Wefunder

Investor Update: Wefunder expands to the European Union

founder @ Wefunder

Published on Feb 16, 2023

Dear Investors,

I’m excited to announce that Wefunder is now live in Europe!

We are the first platform in the United States authorized to operate in the European Union.

We already have more startups live in the European Union than all our competitors combined.

The European Launch Cohort

A dozen startups are now raising on Wefunder. You can browse them at https://wefunder.com/eu.

Some facts about our European launch cohort:

  • Located in Denmark, Spain, Portugal, Germany, and the Netherlands;
  • Backed by top-tier European funds like Breega, SpeedInvest, Goodwater Capital & more;
  • Backed & founded by serial founders from prominent EU scale-ups like N26, Tier, Casper, Blinkist & more.

The E.U. Landscape

Before, each country in Europe had their own securities regulations. This made it unattractive to expand to Europe given the complexity of complying with 30 different sets of laws.

Thankfully, the European Union (and the EEA) now has one set of laws to unify these 30 countries into one common framework, with an addressable market roughly equal to the United States.

It’s now a race between the US and UK platforms to enter the European Union, as there is still no local EU platform with any significant traction.

The two biggest platforms in the UK are Seedrs and Crowdcube, both in the UK. Seedrs (owned by Republic) is not yet authorized to operate across the E.U.

Despite being the first day of launching, we are positioned well against our competitors:

  • Crowdcube has 9 startups live in the UK, but only has 1 in the EU.
  • Seedrs has 12 startups live in the UK, but none in the EU.
  • All other EU platforms combined have 9 startups live
  • Wefunder has 12 startups live in the EU (and 250 live in the US).

Why We Made the Decision to Expand

  • Large Common Market. The combined GDP of the E.U. is roughly equal to the U.S. We believe this will double our long-term addressable market.
  • Network Effects. Our business is one where network effects are powerful. The first platform to launch has a built-in advantage. Founders want to go to the platform with the most funding; investors want to go where the best and most startups are. This is why we believed we couldn’t afford to wait.
  • No dominant European competitor. There is no dominant platform in the EU. We believe we can beat the current players on product - for example, try investing on one of the platforms as a new user.
  • Better laws for growth than U.S. The E.U. laws are roughly the same as the United States, but better for our growth in some key ways. Startups do not have to audit their financials, we are allowed to charge carry, and we are allowed to share compensation with referral partners.
  • Startups can raise twice as much money from retail investors. A United States startup could choose to raise $5M USD in the US and €5M in the EU concurrently.
  • We can work with more startups around the globe. U.S. law only allows U.S. headquartered companies to run a community round. EU laws allow any company around the globe to raise (provided they comply with local law).

Challenges

While we’re the first United States platform to expand to the European Union, there are challenges to this expansion.

  • Fewer European investors than competitors. We have less European investors than Crowdcube or Seedrs, who have been active in the UK for a decade. We’ll need to quickly close this gap.
  • Europe is more complex than the United States. In theory, there is one European law. In practice, each country is a sovereign country with different quirks in the law, different languages, and different cultures.
  • European startup investing is less developed. This is both a risk and an opportunity. There is less capital flowing into EU startups which makes the hair on fire problem that Wefunder needs to solve more important. But the unknown is if European retail investors will invest near the same rate as American retail investors.

A shout-out to our European team

This is the culmination of almost two years of effort by our team.

Our E.U. effort is headed up by one of our longest serving team members, Katie Powers, with a big assist from our General Counsel (and now VP of Corp Development) Adrian Parlow. It was a very long process to work with the European regulators and convince them that our structure (which allows one entry on the cap table for startups) was compliant with E.U. laws.

Over 2022, nearly our entire engineering team was involved in a massive effort to rework Wefunder’s backend to work with multiple regulatory jurisdictions, languages, and payment systems. I don’t think any other startup of our size could accomplish this feat.

I’m also proud that our entire European team is currently only 5 team members. One of our European competitors had an estimated 120 headcount last year. And yet more startups are raising on Wefunder. This is a testament to how motivated and scrappy our EU team is.

We will of course hire a larger team as we scale up. But we’re a big believer in the power of small very fast moving teams to open up a new market. This is a very different strategy than the $100 million that Republic spent to acquire Seedrs and their 100+ team members.

How you can help

We’d most value introductions to high-quality startups in the European Union who are interested in hosting a Community Round, so their most passionate users, customers, and fans can invest.

Under European Law, we can also offer some very strong financial incentives to our EU venture partners.

  • We share 1/3 of our revenue with referral partners. If the company raises €5M on Wefunder, you could earn €112,500.
  • You could earn 5% carry - the profits on the investments. If you also invest in the company, and a company that raises €5M later gets acquired for a 10X investment return, you could earn €2.25M.

If you’d like to refer a startup, please contact our Head of EU Fundraising, Asbjorn Holmlund, at [email protected].


2022 United States Results: #1 Platform

Per the 2022 Investment Crowdfunding Report, Wefunder was the #1 platform.

*In 2022 over 320,000 investors deployed nearly half a billion dollars into 1,100 deals. Deal volume hit record levels within Investment Crowdfunding, and while overall capital was down from 2021 due to geopolitical and macroeconomic events, investors’ check size hit a record level. There were 78 active online investment platforms in 2022. “Wefunder was the online investment platform leader by deals, number of investments made, and capital,” said Sherwood Neiss, Principal at CCA. “They helped deliver $164.1 million by 88,000 investors to one out of every three funded deals. An impressive feat.”*

2022 was a roller coaster year. We were on a fast growth trajectory until inflation reared its ugly head mid-year, the Fed hiked up interest rates at the fastest pace in 40 years, and tech valuations on the public markets dropped near 50%. We immediately noticed our larger-dollar investors started investing less (as they presumably also felt 50% less wealthy).

We’re noticing very early signs of a recovery in 2023, but expect a year of slower growth in the United States for before things return back to normal.

Next Up: Announcement in May

One challenge of having almost 10,000 investors who invested in Wefunder is that any investor update we send is naturally public information available to our competitors. But as a heads up: we do have a very cool project - a new business line - that we’ll be launching in the spring. Expect our next investor update in May with more details.

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