Bootstrap First, Raise Money Later: Art.com CEO Josh Chodniewicz (Part 5)

Sramana Mitra: What did you do after Art.com?

Josh Chodniewicz: We were in San Francisco. I moved to New York and lived a couple of years there. Frankly, I think I dealt with an identity crisis. All I knew was Art.com. I had to get around that. I started making investments in startups. I saw quite a bit of success in that.

Sramana Mitra: What did you invest in that really did well?

Josh Chodniewicz: A company called Mixbook. They’re a competitor to Shutterfly. They make photobooks. They make it in my style. They sell them for more than they make them. They’ve been growing every single year. I was the original investor there. They raised one venture round.

Sramana Mitra: The company has already sold?

Josh Chodniewicz: It did not. It’s still running. I did have a small exit where I was able to take out 5x my original investment. That was nice. Now you see the value of that business is significantly larger. That opened my eyes to the secondary market of investing and also the problems with that. I knew whatever I did, I wanted to be passionate about it. That’s just how I am. I’m compulsive. I want to win.

Sramana Mitra: You can’t be a good entrepreneur without being compulsive.

Josh Chodniewicz: Maybe so. I also wanted to do something big. We had 1,200 people in Art.com at its biggest point. I spent some time thinking about what I would do next. I facilitated a discussion room. I hired a facilitator. I got in a conference room with others to brainstorm. We settled on Fundify where we’re trying to simplify the startup landscape of funding.

With equity crowdfunding, laws have changed. I really like the idea of disintermediating the world and allowing individual investors to deploy their capital into this asset class even though they’re not accredited. You don’t have to be a millionaire to earn these types of returns.

Sramana Mitra: We’ve been doing this accelerator since 2010. We’ve seen the whole equity crowdfunding thing come together and evolve. My two cents is that the vast majority of companies who go out to raise money are not fundable. They need work.

Josh Chodniewicz: That’s correct.

Sramana Mitra: In our accelerator, we state up front that just by joining One Million by One Million, don’t expect that you’re going to get introduced to investors. If you’re not fundable, we’re not going to introduce you. We work with them. We send them to investors when they’re fundable. This is a phenomenon that I expect that if you have an equity crowdfunding platform, you’ll be working with this issue. Somebody will have to prepare them. Some will be ready but not all.

The second thing is these equity platforms are not comfortable leading the rounds and pricing the round. They want somebody else to lead the round and then fill out the round. With my community, that creates a problem.

If I can find a lead investor for my company, I can find a follower investor as well. It’s much easier for me to work with my own network and find both the lead and the follower. As an equity crowdfunding platform, if you don’t give me a lead term sheet, then you’re not very useful to me.

Josh Chodniewicz: There’re a lot of great thoughts there. I agree that most companies are not ready for funding. They need some trusted advisors. We aim to provide some of that.

This segment is part 5 in the series : Bootstrap First, Raise Money Later: Art.com CEO Josh Chodniewicz
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