I had never heard of Fancy.com until I saw its equity crowdfunding campaign on Wefunder. And I have to be honest, I only knew about the online curated shopping site for unique home decor, art and accessories because my editor asked me to write about why someone might invest in Fancy.
Here’s what I found out.
You Don’t Have to Be Accredited to Invest
If there’s one thing that drives me nuts is the “accredited investor” rule. It keeps smaller investors out of private investments for all the wrong reasons. TradeSmith Daily published a December 2019 article that does an excellent job of explaining my frustration.
“The accredited investor rule is silly for multiple reasons. For one thing, the notion is laughable that investors with more money are ‘sophisticated’ in comparison to those with less. Investors can have not just millions, but billions under management and yet still be gullible goofballs.” TradeSmith Daily’s research team wrote in December.
To alleviate this silliness, the Securities and Exchange is proposing that the cap for private companies raising funds online through sites such as Wefunder be increased to $5 million from the current maximum of $1.07 million. Other changes will also be implemented to help equity crowdfunding reach their potential.
According to Jason Frishman, CEO of Netcapital, a Boston-based online portal for private investments, the changes will help entrepreneurs raise more capital while providing greater access to private investments, both accredited and non-accredited investors.
The simple reality is that someone who’s worked as a barista at Starbucks (NASDAQ:SBUX) for 20 years and has diligently saved a significant portion of his or her pay, might be more “accredited” than the corporate lawyer with a spending addiction.
Smart investors come in all packages. There is no one-size-fits-all private investor. More importantly, despite raising more than $7 million in funding since its founding in 2010, anyone with $250 can invest in Fancy.
You don’t have to be accredited to get in on the action.
There is a twice-yearly craft show in my hometown of Toronto called the One of a Kind Show. It brings in artisans from all over Ontario, Quebec, and beyond, who sell their one-of-a-kind creations to shoppers who take in the show each year and never leave empty-handed.
Fancy.com reminds me of this kind of show, which I’m sure exists in every major town in North America. However, given what’s transpired with the novel coronavirus and Covid-19, buying these items for yourself or as a gift, has become the norm.
Don’t get me wrong, if I still lived in Toronto, I would always attend in person, but an online site gives you gift possibilities 365 days a year.
As a business, it’s no overnight success, despite the traction it’s gained in the past decade.
More than 12 million accounts have been created on Fancy since 2010. Those accounts have been offered more than 200,000 products to buy from its 800+ retail partners. It’s processed more than 2 million transactions across 120 countries.
In terms of social media, Fancy has a daily email that goes to more than 1.1 million subscribers. Its Instagram account has more than 347,000 followers, and the site has more than 900,000 monthly active users.
That might not be Facebook (NASDAQ:FB) numbers, but it’s pretty darn good.
As a kid, I was always looking for that next great brand. I guess that’s why I like Pinterest (NYSE:PINS) so much. While I’m not nearly the fashionista my wife is, I can see from a quick peruse of the site that it’s got a lot of neat stuff.
Why Invest in Fancy?
Where possible, it makes sense to go upmarket rather than down. There are very few successes, like Amazon, in the world. When margins are higher, you’ve got a little wiggle room. Companies like Amazon operate on cut-throat prices and machine-like execution that’s hard to match.
Although Fancy saw revenues decline 23% in 2019 to $5.07 million from $6.61 million a year earlier, it was able to cut its losses by 65% to $4.19 million from $12.15 million in 2018.
The beauty of Fancy’s business model is that it doesn’t own any of the inventory. It gets paid a fee for each sale and shipment of the product. Asset light, investors can be confident that any funds raised in this offering will go to securing more customers, marketing the brand, and adding the number of quality sellers it has on the site.
Fancy has raised $172,000, more than three times its minimum target. That’s an average commitment of $800 for each of the 215 investors that have signed on. With a minimum investment of $250, the average investor is three times as committed.
Fancy continues to scale its business on its pathway to profitability. You can expect losses for the next couple of years, perhaps longer. If you can afford to lose $800, about the price of five coffees per week for a year, you ought to spend some time at both Fancy’s website checking out the product and at its Wefunder campaign page.
As with all investments, especially those losing money, there is no guarantee. Do not consider this investment unless you’re prepared to lose it all.
Fancy’s worth a closer look, in my opinion.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
Investing through equity and real estate crowdfunding or asset tokenization requires a high degree of risk tolerance. Despite what individual companies may promise, there’s always the chance of losing a portion, or the entirety, of your investment. These risks include:
1) Greater chance of failure
2) Risk of fraudulent activity
3) Lack of liquidity
4) Economic downturns
5) Dearth of investor education
Read more: Private Investing Risks