Learn about the game changer for WordPress LMS web hosting with Tom Fanelli in this episode of the LMScast podcast hosted by Chris Badgett of LifterLMS. Convesio is the first self-healing, autoscaling, platform-as-a-service for creating and managing your WordPress websites.
Whether your WordPress website serves as a brochure for your business, an eCommerce store, or a full LMS website that caters to customers before and after the sale, you’ll need website hosting. Tom breaks down the different types of website hosting, from the cheapest option of shared hosting that you can find with many companies such as GoDaddy and Bluehost. Then the next step up from there is VPS (virtual private server) hosting where you’re working with similar resources, but they’re dedicated to your website specifically. Then you have cloud hosting, which can refer to hosting technology outside of the scope of shared or VPS hosting. The next tier of hosting for WordPress users would be managed WordPress hosting, and these companies focus exclusively on hosting WordPress websites, rather than trying to serve multiple CMS tools such as Joomla or using your own code.
One innovative approach to website hosting with Tom’s platform is the self-healing aspect. Self-healing is the ability for the system you’re hosting with to internally monitor its own health and take steps that are progressively more extreme to repair the issue. The best part about this is there is zero human intervention, because everything happens automatically.
Tom shares a story of his experience before starting Convesio with a website going down with a popular WordPress host. The website went down at 5:00am, but he didn’t catch it until 8:00am. And then he had to get in touch with his web host, and someone manually restarted his PHP to get the site back up. This entire process took about 5 hours, where with a solution that is self-healing like Convesio it would have been about 15 seconds between the time the system went down to the server automatically restarting and fixing the issue.
Chris and Tom also dive into how Tom was able to get Convesio off the ground using equity crowdfunding instead of using venture capital firms. Tom shares some great tips for anyone considering using equity crowdfunding, and some insights behind how businesses can get off the ground using that instead of traditional investment methods.
You can learn more about Tom Fanelli and the awesome, game-changing technology he has over at Convesio.com.
At LifterLMS.com you can learn more about new developments and how you can use LifterLMS to build online courses and membership sites. Subscribe to our newsletter for updates, developments, and future episodes of LMScast. If you like this episode of LMScast, you can browse more episodes here. Thank you for joining us!
Episode Transcript
Chris Badgett:
You’ve come to the right place if you’re a course creator looking to build more impact, income, and freedom. LMScast is the number one podcast for course creators just like you. I’m your guide, Chris Badgett. I’m the co-founder of the most powerful tool for building, selling, and protecting engaging online courses called LifterLMS. Enjoy the show.
Chris Badgett:
Hello, and welcome back to another episode of LMScast. My name’s Chris Badgett, and I’m joined by a special guest, Tom Fanelli from convesio.com. How are you doing, Tom?
Tom Fanelli:
I’m doing great, Chris. Thanks for having me.
Chris Badgett:
So, Convesio is the first self-healing, autoscaling platform as a service for creating and managing WordPress websites. It’s a hosting company. Let’s start there. What actually is web hosting, Tom?
Tom Fanelli:
Sure. So, in its most basic form, your website, your WordPress website, whether it be a course or a brochure for your business or an eCommerce store needs, let’s call it real estate on the internet to be accessible worldwide, 24 hours a day by anyone that might look it up via its domain name. That real estate is, it comes in many forms, but it’s generally referred to as web hosting. And it can really be the, what I would call, traditional or legacy type of hosting which is shared hosting, which is most of the time what you get at companies, the big companies you think of that do hosting GoDaddy, Bluehost.
Tom Fanelli:
And then perhaps you might graduate to a more resource-dedicated version of that, which is called a VPS, or a virtual private server. And we can go into what these are more in depth or perhaps you might graduate to something even more upscale, which is in our world managed WordPress hosting, sometimes referred to as cloud hosting. That’s a universal term of things that don’t seem to fit into the shared and VPS category. And then probably lastly, there’s flavors of hosting where you can go out and get your own dedicated machines. And that seems to be a shrinking niche, given all the amazing stuff providers like Google and Amazon are doing with virtual machines.
Chris Badgett:
So, what’s the main difference between a VPS and managed WordPress hosting in the cloud?
Tom Fanelli:
Yeah, good. That’s a really great question. Most of the time a VPS is a managed WordPress hosting provider is using VPS technology. Now there’s some of them out there that use a shared hosting approach. And what they do is they let layer on top of that better services, better support, WordPress-specific knowledge, perhaps some optimizations in the platform that are WordPress-specific.
Tom Fanelli:
And so, when we talk about managed WordPress hosting, the biggest differentiator is those are hosts who have an offering or a business that solely focuses on WordPress. And so, that focus allows them to have much more of a better performing product than companies that are out there trying to host every CMS and static webpage that you could have out there. Right? So, if you get a generic shared hosting account, you might want to put Joomla, WordPress, who knows what, on it, your own code. You get managed WordPress, you’re pretty much just running WordPress.
Chris Badgett:
That’s awesome. On your website, which is @convesio.com, it says the game changer for WordPress. I love a good product hook and then a tagline. And I want to unpack your tagline, which clarifies a product hook, which is game changer. But I want to get through a definition of terms so that we can just unpack these individually. What does self-healing mean when it comes to hosting? Like let’s say we get a traffic spike and the site goes down, is that like, that’s a problem that self-healing might help?
Tom Fanelli:
Well, that’s probably more of a problem that scaling would help.
Chris Badgett:
Auto scaling. Okay.
Tom Fanelli:
Auto scaling.
Chris Badgett:
We’ll get to that one. What’s self-healing?
Tom Fanelli:
So what self-healing is, so I’ll give you a little bit of the genesis of this technology that we’ve created because it’s radically different than BPS technology and shared hosting. So, we’ve built this platform from the ground up and we really re-imagined what WordPress hosting would be like. I’ve been building websites, this is going to date me significantly, but believe it or not, the first product I ever used to start building websites was a product called Adobe PageMill, which predates WordPress. Right?
Tom Fanelli:
And so, being in the business for a long time, I was personally frustrated on the solutions for hosting WordPress that they really there was not much significant revolution in the space in terms of how we host WordPress. Yeah, we have shared and we’ve got VPS and we’ve got people doing managed WordPress better than what the traditional WordPress offerings are on shared. But still, if you look at companies like Google and Apple and Facebook, these are companies that are using sophisticated cloud infrastructure setups that have a lot of scaling in them. They have the ability to autocorrect problems that arise.
Tom Fanelli:
And so, that’s what we mean by self-healing is the ability for the system to internally monitor its own health and then take steps that are progressively more extreme to repair the issue with, I love this term, zero human intervention, right? It all happens automatically. So, a great example of this is I was hosting with a popular managed WordPress hosting provider before we started Convesio. And one day I woke up, it was a Saturday morning, right? I started having an alert go off at 5:00 AM that one of my client’s sites was down.
Tom Fanelli:
I didn’t catch it til 8:00. It was a weekend, I had to send an email. Then they replied back and they were like, “This is four or five hours has gone by. Oh, we restarted PHP,” which is essentially a fancy way to say they basically just restarted the service running my website. And everything came back up. Well, that’s great. That took five hours to do what was literally probably someone pushing a button.
Chris Badgett:
That’s the oldest tech support thing in the book, turn it off and turn it back on again.
Tom Fanelli:
Right. Exactly.
Chris Badgett:
Yeah.
Tom Fanelli:
And so in our world, that issue would have been resolved within under 15 seconds because within seconds our platform would start getting notifications that PHP is not responding or there’s some fatal error. Right? The first thing it’s going to do is try to restart the service. And so, that would happen. That five hour outage would have been probably under 15 seconds.
Chris Badgett:
That’s awesome. Well, let’s talk about auto-scaling. Let’s say we have an online course or a membership site and one of our affiliates on Black Friday sends a ton of traffic. What does auto scaling actually do to help us absorb that hit of traffic?
Tom Fanelli:
Yeah, so that’s a good point. So, what I’ll do is just explain roughly how our technology works. And so, when we deploy what we call a cluster, which is essentially a server footprint that your site’s going to go on. We deploy a minimum of three nodes or three servers on that cluster. And every layer of our architecture is broken out into different, what we call containers. Now, that’s a new tech word. Google and Facebook used container technology. Think of them as like micro VPSs, right? It’s a very small virtual private server that only runs specific segments or functions of your website.
Tom Fanelli:
And so, in our tech stack we start with load balancers, right? And then we hit our caching level and then we have your WordPress website, then we have a database cluster, that’s actually one of the things that we do differently. Everybody uses a database cluster, so there’s your database is running on multiple servers in multiple nodes all the time. There is no notion of a single instance of My SQL on our platform.
Chris Badgett:
And that’s also a lack of a single point of failure as well.
Tom Fanelli:
That’s exactly right. And so, what we’ve tried to do by architecting this platform this way is we’ve basically said we’ve taken the whole WordPress virtual private server thing, which is one set of resources on a physical machine and we’ve flipped it on its head and we’ve said, “We’re going to separate all this technology, not into single resources on a physical machine, but multiple resources on multiple servers.”
Tom Fanelli:
And what that allows you to do is your actual instance of WordPress, because we’re using load balancers can replicate itself. So, as soon as your instance or your website starts to come under load, if it hits some peak level based on your plan and your capacity, we replicate a copy of it and then we start to distribute the load between both of those instances.
Tom Fanelli:
And then we replicate another copy and you can go up to any number of replicated instances of your website running simultaneously. Then what’s really nice about it is you don’t have to choose, the best part about this is everybody gets this technology on our platform. You don’t have to choose a different package, go in and subscribe to the next tier. We scale out your website and then as soon as the traffic subsides, we collapse it back in, we scale it in and you only pay for the additional usage during that expanded period of time.
Chris Badgett:
Is that usage base pricing what you mean by platform as a service or what is platform as a service?
Tom Fanelli:
Yeah. So, I don’t like to think of us as a hosting provider because we’re so radically different. And part of this is like I know everyone understands what hosting is. But I don’t think necessarily of Amazon as a hosting provider. And so, the technical term of a pass or a platform as a service is Amazon would be an infrastructure as a service provider, right? And so you probably would not have a lot of people going to that because you have to have deep system administration knowledge to set that stuff up.
Tom Fanelli:
And so, a platform as a service is really the next step of simplifying the usage of an infrastructure provider. And so, because we allow you to control settings, like you can pick different resource usages, you can control your scaling. We feel like we’re the sort of one step removed from an infrastructure provider, but we’re not a hosting provider where you might say, “I need to deploy a single website, right? Or 10 websites.” Every single site that you deploy on our system has its own set of dedicated resources.
Chris Badgett:
Wow. That’s super cool. There’s something you said and I want to come back to, but before we go to that, I want to look at something I saw. Let’s see, where was it? It was something about not your average hosting company where you rely on like cPanel Nginx and some things. Can you clarify what that message was and what the angle is there?
Tom Fanelli:
Sure. I mean, the dirty truth in the hosting space is most hosting providers are pretty much all the same. I hope that doesn’t get me in trouble with my peers out there. But cPanel is the predominant technology for managing websites that are on servers being hosted. Right?
Chris Badgett:
Isn’t Plesk another one.
Tom Fanelli:
Yeah, Plesk is another one. There’s a few others out there and there’s great tools. I mean, they’ve done an amazing job, cPanel’s done a phenomenal job. What we did was we said, “Look, if we could reimagine this platform…” We didn’t want to use anything off the shelf when we were building our platform because we just thought that is, there’s a lot of people out there simply me too-ing one another, right? It does not take any sophistication to buy a server, install cPanel, set up a website and call yourself a hosting provider. Right?
Tom Fanelli:
That’s a viable business for a lot of people. And I’m not knocking it, it’s not what we do. We’re a product-centric team of people that’s trying to innovate some technology. And so, what we’ve done is really, I think the next step or evolution in hosting. And to the point of what’s the difference, our control panel’s really simple to use. It’s easy, it’s fast, it’s focused just on what the WordPress hosting provider needs and the things that you would not find in those traditional solutions that is relevant to our platform like container management and things like that.
Chris Badgett:
That’s cool. Well, I’m a copywriter by just development. I wasn’t classically trained at it, I’ve just been working on it for a very long time. So, when I see a good tagline, I really like to dig in. You said the last part of your tagline is for creating and managing. A lot of times the focus is on just managing. You put creating in there. Talk about creating and managing and why you chose to use both verbs there?
Tom Fanelli:
Sure. Yeah. I think that we are very focused on, well, I feel like the creative agency space is extremely underserved, right? There’s a lot of things that are important to agencies and creators and especially those creating many sites, right? Or managing portfolios of sites. And it’s those types of things that I think we saw, and much to their credit Flywheel had been focused on that space pretty heavily. Right? And they did a great job focusing on agencies and creators and building tools for them and services.
Tom Fanelli:
And I think that’s sort of I’m an agency guy by early in my career I started in the agency space and owned an agency. And so, I’m really motivated by helping agency owners solve the hassle of managing their portfolio of sites from the creation of them to the just managing an update of them. So, our goal is really to build tools that let people create and manage their portfolio of sites.
Tom Fanelli:
Today, I’m not entirely sure. Where we don’t go is we’re not building competitors to page builders and things like that. So, we’re not an actual system to help you physically create your WordPress site, but something that you would use during the creation process.
Chris Badgett:
That’s cool. A long time ago somebody told me, or they were just trying to give me some advice and protect me from myself. And they said, “You don’t want to get into the software business is hard and you’re not a programmer, Chris.” And I’ve heard a lot of people say the same things about, “Oh, hosting seems like it’s easy money,” but then the advice always comes in, “Oh, you don’t want to get into hosting. You don’t want your phone to ring when somebody’s site goes down on Christmas or whatever.” What do you have to say to hosting is hard or why did you decide to tackle such a huge problem that has a lot of risk and people are really, there’s a lot of high stakes on the line, especially when the website is the business, not just a brochure for the business.
Tom Fanelli:
Yeah, absolutely. Well, I think I will answer that in a couple of different parts. Okay? I get asked this question a lot. And so, let me recap a little bit by telling you somewhat of my personal journey that got me here because it lays the foundation of why I chose to do this. And that is, so I was working, starting an agency, eventually wound up at a software company running marketing and really found my niche.
Tom Fanelli:
And 10 years ago, I relocated from Florida to San Francisco, rolled the dice on a startup in the property technology space founded by some ex Salesforce guys, early. This was in the early two thousands, late nineties.
Chris Badgett:
Like a real estate SAS, is that what you’re saying?
Tom Fanelli:
Exactly. Real estate SAS designed for property management actually. We sold that product about a year after I got to the Bay Area. And then a year later we took that company, RealPage, public. And I stayed on with RealPage another five years. And it’s been eight years now since RealPage has gone public. And it was the first unicorn in the property management space. The first company to have an IPO worth over a billion dollars. It was a big deal. If you look at the property technology space now, there’s been billions of dollars put into venture capital in that space. There is lots of money, there’s hundreds of startups that have occurred. It’s exploded.
Tom Fanelli:
There’s multiple companies that had IPOs or are going to have IPOs. There are people being acquired for hundreds of millions of dollars by larger players. That space was validated and verified when RealPage had its IPO. If you look at the WordPress space now, I think there’s a lot of people in the WordPress space who have been here for a long time and they look at it and they go, “The market is crowded. It’s so competitive.” And they’re looking at it from the perspective of where it might have been 10 years ago.
Tom Fanelli:
And my outside perspective on this is as soon as we have… Look at the things that have happened in the last six months, right? WP Engine acquires Flywheel, who Flywheel gets from zero to 18,000,000 in annual recurring revenue in six years. Okay? And keep in mind, the space is accelerating as time goes on, growth is accelerating in the space. WordPress is now 35% of the market. You’ve got Salesforce making a strategic investment into automatic of $300,000,000.
Tom Fanelli:
You’ve got WP Engine after that acquisition said they’re going to have $1 billion plus IPO. When WP Engine has its IPO, that is going to drastically change the landscape of this market. It’s going to start growing, I think, even faster. And you’re going to have automatic follow with an IPO probably sometime in the next three plus years.
Tom Fanelli:
And so, I think in the next two to three years you’re going to see a couple of major companies go public. It’s going to legitimize this, you’re going to see institutional money start to come into this. VCs are going to start to pay attention to WordPress, which feels like it’s a bit of still a grassroots very much because it started that way, grassroots industry. And I think there’s going to be a lot of change over the next five years in the WordPress space.
Tom Fanelli:
And so, I’m extremely positive-minded about what’s happening in WordPress. And that’s why I think now is a great time to get into WordPress as an ecosystem. Why we chose to get into hosting, it’s something I was personally frustrated that I hadn’t seen the technology evolution in. And then we’re extremely driven by creating systems. It doesn’t bother us to be on call 24 hours a day. We’re the team that’s going to stand in the gap for you. We take the responsibility of making sure people’s sites are up and running really seriously.
Tom Fanelli:
Every site on our platform is monitored down to the minute level, 24 hours a day. If there is ever the slightest hiccup on someone’s site, we have a team of people that are engaged in fixing it no matter what the time is, what the holiday is, Christmas, New Year’s, Thanksgiving. We’re there.
Chris Badgett:
That’s awesome. What would you say, just in general, what is the current state of the hosting industry? And what I mean by that is I just have a general feel, and this is not for me, it’s just stuff I hear from users and customers where they get really frustrated with their web hosting or they feel like they’re hitting a wall or they just can’t understand the support they get, support is way too technical or they’re just not, there’s like a disconnect on the communication. It just seems like it’s an industry ripe for disruption on all kinds of levels. What are some of the biggest problems with modern hosting, especially for people running WordPress sites?
Tom Fanelli:
Sure. Well, I think that the technology is a problem, which I hope our goal is to address that. Right? I think that a lot of times the fact that everyone is providing… The market was treated as a commodity a long time ago. And there was a race to the bottom. Everyone was like 99 cent hosting. I mean, we’ve all seen this type stuff.
Chris Badgett:
And there was a lot of consolidation of hosting companies and streamlining and outsourcing the support and a lot of that kind of thing. Yeah.
Tom Fanelli:
Exactly. But what’s happened is people begin to realize, so there’s been this opposite directional curve where it’s like hosting has been going down, down, down, down, down for a long time. But the sophistication and dependence on E-commerce in the market has been going up. And so, as people begin to realize, “I’ve got a substantial business here, I can’t run this on a 99 cent a month business or a hosting solution.” And so, I think the market is changing. And what’s happened is I don’t see enough change in the hosting provider space to keep up with that.
Tom Fanelli:
And so, I’ll give you another example is, and this is something we’re doing that’s interesting is because we’re focused a lot on helping agencies, we offer people support via Slack. Okay? Now, we have in-app support and email ticket support. But I think email ticketing support is like, so 10 years ago. So what we’ve done is we’re piloting this new idea of we bring agencies into our Slack organization and then they have access 24/7 to our team and various people on the team, right? Just like you would if you were in a Slack channel with a bunch of other people.
Tom Fanelli:
And we give people real time support as they need it via Slack. And that could be for billing issues. And so what we’ve found is we act almost like an extension of their agency, as their technology team for their hosting of their sites and their servers. And that has been extremely encouraging to see how much people really like that. That is the new way I think of working this idea of sending tickets in.
Tom Fanelli:
And I think even calling people. I know a lot of people like to pick up the phone and call folks, but I think most people nowadays are really comfortable in a chat type of a format. And I know there’s going to be people, a lot of the other stuff too is we tend to do a lot of stuff for our customers. Sometimes we’ll have people who will be like, “Well, I want to know how to do it.” So, if someone’s like, “Can you apply an SSL to our site?” Yeah, you can watch our really quick 30 second tutorial and do it yourself.
Tom Fanelli:
But if you ask like, “Hey, how do I do an SSL?” We’ll probably just go in and do it before you. And so, we like to over-service our customers at this point because we’re trying to build raving fans who feel like our hosting is something radically different than the experience they’ve had by other providers.
Chris Badgett:
That’s awesome. I was looking at your pricing page and I wanted to ask you about cashing, particularly because I see people on low end economical host, one of the ways they are able to be cheap is they cash the heck out of everything, which doesn’t necessarily work for dynamic E-commerce LMS or membership site. And so, they get into trouble where their users can’t log in or people are getting redirected to places they shouldn’t be and stuff like that.
Chris Badgett:
So you have basic containers, high traffic containers and compute intensive containers. In the context of, I guess in general, how are your tiers different? How do you define those? And also can you speak to cashing and which one you would recommend for somebody running a membership site in the LMS, where they should start, or where they should be, whether they’re a beginner or they’re already at a high traffic state?
Tom Fanelli:
Yeah. One of the things that’s really nice about our platform is we allow your site to run in multiple containers simultaneously. Right? And so, that is really one of the big differences between us and a lot of other companies that are out there. Definitely the traditional providers. And so, I would say, we recognize, because again, we’re working with people that have all sorts of different requirements. The local landscaper, plumber, doctor is not going to need a super compute intensive website.
Tom Fanelli:
There’s also a segment of the crowd that we’ve found out there that are very high-traffic bloggers. Okay? And we wanted to provide a level of service that would allow the agency who’s doing local business websites to come in at a lower price, apply another tier that would allow people who might be spending a lot of money on VPSs on various providers, DigitalOcean, Google Cloud, but they don’t really need a ton of compute resources, but they have a lot of traffic.
Tom Fanelli:
And so, a lot of hosting providers will price them up in tiers because they’re getting a ton of traffic, even though there’s really not, it’s all static content with caching, right? It’s just a food blog or something. And then lastly, there are those that are doing real applicational stuff in their tech, like E-commerce, membership sites, LMS sites, all that type of stuff.
Tom Fanelli:
So we really tried to make three plans that would allow people to get in at those different tiers. And the idea for us was that on that third tier, which is the one I’d recommend for… And by the way, I don’t think we… We’re not saying you have to be on this tier. These are our recommendations, right? Absolutely, if you want it to be on a higher tier than we recommended, you could do that. And we don’t restrict people on the lower tiers from putting LMS system, as an example, or an eCommerce store.
Tom Fanelli:
But these are guidelines we have. And it says, “Look, if you’re a compute-intensive product or service, you’re probably going to need more memory VCPUs, more processing power in your container. And then you still get that scaling technology even on all these tiers, right? So you still get the ability to scale up if you have a surge of traffic.
Chris Badgett:
Wow. That’s super cool. I mean, what I’m seeing just looking at this is it seems like it’s more value. It’s cheaper and better at the same time, which is like a really disrupting force, which I’m really excited to learn more about Convesio. In terms of disruption, also before we started hitting record, we were talking about equity crowdfunding. Can you tell us the Convesio story and what it’s doing with the equity crowdfunding and what that is?
Tom Fanelli:
Absolutely. Sure. So, like any typical Bay Area SAS CEO, I had for the beginning stages of Convesio self-funded the platform to build it and get a basic minimal product designed. And we started getting some great feedback and we decided we want to go out and take this thing to the world. And so, we had to make a decision on raising some capital to do that.
Tom Fanelli:
And I had originally thought, “Well, I’ll just go the traditional route of venture capital.” That had worked a couple times before in other businesses that I had been in. And the thing about getting VC money is that, one, we’re fortunate in the Bay Area that there’s such a high density of VCs. That’s not the case for everybody, right? So, VC money, if you’re in the middle of the country, it can be hard to come by.
Tom Fanelli:
And so, also raising venture capital money it’s more than a full time job. I mean, it’s a lot of time and energy. I had a friend of mine who tracked every single VC meeting he had in six months. And he had 300 meetings with VC companies from coffees to meet and greets. And he wound up getting two people. Now, we know as marketers that’s a horrible conversion rate.
Chris Badgett:
Yeah.
Tom Fanelli:
So, that’s not a great conversion rate. And at some point in this VC journey, I was like, “Well, this feels like it’s a lot of work. And I could be seven, eight, 10 months before I get somebody on the hook.” And so, a buddy of mine came to me and said, “Hey, you should look at equity crowdfunding. I just raised a million bucks for my startup, which was in the cryptocurrency space. And I’ll introduce you to these guys at a company called Wefunder.”
Tom Fanelli:
And so, what equity crowdfunding is or sometimes referred to as regulation CF, regulation crowdfunding. In 2016, I believe it was, when the Jobs Act was passed by Obama, it changed the rules on who could invest in startups. Previously, in order for you to invest, you had to be an accredited investor, which means you have either a income over $200,000 for the last three years sustained or a net worth over a million dollars.
Tom Fanelli:
And basically, it was something that high net worth individuals did, right? Is they invested in startups. Well, when they removed that regulation, what they did was they said, “Okay, you can invest up to a certain amount of money into startups and you don’t have to be a credited investor.”
Tom Fanelli:
And so this gave rise to, the easiest way to think about it is investing meets Kickstarter. So in our case, we went this route and we raised about 1.2, 1.3 million from almost 850 investors. I think our final count was like somewhere around, I don’t know, 840. And that segment consisted of customers, it consisted of WordPress fans out in the market place that liked what we were doing. Just like you said, “Wow, this sounds like it’s pretty good.” And people invested everything from $100 up to tens of thousands or hundreds of thousands of dollars.
Tom Fanelli:
And so, you have the ability to control who you’re going out to. And I think someone put it really great. They said, “Equity crowdfunding gives people who are passionate about what you’re doing the ability to get behind your business because of other reasons than trying to get an exponential return like a VC would.” Venture capitalists are concerned really with one thing which is getting an end return on their portfolio. Equity crowdfunding people invest for all sorts of different reasons that are sometimes more aligned with this future success of the business than simply just profit.
Chris Badgett:
That’s super cool. And I mean, it’s WordPress, so we’re trying to democratize everything. So democratizing raising funding is a super cool concept that I personally wasn’t that familiar with. I wish I had known about that when you guys were open. How does it work? Like for the person who invests a hundred or 200 bucks? Are they still getting a little small piece of the equity pie just like a $10,000 or more investor?
Tom Fanelli:
Great question. And this is something that I would say one of the biggest things working against equity crowdfunding is a lot of people in the industry think it’s like Kickstarter where you really get nothing. Okay. You don’t own a component of the business.
Chris Badgett:
And the smaller you invest, usually the less valuable the, I mean the… What do they call it? The incentive or the prize or whatever.
Tom Fanelli:
[crosstalk 00:35:01] yeah whatever. So, in equity grant, and by the way, so equity crowdfunding is all regulated by the FCC. You don’t have to file your paperwork with the FCC. It’s regulated by FINRA. It’s an extremely, yeah, you have to have your financials reviewed by independent CPA. There’s all sorts of official hoops you have to go through to do this type of fundraising.
Tom Fanelli:
So, it’s not something like a Kickstarter campaign where you can just poof, set it up and anyone can come invest. There is months of work and preparation that have to go into setting these campaigns up to make them both legal and successful. And so, one of the things I’ll say is that as the company you choose what type of financial mechanism or agreement. There’s various different types. Some of them do convertible debt, which is like financing, which converts to equity.
Tom Fanelli:
Some of them do revenue-based financing, whereas the company grows, they pay shareholders back a certain amount of money. We chose to go with a mechanism called a safe agreement, which is very popular. It was pioneered by Y Combinator, a really popular startup incubator. And so, basically the safe agreement, yes, will convert that money that you invest in the company into real equity of the company.
Tom Fanelli:
And so, you actually will own a piece of the business, unlike Kickstarter. And so, yes, if you invest more, you’re on a larger chunk and if you invest less, you’re on a lesser chunk, but it’s all based on the same economics at every investment level. There’s no favoritism based on how much you invest.
Chris Badgett:
That’s super cool. And besides giving up a piece of your company, like the actual equity, did you lose or in any way, do you lose control over the decision making or the operations in terms of board of directors or anything like that? Or is it purely a financial instrument? Like in exchange for your money, I’m giving you a piece of the company and if we exit one day, you get your piece of the pie. Is it pretty straight-forward like that?
Tom Fanelli:
It can be, yes. It’s also very much driven by the company and the leaders of the company. And if you have a board of your company already, that board, but I will tell you that under the safe agreement that we use. And so this was an adapted safe agreement created off of an original safe agreement by Wefunder. And there’s several companies just to throw out a few others. There’s StartEngine is another good one. There’s SeedInvest, which is another good one. And some of them specialize in different categories. Maybe some are more consumer-focused, others might be more B2B.
Tom Fanelli:
But to answer your question, basically you control how you want to do that. And with crowdfunding, because you’re going to have hundreds of people, it’s going to be very difficult if you had to vote on any sort of actions. So Wefunder’s safe consolidates all of the people under one lead investor. And so, that one lead investor is the person who is, you have to go to if you want to get any voting done.
Tom Fanelli:
And so, there’s mechanisms that make it very simple for that. And it’s not super common on a seed round that you would have a VC that would insist that you put a board in place from what I’ve seen. Maybe other people can give different experiences on that. But in this case you’re not regulated to put any sort of board or advisory team or anything like that. That’s totally driven by the leadership team of the company.
Tom Fanelli:
And that’s one of the things that people that are doing financing through Wefunder like is that it really puts a lot of a control on the business still. So you can make those decisions that you think are best for your company.
Chris Badgett:
That’s awesome. Well, I’ve learned a lot today from you, Tom. If you’re listening to this, I’m curious as the CEO of LifterLMS, if you’re interested in investing as a user in the Lifter, send me a private message on Twitter or Facebook or wherever. I’d just be curious to explore this idea of crowdfunding because, like you’re saying, at Convesio, how cool is it for an actual customer to invest in the company that hosts their business? There’s this virtuous cycle as opposed to not the outside money is bad, but there’s more skin in the game than purely being a portfolio piece in a investment portfolio for a financial person who does that, that’s their business. But it doesn’t really have anything to do with the company they’re investing in besides if they’re successful.
Tom Fanelli:
Yeah, I agree. And I definitely think I don’t think we did as good of a job getting the word out to the WordPress community because I think a lot of times that we tried to share this with various media outlets and WordPress, they didn’t know what to make of this because it’s still somewhat of new type of thing.
Tom Fanelli:
And I think one of my hopes is that we’re leading the way that other WordPress businesses who are interested in doing this would take the steps to start to look into doing this because the model works so well for us as a community-driven ecosystem, right? If we can have businesses that are owned by the community and we mutually benefit from the coming success that I just articulated a few minutes ago and why I think the WordPress space is still at the very beginning of its story, I think that is an amazing way to create wealth. It’s also an amazing way to create community-centric products and services that the community actually can own a portion of.
Tom Fanelli:
So, I would say if anyone’s interested in listening to this, feel free to reach out to me. I’m happy to talk to anybody about equity crowdfunding and if it might apply to their business.
Chris Badgett:
That’s awesome. Well, Tom, I really appreciate having you on the show. Convesio.com, go check that out. As a WordPress host, any final words for the course builders and the membership site creators out there about your hosting option?
Tom Fanelli:
No, I think we’ve pretty much covered everything, and I appreciate you having us on the show.
Chris Badgett:
Absolutely. Well, that’s Tom Fanelli at convesio.com. Thanks so much. We’ll have to do this again some time.
Tom Fanelli:
Alright. Thanks, Chris.
Chris Badgett:
And that’s a wrap for this episode of LMScast. I’m your guide, Chris Badgett. I hope you enjoyed the show. This show was brought to you by LifterLMS, the number one tool for creating, selling, and protecting engaging online courses to help you get more revenue, freedom, and impact in your life. Head on over to lifterlms.com and get the best gear for your course creator journey. Let’s build the most engaging, results-getting courses on the internet.
