market is saturated. How is the company standing out from the competition?
Assess the brand and read between the marketing lines.
Social media is digital real estate; businesses need to have a following if they want to grow.
[31:37] Discerning Share Prices in Private Equity Investment
Businesses approach crowdfunding for two reasons: as a financial crowdfunding tool or as a marketing tool.
Look at the business as objectively as possible.
Businesses in crowdfunding platforms are pre-revenue or post-revenue. A company that’s post-revenue needs to be transparent with its financials.
Hard evidence and financial records are critical. Hear why in the entire episode.
[37:01] Learn as You Go
You will make mistakes as you go along, but keep learning.
A lot of platforms allow a small amount of investment.
Learn the process and just do it! You can start with a small investment.
“I want to play with this; I want to get my feet wet. And just learn the process, do it once, find a cheap investment that you think you believe in, and just try it out.”
Remember, look at the revenue and business model. Don’t be swayed by the marketing.
Find businesses with multiple revenue streams. Learn more by tuning in to the full episode.
[42:43] Look at the Team Composition
Look into the people working in the business. There needs to be someone who knows finance.
Know if there’s someone in the business who can help them go public.
Not a lot of businesses can hire a full-time CFO, so look at their advisory board as well.
Knowing the team’s experiences can help you project expectations on the private equity investment.
[45:43] How to Gauge Valuation
If you want to know a company’s valuation, you can check the competition.
You can also check the profitability of products through websites like Viral Launch.
There are a lot of innovative companies out there, and you can find them through social trends.
Observe and notice patterns and growing trends.
Have the assumption that your investment won’t return for a very long time, if at all.
[50:37] Empower Women in Investing
Daryll shares that the majority of subscribers on her Youtube channel about investing are male.
Women need to be empowered towards financial independence, no matter what route they will take.
“I knew that I had the drive to be successful because I never wanted to experience that again. I'm like, ‘Okay, this is maybe reverse karma. This sucks now, but it doesn't have to be like this forever. So I'm going to find a way to create my own financial independence.’”
People need to have financial knowledge and literacy.
Darylle Johnson is the co-founder of JAB Publishing, a card game company in Canada. Before founding this business, Darylle was the owner and founder of Street Kings Dance, a hip-hop dance studio for children. The studio produced contestants who went on to win a silver medal Hip-Hop International competition.
Along the way, Darylle got interested in equity crowdfunding and got into private equity investment. In her experience, she saw that investing is still dominated by men, and she wants to change that. On her channel, Private Equity with Darylle, she shares insights into private equity and hopes to inspire and empower women towards financial independence.
“And they [Warren Buffet and Charlie Munger] talk about a moat. And that's something that a business has, that kind of protects them, circles them, that makes it harder for competition to compete against them.”
“And that's, that's one of the reasons why companies do equity crowdfunding is because they get this base of investors who turn into advocates of the company.”
“Don't start biting off things just to bite off things. Bite off things because there's a demand for it. And you can supply it.”
“You really need analytical skills, and to be able to pick apart and see past what is being presented for you and just dive deep. Get creative on how you can find answers for things and just be as objective and unemotional as possible in the process.”
“My mission is to help women get towards financial independence...I just want to help kind of bridge that gap. And just bring information and people can choose what they want to do and how they want to do it. But I want to be that voice.”
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