We're all happy 2020 is over and done with. That said, it was a great year for Wefunder.
Finally... Hockey Stock Growth
The rapid growth is due to the custodian structure we rolled out in Q2. This groups all investors as one entity on the cap table, which made Wefunder much more appealing to both founders and investors. Founders are more willing to raise on Wefunder when they no longer fear chasing down thousands of signatures to consent to future financings. Investors are likely to get better terms that match professional investors.
#1 in Market Share
The industry has consolidated: Wefunder, StartEngine, and Republic represent about 80% of the funding volume. A couple dozen other competitors have the remaining 20%.
Our goal is to increase our market share past 50% in 2021. We aim to kill off a dozen or so niche or vertical-specific competitors. Network effects and economies of scale make it hard for any new entrant to compete.
December 2020 over 2019: 4X-5X
2020 over 2019, we only grew about 2.1X. But this camouflages our growth that started in Q3. For a better picture of how far we've come, let's look at December. (These investments include Reg D and A+, not just Reg Crowdfunding).
We grew overall funding more than unique investments. While our median investment remains $250 (as we intend), our rollout of lead investors has grown the mean among accredited investors.
Revenue: $8M Run Rate
Our final GAAP accounting is not done yet for the year, but our revenue will be close to $5 million in 2020. We'll run a small net loss, as we invested a lot of money into legal fees to pioneer our custodian solution (which unlocked our growth), spent extra money in temporary engineering resources, and gave our team a bonus for their hard work for the year under tremendous hardship.
With 25 full-time salaried employees (in addition to freelance and consultants), our fixed costs are very low relative to our revenue. Here's a closer look at what our finances look like given our current revenue run rate and fixed cost structure.
I use the word "surplus" instead of "profit" in this pie chart because our goal is not to be profitable. We use any additional cash flow (and sometimes more) in order to invest in projects that may help us grow faster in the future. For instance, we spent extra money to create an iPhone app, which went live on December 31.
New Laws Roll Out March 2021
For four years of waiting, the SEC finally issued new reforms. They will roll out in March 2021. Four reforms in particular will help us grow even faster.
- Companies that use Reg CF can raise $5M instead of $1M per year. This will almost immediately double our revenue (Of the $16M we raised in December, we only could legally charge for the $9.5M Reg CF portion). It will also make us dramatically more appealing to companies.
- Companies can start a campaign in 15 minutes instead of a month. Previously, companies had to do all the compliance work before they launched a campaign. Now, they'll only need to do it before they close the campaign. This will let us launch thousands more companies while reducing our operational costs.
- Accredited Test & Investing Limit Fixes. People can take a test to become accredited. Accredited investors also no longer have investment limitations when investing in Reg Crowdfunding offerings (a fix to poor drafting in the 2012 law).
- SPVs. Thanks to our custodian solution, this is no longer a "must have". But since more founders are familiar with SPVs already, they will help with market adoption.
These reforms are a Very Big Deal. I started working on Wefunder in 2011. It was only in 2021 that the laws finally caught up to what I envisioned back then. I certainly did not expect to wait a decade!
We're all working insanely hard to make the most of this moment.
I'll conclude with an except of the letter I wrote to the team when we heard the news.
... This time, it's not Do or Die. We are not going to die. We've already proven that.
But we need to decide if we want to become great.
Is Wefunder a lifestyle business or a generational company? Is our ceiling Kickstarter or can we go well beyond the path they forged?
Is our mission just words we say to each other to make us feel good, or are we actually going to fucking fix capitalism. If so, now is the time to prove it.
Can this team - again - accomplish something extraordinary? So extraordinary that, in a few years, when we have hundreds of team members, I'll be speaking to them of what we accomplished? I look forward to telling all the stories that lay in our future over the next 60 days... that make them wish they were there at the very start of it all.
Because this is a new beginning.
Thank you - as always - for believing in us. We're working hard to prove ourselves worthy of it.