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Note: This is an original transcript–edited for sense, length, and clarity.  If you have any questions or concerns, please email our host, Doria Lavagnino, at doria@sheventurespodcast.com.

Intro:

Doria Lavagnino: If you are intimidated by investing or feel your comfort level with growing your personal wealth is limited to the exposure you have through a blend of your mutual or index funds in your 401(k) or IRA, today’s episode is for you! Why? We are speaking to a woman whose two decades as a finance exec were spent at companies such as Goldman Sachs, Deutsche Bank, and Instinet. Today, she is co-founder and CEO of fintech Rialto Markets, a FINRA broker-dealer platform that can help people like you and me invest in early-stage private companies while helping those companies raise capital. 

Today, we’re going to explore how early-stage companies and everyday investors can be active in the private market — something that was not even possible until the JOBS Act was passed in 2012. Here to tell us about her pivot from big banks to entrepreneurship — and to explain how some women may want to explore investment in early-stage companies or become one of the companies on her platform is Shari Noonan. Shari, welcome to SheVentures!

Shari Noonan: Thank you so much for having me! I really appreciate it.

Doria: It’s great to have you here. It was really exciting to research everything that you have done with your team. 

The Beginning 

Doria: I’ve always liked to start with, not the beginning per se, but how your career started. Your education was in finance and international relations. What drew you to those fields?

Shari: It’s really interesting. I always thought I would be working overseas by this point in my career. I was drawn to working and living overseas when I was in high school and college. I was fortunate to attend Marquette University, which sort of allowed me to construct my own major and minor before that was a thing. 

I went to Turkey when I was a freshman. I went to France when I was a sophomore and Poland when I was a senior. Then, I lived in Budapest after that. That provided a stage for throwing myself into completely new situations [and] having to improvise and learn on your feet. I’m forever grateful to Marquette for allowing me to do those interesting and off-the-beaten-path types of experiences. 

When I graduated, I wanted to spend some time in a large city after graduation. That’s what brought me to New York. I didn’t know anybody in New York City. I got a job at a Big Four accounting firm. I just said “yes” to all of the opportunities, which landed me at Instinet and electronic trading. 

Doria: Numbers were always kind of a thing for you, in addition to exploring other countries.

Shari: That’s right. I was always fascinated. I always felt accounting was one of those disciplines where you can offload a lot of other things to experts. It’s best for you to know accounting and books and be able to understand and read a financial statement. 

Doria: That is so true. My mom is 88 years old, but she was a CPA and never retired. She loved it. To your point, when I sometimes hear people discussing balance sheets, I don’t know all the terms and I do feel a bit lost. I think that education is so invaluable. 

Technology and Other Transformations

Doria: You spent two decades in a field that also has gone under rapid innovation, I think mostly because of technology [and] maybe other factors. What would you say is the most significant transformation?

Shari: Well, of course, I’m biased. I spent 20 years working on the infrastructure for electronic trading to move U.S. markets from voice to electronic. When I first started, that wasn’t a foregone conclusion — it was the 90s and the big exchanges were having concerns around that movement. Of course, the big banks [and] incumbents didn’t want that movement either. The market structure and, certainly, technology changed that. 

I was fortunate to work at a company called Instinet, which was one of the first electronic communications networks that is like a mini exchange right in the middle of all of this massive change. It was an extraordinary experience because you could tell that what you were doing was really impactful. Some days it was pushing a boulder up a hill, and very few other days you were doing a victory lap and realizing you had made a difference. 

The reason I was drawn to electronic trading is because of the shift in the markets that it had allowed for scale. Exchange-traded funds (ETFs) just brought that cost of trading down to a degree that is free for the consumer. The spreads have compressed so much. I do feel like that was a real benefit to everyone. That’s, I think, one of the most significant changes, as well as the shift in terms of who’s participating in the stock market. 

Thirty years ago, not everyone was a participant. Today, there are a lot more people that are taking their financial future, taking control, and understanding. It can be scary, but people are learning. There are so many more tools, applications, and programs out there for people. 

Doria: Absolutely, I had a number of thoughts as I was listening to you. First, I was thinking about how in movies, they show the trading floor [and] they would be holding papers. I don’t know if that’s actually how things were traded at some point in history. Is it?

Shari: Absolutely, they had runners. That’s why a lot of people were down on Wall Street because runners would run from the stock exchange to the brokerage company and run the papers back and forth — which is just crazy, you think about all of those papers, right? [In] the 80s or 90s, things became too big in terms of electronification. Things shifted from there. It’s been a really interesting evolution.  

I actually met a runner when I was traveling in Boulder. He came up to me after [my] speech and said, “I used to be a runner. It was my first job.” It’s amazing but that’s how it worked.

Doria: Oh, wow.

Shari: When I was a sales trader, we still had paper tickets. This is, gosh, in 2005–2006. We still had a clock and some people would stamp the paper tickets. Then, within a year or two, it was gone. It lasted that long.  

Doria: My father was active in the market. He was self-taught before there was CNBC and everything. There are so many more tools, to your point. I remember we were flying back from Italy, it was 1986 or 1987, I can’t quite remember, but it was the day when the stock market fell precipitously. What I remember is that there was no real-time. You waited till the next day, if you weren’t in the field, to find out what the stocks did. You actually had to go to the back of the Wall Street Journal and look.

Shari: Isn’t it incredible? My first job was working for a mutual fund company in college, Strong Capital Management. I worked from midnight to eight. I would price all the Asian portfolios. I would run off the portfolios on those huge printers with the stripes across it [and] carry the paper to all the portfolio managers’ desks between four, five, six, seven in the morning and drop it off. Then they came in, they’d have a stack of papers. They would flip through and see the performance of their portfolios the day before, which is just crazy. Not to mention, I couldn’t wear pants. I had to wear a suit [and] stockings, which is a whole other topic of conversation.

Doria: Oh my gosh. Yeah, I remember that as well. All of a sudden, one day I realized no one wears tights anymore. 

​​Getting Women a Seat at the Table

Doria: Finance and executive-level positions overall are heavily male-dominated. From the perspective of an executive at a bank, why do you think so few women had a seat at the table? Then, from the perspective of a woman, what can women do today to improve their chances of getting a seat at the table?

Shari: Yeah, absolutely. I was actually heavily involved in a lot of the women’s groups at the big large banks where I worked at. We talked about this quite a lot. It would often be seen as a “pipeline problem.” The classes coming in would be 50-50. Then toward women’s end of their 20s, beginning of their 30s, [they’d] start dropping off. I think it’s very difficult to juggle everything, then and now. 

The advice I would always give women is 1) take your entire maternity leave. Some women would come back early. I would say, “No, take your entire maternity leave. 2) Have advocates that you can lean on within the organization that aren’t necessarily competing with you. I hate to say that, but in the beginning, there were a lot of women that were in the same cohort but they would see themselves as in a competition for the one or two spots. It was more of a quota. I’m probably using the wrong word and I apologize.

Doria: Yeah, I know, I’m always terrified. I think that’s what it was at the time.

Shari: I know, exactly. Unfortunately, the dynamic that would happen is that women who should be banding together actually felt that they were in competition. It created some not-great dynamics. I do think that has now shifted because there are a lot more women at senior levels. There are a lot more women coming through the pipeline. There’s a lot more support around taking your full maternity leave. 

I do think there are certain segments, specifically sales. I spoke to a lot of young women in sales who were getting ready to go on maternity leave. They were terrified because their client list would be covered by someone else for the time they were out. They were nervous they would never be able to take that client list back. There were a lot of conversations like, “Don’t answer your phone during your maternity leave. You don’t know what kind of state of mind you’re gonna be in. Don’t go to see clients on your maternity leave. Don’t just take those four months and sort it out after that.” 

I was fortunate that I had a lot of support. I had a lot of mentors as I was coming up and support from some key people who helped me navigate. Of course, I had my two children in 2007 and 2008. It was like the world was ending.

Doria: That’s a very quick succession.

Shari: Yeah, that was an interesting timing for me, personally. I did have senior-level support during that period, which was crucial for my own purposes. From the executive perspective, I do think companies are getting better and realizing that they need to put these programs in place. They need to understand how to retain women and keep the talent in-house. I apologize [what was] your second question? 

Doria: My second question was, what can women themselves do? I think there’s often this feeling of, “I wanna do what I can myself. I’m willing to do whatever it takes, within reason.” What are things that you’ve seen that you think either you could have done better or just generally could be done differently? 

Shari: Yeah, I think finding an advocate to help you, whether that’s in the firm or not in the firm. 

Take Your Entire Maternity Leave

 Shari: After I had my children, I was speaking to younger women who were getting ready to go on maternity leave. A comment that I’ll never forget is that a few of them said, “No one’s ever been honest with me about how hard this is going to be.” Everyone sort of comes back, puts on their game face, and says, “This is great. I’m back!” It’s a very Lord of the Flies type of situation, right? Be honest with how difficult it’s going to be when you come back and try to build some support for yourself, whether that’s at home, having family members or others help you and kind of get through it. Bring in help and try not to do it all yourself. It’s a 24-hour job.

Doria: Absolutely. I see that happening a lot. There are, I think, other issues that are broader but the United States being one of the few that has no paid maternity leave. There are a lot of considerations. I see it now with women and men. 

When I was having my children in 2004 and 2007, I took most of my maternity leave. I didn’t take all of it and I regret it. I felt ready to get back. My husband took one week and that was it. Now, more companies have paternity leave or family leave policies. The fact that it’s unpaid is really hard. I know the whole short-term disability piece, et cetera, but it’s not easy.

Shari: Yeah, it’s challenging. I also think when you’re in it, on the ground, sometimes it’s easy to lose sight. I remember everyone telling me, “You sleep when the baby sleeps.” I was like, “Oh, I’ll just do the dishes or this or that.” 

Doria: Exactly.

Shari: Then, before you know it, the baby’s up again and you don’t sleep for 24 hours. Understand that you’re being kind to yourself. Give yourself the ability to say, “I see I’m not really in a good space right now. My body went through a lot.” Be kind to yourself and realize that it’s going to be challenging when you go back, whether you’re honest about that or not. 

A lot of women I saw [were like], “I’m great, I’m back.” It was a defense mechanism. They didn’t want to show weakness. It’s not weakness; it’s just being human. It’s a human condition.

Doria: Right, absolutely. I think what you’re saying is kind of primal. It is very Lord of the Flies. It’s like, “Show no weakness so that I can’t be hurt.” Yet, it doesn’t solve anything for anyone.

Shari: Yeah, it doesn’t. I hope that, as a collective [and] all of us together, corporations and employers are beyond that. I went back eight weeks after my second son was born. I just couldn’t imagine how anyone could go back at six weeks. I was barely holding it together at eight weeks. I know it’s challenging for employers, but I also think there’s a responsibility that [they] have to be able to keep their employees safe, happy, and not put them in a bad situation.

Doria: Yeah, I’ve always thought [that]. I’ve never done the math but it just seems to me it’s that rather than have unproductive employees, why not make the investment in, say, paid maternity leave or other kinds of support that are going to make women happier when they come back, which makes them more productive? I mean, even if I’m just looking at it from a capitalistic perspective, it’s still beneficial, I think.

Shari: It’s absolutely beneficial. I think what that allows is for you to come back in a completely different state of mind and also be more loyal to the company, frankly.

Doria: Yes, I love that. 

Pivot to Entrepreneurship

Doria: You spent two decades in really large banks doing executive-level work, as you said, the electronification of the markets you were involved with. How did you go from there to decide that you wanted to try entrepreneurship? How did that pivot happen? 

Shari: Yeah, it was interesting. It was a long time in the making. It wasn’t like I woke up and said, “I’m leaving!” It was my husband and I — we started the company together. That was also an interesting dynamic. It was probably over eight years. 

I realized that I was rising in the ranks; I was becoming a managing director and had a nice office. My day-to-day impact was very small. It was a lot more defense rather than offense. It was very much becoming a job of getting things aligned in a defensive position rather than thinking of launching new products — changing the world [and] all of those good things. The markets were mature. There weren’t any big things to kind of tackle. While I’m forever grateful for those experiences, after a while you figure, “Okay, I’m coming upon a time in my life where I need to either make a move or this is what I’m going to be doing for the next 10 or 20 years.”  

We spent eight years ruminating. It was the last year to two years of planning and preparing and saying, “This is what we want to do. This is really crystallizing.” From a business perspective, that discipline of going through, creating a business plan, understanding the details, and doing the analysis was beneficial. [It] helped clarify exactly what we wanted to do. Then, on the personal side, how we [were] actually going to do it. We both started the company so it was two paychecks that stopped, not just one.

In the beginning, it’s very lonely. You’re not going into an office. You’re not really having coffee with a lot of people. It’s a lot of, “How do I do this? How do I do that?” All of the things you didn’t think about [before]. It’s a lot of rejection and people saying, “That’s the worst idea I’ve ever seen. Why would anyone want to do this? This is ridiculous.” 

It took me about two or three months. I [was] sitting at my kitchen table working all day. People from my old job would call, email, or text. We’d go out to lunch. Finally, one day I said, “I need to burn the boats. I’m communicating too much with my old life. It’s holding me back.” It was a safety mechanism for me to say, “Well, I can always go back there if this doesn’t work out. I can always rejoin or get another job.” That’s why I was maintaining those relationships. It wasn’t for anything else. Obviously, it was nice [and] I was friends with them, but it was really because I wanted to keep that identity in the old world. I remember sitting at my kitchen table and I said, “I have to completely burn this old identity.” It’s hard to almost even think about. It was kind of like I felt like an imposter saying, “I’m an entrepreneur.” I worked at a big bank two weeks ago. How can I say I’m an entrepreneur? I didn’t feel that. 

I had to very consciously burn that whole identity and say, “This is now the new identity.” It still took about six months to be very comfortable in those conversations. Seven years later, [I’m now] comfortable having conversations with big venture capital [and] private equity type firms because of that shift in who you are and how you identify. 

Doria: You talked about it being a long process. Were you building the platform at the time? What were the pieces that you felt you had to have in place before you and your husband took the jump? The jump was a long process.

Shari: Well, we couldn’t do anything. That was one of the challenges because I worked for a bank. I was going into another financial service. I had to have a split. Obviously, I was a COO and knew all of the legalities around this. It was more, “What does the business look like? What does the marketing look like [or] the business plan?” Not the platform, technology, or any of the licenses that we needed because all of that had to be separated once it couldn’t be a side hustle, right? It couldn’t be something that I was doing at night. I could think about it and write things down in terms of, “Let’s look at this market,” or “Let’s look at that.” I couldn’t actually be building a company because it was in the same field as my company — which is different from a lot of people. They can build a business at night. This was different in that respect.

Doria: Because you were COO, did you have to wait a certain amount of time. 

Shari: Yeah, I had a garden leave. I had to wait that out.

Rialto Markets

Doria: Rialto Markets is the name of your new platform. What are the problems in layman’s terms that you’re trying to solve and for whom?

Shari: Absolutely. The reason we called it Rialto Markets is because Rialto was the name of the bridge where the first debt market started back in the 1500s. We wanted to anchor our name in something new around markets. We chose private markets. 

What we’re trying to solve is we saw an interesting opportunity with private companies being able to — for the first time with the JOBS Act — raise money from public retail. I can’t tell you how many times I’ll have a conversation with someone and they’re like, “You mean accredited investors?” I’m like, “No, retail.” 

That, to me, represented a fundamental shift in a huge market that most people don’t talk about. This market didn’t have a lot of infrastructure. It had legal infrastructure. There are a lot of private equity funds. There are a lot of venture capital funds, but it didn’t have technical infrastructure. That’s what we set out to build.

If we think about our DNA, what the founders — all three of us — really had [was] a steep background in looking at a shifting capital market [and] a changing market. What did the market structure evolve and provide for? What changes by the SEC resulted in an opportunity? Then, how to harness those changes and make it easier to scale: get out to more people, make the costs lower and cost-effective. That’s what we do for issuers [and] private companies. We allow them to raise money from their communities and do it cost-effectively. 

For actual investors, we allow them to get access to these high-growth companies. If you think about the last five or 10 years, when companies go public, they aren’t high-growth anymore. When Amazon went public, it had been around for three years. Microsoft [was] the same thing. When Uber went public, everyone had kind of wrung out all of the growth from it. I think people realized that now when you go public, the company is much more mature than it had been in the past. We want to allow investors access to high-growth companies and different opportunities. We work with marketplaces that fractionalize art, wine, cars, and even music royalties — alternative assets. It’s not just, “I’m investing in these four index funds, which are critical.” You should invest in index funds and have that to begin to have some of these assets that are truly growth assets that have never been available. 

The JOBS Act 

Doria: To your point, a few things that I want to mention, I believe it was before the JOBS Act, to be an accredited investor, you had to have $1 million in assets. Is that right?

Shari: Mm-hmm.

Doria: When the JOBS Act passed, it basically said that other people could invest. When Martha Stewart went public, for example, I remember that whoever the brokerage or bank firm was involved in that had an inside advantage and that wasn’t passed onto the public. 

Shari: That’s right.

Doria: It was such an unlevel playing field to such a degree that it was unfair. That’s why I love what you’re doing. 

Shari: Yeah, and I’ll just dial into those in terms of the JOBS Act. What the JOBS Act did is allowed private individuals to invest within a framework. We do this in digital form, so blockchain-based securities. That’s what I love about the regulated framework because if you think about other offerings that may not be regulated. 

Doria: Right.

Shari: You can put your whole life savings into it. With crowdfunding, Regulation CF, and Regulation A, there’s a framework saying you can only invest 10 percent of your annual income or you can only invest up to this amount.

Doria: I did not realize that.

Shari: If you’re accredited, you can invest more. It allows retail investors to put some of their money into it, but not their entire life savings, which is the whole framework that the SEC has worked hard to create. That’s why I’m so passionate about some other new innovations coming into a regulated framework. One of the reasons that it was so harmful to individual investors is because it wasn’t in that regulated framework.

Doria: That is important, you’re right. When you say that, the first thing I think of is cryptocurrency. I’m just going to leave that alone, but I know some people are into it. It’s risky. 

Breaking Down Some Basics

Doria: I want to take a couple of examples of people and then we could speak to how they might be able to harness your platform. Let’s assume that she’s in a financial position where she’s working full-time. She already has her three to six months of emergency funds put away. She’s saving for her retirement and has minimal student loans, credit cards, or mortgage debt. It’s management. She has extra money. I’ve heard this over and over again and I think that even studies contradict themselves. Are women more cautious with investing or not? How could she use your platform to invest? What are the potential risks and rewards?

Shari: Absolutely, she could use our platform to invest in one of the 18 different issuers that we’ve got live right now. We onboard a new issuer about every two weeks. It’s actually self-hosted. The issuer is on the issuer’s website. We’re sort of managing it on the back end. The benefit of that is that they’re usually early-stage companies and there’s the growth potential. The risk associated with that is they’re very early-stage companies. You need to only invest money that you can lose; like if it went away, it’s not going to put you in a bad position. If it goes up 10 times, fantastic. You’ve got to not invest money that you can’t afford to lose, especially in these early-stage companies.  

One interesting theme that we’re finding is some later-stage companies are coming onto the platform. This is becoming more popular as a way to engage communities — to engage whether it’s ambassadors, brand ambassadors around the company, or anything else. Substack has crowdfunding that they’re doing right now. They’ve got their own merits. I mean, I don’t think they’re profitable yet. We have a logistics company that’s coming on. I think they’re about 100 years old. They’re going to be launching soon. I found that was an interesting transformation in the marketplace where it wasn’t just early-stage companies. 

Doria: Yes.

Shari: However, the bulk of the companies are early stage. it’s important to realize that what we find is that most of the investors that invest in these, it’s really because the company resonates with them. Our most popular raises are either around electric vehicles, agriculture, food, or tech — those types of things that people feel very passionate about. 

There’s a very large fan base around space technology. They want to support the development of it. Those are popular. You’ve got other things that are yield products that are maybe real estate offerings that say, “We’re going to provide yield or some sort of income fund.” That’s another popular type of investment that resonates quite a lot with the community.

Doria: That is fascinating. I didn’t realize that later-stage companies were coming on. Do you think, hypothetical, that they’re coming on with an eye to go public?

Shari: It’s interesting. They’re coming on to either engage their fan base or find another hook into how you increase engagement. How do you increase engagement with your community? How do you create more of a fan base?

Doria: Right.

Shari: That’s one reason. Another reason is they’re availing themselves of a different way of raising capital. Over the last six months, it’s been challenging to raise capital. A lot of people are saying, “Let’s look at all these different opportunities.” It may not be traditional, but I’m willing to try it out. I do think some companies do eventually go public. We did have one of our companies, they did three raises with us and then went on to NASDAQ. That was fantastic.

Companies need to think about the impetus for why they’re going public and what’s behind that. We do see a trend in companies staying private a lot longer and just availing themselves of the private markets because they’re so massive — they’re also very mysterious. It can sort of be challenging to understand all of the different sources of funding and how you can access those sources of funding.

Doria: Is there a minimum investment? Could I invest $10? Could I have to invest $500?

Shari: Yeah, usually it’s $50 or $100. Sometimes it’s $500, but it’s not more than $500.

Doria: Okay, if I want to sell my holding once I’ve bought it, is there ever a liquidity problem?

Shari: That is one of the things we’re hoping to solve with our alternative trading system. We do have a secondary marketplace. The issuers need to sign up for that but we’re finding, as companies are staying private longer, they’re needing to give their investors and their employees, frankly, the ability to monetize those investments because it’s trapped until there’s an event. What our alternative trading system (ATS) allows is for these issuers to separate the company’s exit plan — whether it gets bought, goes on the public markets, or whatever that exit event is — from the shareholders and exit event. That’s really critical as these companies decide, “I’m going to stay private for as long as I need to.”

Rialto’s Alternative Trading System

Doria: Rialto does allow companies to do this at this point or is it something for the future?

Shari: We do have an alternative trading system. It’s issuer by issuer. Some issuers come on and they say, “Yes, I want to list or place on the ATS and I’ll do quarterly auctions.” Some issuers say, “I will purchase the security if it goes below this level because it’s a yield.”

Doria: Okay, got it. 

Shari: I’d rather have it in-house and I’ll repurchase that security. It just depends issuer by issuer. We offer a lit market, meaning like the New York Stock Exchange where you can see all the bids and offers. We also offer an auction where it’s a point in time [and] everyone puts in their bids and offers, and a price is found.

Doria: That is very cool. I’m gonna have to experience this myself!

Women Accessing Capital

Doria: There are a lot of women that come on the podcast. Some of them have been successful at raising venture capital, but we know the statistics — 2 percent of women are successful. Again, I don’t think it’s a pipeline issue. For women of color, it’s even smaller — they have difficulty accessing capital for whatever reason. How could they use your platform to raise capital? What are the requirements, if any?

Shari: Sure. First, I’ll say that I am also in that boat of venture capital. It’s extremely challenging. When I was raising capital, I did everything wrong. I went after the wrong investor segments at the wrong time. That was the one area of my business that was very challenging for me. I think it’s important for any woman who’s becoming an entrepreneur to understand the different segments of investors that there are and when they should be going after which type of investor. If a woman has a business that has a community around it, whether it’s a consumer packaged goods (CPG) company and there’s a lot of people that are using the products that really love the product [or] it’s people that are interested in space technology, or whether it’s people that are interested in a lifestyle brand. That’s really when utilizing our platform would be beneficial. 

They would do it either of three different ways. The first two are the most common. [With] regulation CF, a company can raise $5 million over 12 months. We usually recommend reg CF because, for companies that are raising for the first time, it’s cheaper [and] faster. You can understand if you’re getting traction for less money and a shorter time period to market. That is better than regulation A. 

With regulation A, you can raise up to $75 million every 12 months. You can, [but it] doesn’t mean you will. People sort of say, “Oh, I’m raising $75 million.” That’s great but you need to understand who your community is and how much traction you’re going to get. That costs more money and takes longer because you get qualified by the SEC [and] the SEC has to qualify that. 

Whereas, a reg CF, they’re just reviewed. It’s filed, but they don’t need to be qualified. I would recommend if there’s a woman that has a community, to check that out in terms of financing. 

Doria: Okay. I kept hearing community, who obviously wants to scale. That would be the idea. 

Shari: Yeah, absolutely. If you don’t have a community, our solution is what we call self-hosted — meaning we will promote it to our base of 300,000 people. We’re relying on the company’s base to make up the race, right? Even if you go to a portal [or] got your own strong base, you’re not going to get the traction you need to get that raise off the ground. 

Doria: Yes, that makes perfect sense to me, having been there before. 

What Companies Qualify

Doria: Can any company go through this process? Are there companies that you’ll say, “It’s too early?”

Shari: We do work with, usually, seed and series A stage — whatever that means these days. Where you could be pre-product depending on the industry you’re in, I do find that CPG companies and electric vehicle companies have very long cycles to get to market. They resonate, though. You can not be sort of out in the market yet, but be far along in terms of the design and production and be able to do a crowdfunding raise. I think it’s challenging with biotech companies because you’ve got the long process, and FDA cycles, and a lot of retail investors can’t get their heads around that. It’s complex, right? We’ve seen some medical technology companies that have resonated if it’s for a particular disease or something that people can rally around. Again, that can be a long sales cycle. 

I would say, depending on your sector, what you’re looking to do, and the ability with which you can tell that story to the community. SpaceTech is a perfect example. There are a lot of people [that] like to tinker at night. They enjoy the conversations around SpaceTech. That’s a small community, but it’s powerful. If you can harness something like that and they can understand what you’re doing, then that’s a really good fit. 

Doria: Yes, makes a lot of sense. 

Rialto vs. Crowdfunding Sites

Doria: What is the benefit of using Rialto instead of using a crowdfunding site?

Shari: Sure, there are two main benefits. One is the cost. We’re cheaper than the portals, in general. We’re between 2 percent and 4 percent. We’re success-based, meaning there’s a small upfront fee to integrate. The majority of the fee comes from funds that are raised by the company. We will take 2 percent to 4 percent of those funds raised. Portals can range anywhere from 6 percent to 12 percent in terms of how much they charge. That’s the first difference. 

The second difference is when you’re doing a crowdfunding raise, one of the major expenses is marketing. The beauty of that marketing is you’re gaining awareness of the company, as well as bringing people to the site to raise money. It’s kind of like you get a twofer, but it can get expensive. Now, when you’re using our site [and] service, all of those marketing dollars can be tracked digitally. A lot of work has been done on digital marketing; all of those dollars can be tracked digitally. If someone’s clicking a button or link, those links send the investors back to the issuers’ page. If you’re using a crowdfunding portal, it goes to the portal. You’re spending money on marketing, but you’re losing that shape of the funnel. It’s all getting diverted to the portal. That’s a big reason why people use self-hosted rather than going through a portal. 

Doria: Yeah, that’s very big. I think any online entrepreneur knows that if you don’t have control of your sales and marketing portal, it’s going to be very hard to get people to where you hope that they go, right? 

Shari: That’s right.

How AI Is Changing Business

Doria: How do you think artificial intelligence is changing the way that you do business, if at all?

Shari: It’s changing the way that we do business. I think it’s early in the cycle around what’s happening. I think the conversation [has] moved from, at least in my household, [from] my son doing homework using AI to what are some things that are some of the challenges? 

We are a FINRA member broker-dealer. Anyone who comes in, we’re vetting them. If there’s some sort of bot, AI, or other sites that come up that starts gaining traffic away from that, we need to be concerned about that. I’m seeing a lot; whether it’s fraud or other types of things pop up, you have to keep track of that. 

The beauty of making things more efficient is that you can do it much more quickly, right? You can get an investment in a minute [or] two. As you become more efficient, you become less resilient. You need to kind of weigh efficiency with resiliency and make sure that you’re constantly monitoring for changes in technology and how that is going to impact your business in ways that you may not have even thought of. It’s going to be fascinating. 

I have two teenage boys. My younger son is concerned about AI. I got him on ChatGPT. The first thing he said was, “Is this connected to the Internet? I don’t want this connected to the Internet.” I said, “It is.” He went, “Oh no.” I find it fascinating to track that and see how it evolves. 

Doria: Absolutely, I think it will be fascinating, as well. 

Raising and Earning Funds

Doria: How much money have you raised? How many companies have you helped raise money?

Shari: Sure. In terms of how much money have we raised for companies or ourselves?

Doria: I guess both actually, I’m curious.

Shari: Perfect. Yeah, we’ve raised about $40 million for companies — that’s across I want to say like 30-some companies. We’ve got 17 companies right now out raising roughly, I want to say $300 million. I could be off a little bit by $10, $20, or $50 million, depending on who’s launched. That’s sort of what we’ve got in the market right now. 

We personally have raised about $18 million in capital. It sounds like a big number, but it’s been over seven years. It’s been a knife fight to get that money in, but it’s been critical because we are a regulated entity. It’s expensive to set this business up and run it.

Doria: Yes, Absolutely. How is Rialto earning money? How do you earn money?

Shari: Sure, so we earn money in a couple of different ways. In our primary business, what we do for companies in raising money is earn a small setup fee. That’s just to cover the cost of our people. Then, we earn the bulk of it through commissions. We call them success fees, but you could also call them commissions. All money that’s raised, we take a percentage of that. We take anywhere from 2 percent to 4 percent, depending on what product you’re using. 

We have another product where people can white-label our entire platform. They can white-label our primary issuance and our secondary trading. That’s our enterprise solution. We customize the workflows depending on what they want to do with the platform. That’s a setup fee that we charge. We charge a monthly fee to maintain that technology and operations. Then, we charge commissions on the secondary market.

Doria: It’s a subscription, right?

Shari: Yeah, because we’re a broker-dealer, we can charge those success fees, which help align incentives and economics for our clients.

Doria: It’s interesting how there are such diversified ways of making money because of the white-labeling and having it integrated into someone’s portal, that’s a recurring revenue for you.

Shari: That’s exactly right, which is helpful.

New to Investing?

Doria: As we’re wrapping up, if you are a woman who is new to investing, but is interested in both the risk and reward of investing in an early-stage company, how do you suggest that she starts with a platform such as yours?

Shari: Research the company. We often see people coming in and investing because they love the company. It’s a passion project [or] idea. I think that’s critically important. 

Also, getting comfortable with financials — understanding financial statements and reading the language that is put up. There’s so much that’s provided in terms of disclosures, the information available, [and] understanding that. I don’t mean studying it for two weeks, but I mean reading it and understanding it. It’s going to be challenging your first time, but putting a minimum investment in and tracking that. Then, find another company and look at it. You’ll become more comfortable with the language, educating yourself on what’s important and what to watch out for. That’s what I love about this market is you really can start to educate yourself for very small amounts of money and build that portfolio right over time. That gives you a whole other skill set.

Doria: That is so important, incredible, and exciting. 

Rialto Five Years From Now

Doria: Where do you want Rialto to be five years from now?

Shari: Oh, this is exciting. This is fun! Well, I think five years from now, private markets are going to change in so many ways. I think average investors are going to have access to products they never had access to before. You often hear about the 60-40 portfolio: 60 percent stocks [and] 40 percent bonds. I think that’s going to change. There’s going to be a carve-out of it — might be, 50, 30, [or] 20 for these alternative investments. 

People are going to become more comfortable with earlier-stage companies becoming involved in the journey of these early-stage companies. Also, investing in assets that are countercyclical to stocks helps weigh that portfolio and balance [it] out. That’s why I get excited about building that infrastructure for that world in five years. To me, the cost of investment is going to have to come down to a low point. It’s going to open up so much access and opportunity for investors and issuers alike. 

Doria: I think if you ask most people, they are very pro-small business. This is an opportunity to be able to be more involved, which I think is exciting.

Shari: We’re working with some community banks. We’re with them to help structure. They’ll have a debt offering, but they need to have a certain amount of equity for the company to have to give them the loan, be able to combine that, and have the community rally around small businesses that they care about and want to see. I feel like we’re at a point in time where the pendulum’s swinging back — everything got so big, big, big! Now, let’s bring it back to the community. Let’s bring it back to local. To me, that’s impactful. 

Doria: Absolutely, it’s impactful. I think women-owned small businesses are one of the fastest-growing segments. That is also exciting.

Shari: It’s exciting being able to help women-owned businesses because it’s challenging.

Doria: Yes, it is challenging! 

Learn More

Doria: Where can listeners find out more about Rialto Markets and you?

Shari: Absolutely! You can go to rialtomarkets.com. You can see all of our issuers, products, and services there. There’s a link under “the team” to me and my LinkedIn.

Doria: Thank you for coming on SheVentures. This has been an educational conversation.

Shari: Thank you so much for having me! I really appreciate it.