This is a writing sample by “nycghostwriter,” AKA Barbara Finkelstein. It is “A tide to lift all ships in an emerging economy,” a cover story published in the December 2017 issue of B-Tank Magazine. You can get professional ghostwriting services from a published non-fiction writer. Email me or fill out the short form on my contact page.
BizTank founds first-ever, non-accredited Jewish crowdfunding platform
By Barbara Finkelstein
Politics aside, most people acknowledge that it takes a village to raise a child. And as entrepreneurs in need of investors increasingly recognize, it takes a village to raise a startup too.
This apparent truism has been the basis for Joel Klein’s BizTank, the startup incubator that constructs an ecosystem — or village — of entrepreneurs and investor “moguls,” all committed to creating wealth for their families and the wider Orthodox Jewish community. By the time BizTank moguls had promised $2 million in financial support for a range of startups from Cozy Cuddlerz, a Brooklyn-based purveyor of pet beds, to WaiveCar, a free electric car-sharing “mobility experience,” individuals outside the conventional investor community started asking if the village had room for them too.
“People wanted to be part of the tremendous creativity among innovators and inventors,” says Klein, a certified professional business consultant (CPBC), who combines his rabbinic training with marketing expertise to help business newbies build viable companies. “In email after email, they were asking, ‘Is there a possibility for me to invest in this or that opportunity?’”
As a lifelong member of the charedi community, Klein felt his community’s anxiety in his gut. While he knew that his talmudical background gave him a business advantage, Klein also realized that he had to investigate what it took to bring parnassa— financial self-sufficiency— into his family. His plan at age twenty included learning English and marrying a woman with the same vision of integrating business into a religiously observant home. How exactly to realize his goal, though, was a challenge for a Yiddish-speaking young man whose intellectual gifts had been trained exclusively on Torah studies.
Going after success
The path from Yiddish-speaking yeshiva student to global investor did not come with a guidebook — at least not until Klein eventually compiled his best business practices and lessons learned in The Audacity of Success and a similar Yiddish volume, both of which he wrote specifically with the charedi community in mind. Klein’s earliest foray into the business world was halting but fortuitous: As a volunteer with an organization called Rofeh Cholim Cancer Society (RCCS), Klein’s wife Leah became adept at fundraising and shared her skills with her husband. When Klein was ready to try his hand at a check-printing businesses, he was surprised when RCCS’s owner advised him not to do it.
“I don’t know, maybe he had a sixth sense about the role the Internet was going to play in personal and commercial banking,” Klein says. “He urged me to open a marketing company instead.”
The RCCS executive spelled out what Klein already intuited about himself. “He told me, ‘I know very few people like you who could help our community with marketing and messaging,’” Klein recalls. “He made a few well-placed phone calls to graphic designers and writers he had worked with, and slowly, I acquired several freelance projects where I could hone my innate marketing skills.”
The creative thinking that many a marketing MBA learns in school really did seem to be part of Klein’s business DNA. He could not go into a supermarket, department store or volunteer organization without asking himself, “How could this business become more profitable? More exciting?”
A failing juice bar rebounded after Klein advised the owner to highlight the health benefits of drinking banana-mango smoothies or carrot-celery juice. A mom-and-pop shop had a turnaround after Klein hired a horse-and-buggy to publicize its wares. He named a not-for-profit marketing campaign the “Kaleidoscope of Life,” and handed out kaleidoscopes to potential beneficiaries.
“I was always trying to come up with ideas about how to approach the public and how to grab their attention,” Klein says.
As Klein’s marketing business gathered steam, various investors and entrepreneurs expressed an interest in “opportunities.” Klein responded with a campaign he called “The 21 Marketing Mistakes,” which included specific advice for sellers (entrepreneurs) and buyers (funders). The de facto tutorial was effective and so profitable that he went on to establish his “Million Dollar Joint Venture” program — BizTank in all but name. Klein had responded to each new turn in his own business with the belief that every situation demands a unique plan of action. He concluded that the same kind of creative thinking would be key to solving the problem of underemployment and underinvestment in charedi communities around the world.
Turning no to yes
Telling people they couldn’t participate in the BizTank village may have been unavoidable, but it left Klein troubled. He reasoned that he had no choice. Security and Exchange Commission (SEC) rules were clear about investment by non-accredited investors — individuals who do not meet net worth requirements under the SEC’s Regulation D: Unless you had a million dollars and earned more than $200,000 a year for the last two years, you could not have a share in a new company.
Meanwhile, Klein’s investor hopefuls in the Jewish world were not the only people looking for a way into the innovation marketplace. Shaped largely by the technology disruptions that arose out of an ascendant Internet-based economy, and by the mortgage crisis of 2008, millions of Americans were looking for ways to become more financially self-reliant. One way to make that happen: Invest in the high-tech products and services that were replacing the way people read books, acquire information, look for jobs, move from place to place and shop for just about everything.
Turning little into lots
The answer to many an American’s prayers came in 2012 when Congress passed the Jumpstart Our Business Startups Act. The JOBS Act, particularly its 2015 Title III crowdfunding provision, permits small investors to make small investments and earn money if the company becomes profitable.
“BizTank’s emphasis was always on bringing the right deals to the right investors, and despite my desire to bring the benefits of BizTank to the wider frum world, I initially believed I could do that by working with well-to-do accredited investors,” Klein says.
In his ongoing search for BizTank funding sources, Klein nonetheless understood the potential power of crowdfunding, the online fundraising mechanism in which entrepreneurs and artists use the Internet to raise small amounts of money from large numbers of people. Indeed, an abundance of crowdfunding websites, such as Kickstarter, Indiegogo and GoFundMe, had been gaining traction in all kinds of communities since the early 2000s:
+ Eric Migicovsky’s Pebble E-Paper Watch, a customizable watch that could sync with smartphones, raised more than $10 million in 37 days from nearly 69,000 people who donated via Kickstarter. Migicovsky eventually sold his product’s software to FitBit, the wearable device maker.
+ David Mandel’s Bitvore, a business intelligence platform that lets companies analyze and integrate their data in new ways, garnered $4.5 million on Fundable, a crowdfunding company that generated $80 million in funding commitments in its first year.
Absolutely mesmerizing were the “turn-the-world-upside-down” startups, Ellison Eyewear among them, that exceeded their funding goals with a relatively small number of everyday people well inside their time frame.
Emerging economy in Brooklyn
With the appearance of the JOBS Act Title III provision, Klein felt ready to make crowdfunding part of BizTank’s communal wealth-generating strategy. With so many options, though, where to begin?
Klein says that one of his biggest challenges was leaving his comfort zone.
“Who was I,” Klein muses. “A boy from the charedi world. I was comfortable staying within the community. I was comfortable being a small marketing company. Taking on bigger challenges was actually painful.”
Klein remembers an incident early in his career when a job recruiter said, “Joel, you are too soft-spoken. If you want to succeed in business, you’ve got to be aggressive. Loud!”
Klein’s recalls that he walked out of that meeting “shattered.”
“I needed to change myself,” Klein says. “I needed to start talking loud to become more convincing and more powerful —“
He caught himself. “I needed to talk loud because this guy decided I should?”
Klein decided to “teach this guy a lesson.” He would stay true to himself and get out of his comfort zone, even if that meant interacting with people beyond his own community.
When Klein sought to expand BizTank’s funding reach, he was determined to find the right top-of-the-line crowdfunding platform — wherever in the world it might be.
A happy meeting of the minds
In one of life’s just-in-time synchronicities, Chuck Pettid, founder of RainmakeMe, a funding group that invests in early-stage, pre-revenue startups, and a partner at AngelList spinoff republic.co, read a story about Joel Klein and BizTank in The New York Post.
“They called BizTank the ‘ultra-orthodox Jewish version’ of ‘Shark Tank,’” Pettid says, referring to the New York City tabloid’s July 9, 2017 profile of Klein and his brainchild. “BizTank had the characteristics of the businesses I’m looking to fund.”
Pettid’s approach to crowdfunding involved some counterintuitive thinking.
“The people who graduate from Stanford University can work their networks and raise money for their startups, but not so much the minorities with ideas that are just as exciting,” he says. “As for the Jewish community here in Brooklyn, it is appealing because of its as-yet untapped entrepreneurial creativity.”
What Pettid alludes to is the rise of Williamsburg, Boro Park and Crown Heights as Brooklyn’s best-kept secret: The ultra-orthodox Jewish community, steeped in Torah learning and committed to a religious lifestyle, is eager to support startups that will bring parnassa to individuals and families alike. To that end the Brooklyn charedi community may be every bit as much an emerging economy as countries such as Thailand, Poland and South Africa.
“Making a crowdsourcing platform part of your growth strategy is key to expanding investment opportunity not only for entrepreneurs and accredited funders, but also for any ordinary person with twenty-five dollars to invest,” Pettid says.
Wisdom in a crowd
Encourage ordinary people — many of them with a yeshiva education only — to invest in a high-tech startup? Sounds risky. As Pettid observes, however, the members of the charedi community are likely as prudent a cohort as the 40,000 investors on the Republic crowdfunding platform.
“There’s generally a myth that non-accredited investors are not sophisticated enough to invest in private companies,” Pettid says. “Totally untrue. At worst, they are at the same level of intelligence and ability to do due diligence as accredited investors. And that’s the case if they are making a twenty-five dollar investment or a $20,000 one.”
Pettid’s analysis is more than a case of enlightened self-interest. Finance journalist James Surowiecki begins The Wisdom of Crowds with the same premise, offering example after example of instances where “random crowds of people” make well-reasoned guesses with a higher degree of success than individual experts.
“A classic demonstration of group intelligence is the jelly-beans-in-the-jar experiment, in which invariably the group’s estimate is superior to the vast majority of the individual guesses,” Surowiecki writes in his highly cited book. “When finance professor Jack Treynor ran the experiment in his class with a jar that held 850 beans, the group estimate was 871. Only one of the fifty-six people in the class made a better guess.”
As an angel, or small startup, investor himself, Pettid is in a position to see the impact that the “wisdom of crowds” can have on the development of a fledgling company. He cites Kickstarter as the source of initial funding for Oculus Rift, a virtual reality gaming system created by then-eighteen-year-old Palmer Luckey. Some 10,000 individual backers pledged nearly $2.5 million to get Oculus Rift off the ground.
“Because Kickstarter is a rewards-based platform, small donors were walking away with a limited-run t-shirt or poster, while the heavy hitters who invested between $300 and $5000 got varying editions of the product itself,” Pettid says. “But just imagine if people could have invested their three- or four-hundred dollars through Republic’s equity crowdfunding for a stake in the company. They’d have walked away with hundreds of thousands of dollars when Palmer Luckey sold his startup to Facebook for $2 billion.”
Even so, the question remains: Can crowdfunding be a rising tide that lifts all boats?
What crowdfunding overall, and Republic specifically, offers BizTank is a means of bringing founders and investors together in a way that Tarun Khanna, director of the Lakshmi Mittal South Asia Institute at Harvard University, would say is reliable, credible, easily accessible and reproducible. Professor Khanna believes these four requirements fill what he calls “institutional voids” typical of every emerging economy from Brazil to Brooklyn.
“Institutional voids are impediments to a thriving market economy and cannot simply be mandated away,” he says in an online course he gives on Harvard’s edX open learning platform. Moreover, identifying institutional voids provides a “crucial jumping off point for assessing business opportunities, market conditions and risk.”
Klein believes that partnering with Republic to include crowdfunding in its founder-funder match game addresses the institutional void that has restricted opportunity and financial self-improvement in the charedi community.
Only the beginning
Pettid marvels just how far BizTank has come in its relatively short existence.
“Until a year and a half ago, BizTank had only one way of raising funds for its entrepreneurs,” Pettid says. “Thanks to its openness to crowdfunding, BizTank suddenly finds itself in a twenty-first-century investor marketplace alongside hot investor groups like Y Combinator and Techstars. This is all new and potentially very lucrative, not just for BizTank but also for Brooklyn’s Orthodox Jewish community. And we’re only in the first inning of a nine inning game.”
In the same vein, Klein adds, “If you want your business to be relevant, to yourself and your community, you need to keep your eye on the ball. That means knowing your own company inside out, using your business successes to raise your community up alongside you, and taking advantage of entrepreneurial trends available to everybody. This is true for startups, and it’s true for BizTank too.”
Will the charedi “crowd” step up to the plate?
Says Pettid, “I can only say it’s refreshing to see people treat a twenty-five dollar investment as precious as they would a ten thousand dollar one.”