Dear Wefunder Investors,

When interest rates rose in mid-2022, our business (along with the overall tech and VC industry) took a big hit. For the first time ever, our revenue declined. We responded by dramatically cutting costs over 50% to reach profitability. It was a very painful but necessary correction.

We're now reaping the rewards. 2024 has been off to a great start. In Q2, we hit highs in quarterly revenue ($5.2M) and profit ($1.7M).

Knock on wood, but I am optimistic that the good times are coming back.

Highlights

• $5,215,302 Q2 Revenue
• $1,739,610 Q2 Profit
• 129% year-over-year revenue growth
• $20.8M revenue run rate
• Profitable and cash flow positive over 2024
• #1 Market Leader in Reg CF every year from 2016-2024

Charts

Our growth rate started declining in early 2022 as interest rates rose. The consequences were most severely felt in 2023. In 2024, we've now adjusted to a higher interest rate world, and hit a new quarterly high in revenue.

Our revenue per employee chart best shows how lean we are. We had a team of 69 in Q2 2022, 45 in 2023, and 35 presently. We've always been far leaner than our competitors, but in the past year we've reached the next level.

The combination of our highest quarterly revenue and cost reduction has led to our largest quarterly profit ever.

This large quarterly profit is temporary. We aim to stay roughly breakeven over the course of the year (targeting a nominal profit), and intend to re-invest most excess cash in growing the business.

Competitors

Like every year since the birth of the industry, we remain the market leader. StartEngine and Republic are our #2 and #3 competitors.

Our market share declined from 36% in 2021 & 2022 to 33% in 2023 & 2024. We attribute this to cutting our spending from $1.7M a month to $750k/month. Also, since almost all Series B VC-funded startups raise with Wefunder, the downturn of the venture market hit us more heavily than our competitors.

The biggest change in the industry has been Republic's drop in market share from 20% to 6%. Over the last year, we've delivered over 5X more funding.

The industry is turning into a two-horse duopoly of Wefunder & StartEngine. We expect dozens of other platforms to have under a couple percent market share.

Future

I'm optimistic that the best is yet to come. We're aiming to keep up this growth pace for the remainder of the year and through 2025. Over the next year, here are some areas we would like to invest in:

• iPhone & Android App. 60% of our investments are made on mobile. Yet, our native apps were so bad that we decided to yank them from the app stores. We will hire a team that can produce a world-class app worthy of Wefunder.
• Social Investing & Expert Opinions. We're in the early phases of rolling out new features that lets investors invest together and follow those they respect. We want to provide a channel for more and better due diligence that investors can share with one another.
• Use AI to improve our product. Some ideas: help founders to post more updates to investors, help investors keep track of the value of their investments, help spot potential fraud or other compliance issues, and offer more personalized search results of investments that may interest you.
• Funds. We're expanding our Venture Fund product line. This is currently only available to accredited investors, but we plan to bring our funds to retail investors when practical.

Asks

• Meet us on our Train Trip. In July, our entire company is taking a train trip across America. Are you in a city we are stopping at? Come meet us!
• World Class Lead Designer. We are looking for a world-class designer to lead Wefunder and we will compensate them accordingly. We're offering a $20,000 bonus for any referral that leads to a hire.

10 Lessons Learned

I thought it might be interesting if I ended on a more personal note.

One of the reasons I love investing in founders is to learn from their experiences. If you also enjoy that, then the rest of this update is for you.

We've been on a roller coaster. Thanks to law reforms and Covid stimulus, we had rocket ship growth in 2020-2021: we 10xed over 2 years, peaking when we landed a Series B term sheet at a $500M valuation in April 2022.

Then, incredibly painfully, the market abruptly turned, our revenue dropped, and the term sheet was yanked. It's been a two year grind to get back to sunny times.

Here are some of the lessons I have learned along the way:

1. Cut deeper than you expect. One of my proudest (but hardest) moments was how fast we did layoffs in 2022: within 30 days of our metrics declining, I laid off 33% of the team. It was painful and sad for all involved, but it saved the company. That said: I should have cut 50%. We ended up doing another round of layoffs in 2023. Delaying pain until later does more net harm.
2. Smaller teams move faster. After our layoffs, we moved faster. When our engineering team dropped in half, we shipped more. The extra process required for larger teams adds inevitable friction. But more importantly, some team members - even supremely talented individual contributors - can have a work style that slows other team members down.
3. Always increase talent density. During our rapid growth in 2021, we hired people who I thought were good.... but I didn't feel were great. Our hiring bar is now much higher. Someone on the team needs to feel utter conviction that a new hire will increase talent density, no matter how dire our need is.
4. Organizations expand and spend more by default. The more people you hire, the more ideas they'll come up with to spend money. It's human nature to want to expand teams and spend more when trying to hit metrics. It requires discipline and a "bad guy" to say no when it's capital inefficient.
5. Be wary of unknown unknowns. Most of my shower thoughts go to how to grow and create value. I've since learned that I need to devote more time to manage risks from unknown unknowns. This was driven home when we found a small error in an escrow account, that, left undiscovered over years, could have Synapsed us. We fixed it immediately upon discovery, but it was a wake up call that risk-prevention becomes ever more important with scale.
6. America is special. We expanded to the EU in 2023. It turned out to be a bad idea: Europeans invest at less than half the rate of Americans. There is something special about American risk-taking and innovation. We've since decided to focus on increasing America's advantage even further.
7. Don't settle when regulators have bad incentives. I'm a big believer in regulation. The SEC has also done a great job in our industry. But I'm now less naive about the personal incentives (i.e., promotions) that some employees at other agencies have. Thankfully, the Supreme Court ended Chevron deference and now requires a trial by jury when a regulator seeks to punish a company.
8. SaaS companies are skilled at overcharging. I was surprised by how much money we were wasting. Each time I went to cut costs, I could easily find ~$50,000 of spend we were being overcharged for. (Rippling in particular is a star at this). My lesson is that when times are good, no one is paying enough attention to costs, and other startups rush in to exploit it.
9. The world can change on a dime. Humans overweight the near past when they make decisions. Humans are also herd animals. As a result, the world can change overnight from grow-grow-grow-spend-spend-spend to oh-my-god-the-sky-is-falling-aaaargh. Always be prepared for the vibe shift. I also believe: when times are good, they are not as good as they appear. But the flip side is also true: when times are bad, they are not as bad as they appear.
10. Managing your own emotions is key to making better decisions. I read a book that claimed that humans never make rational decisions, they just think they do. The theory is that your emotional state - good or bad - always skews your 'rational' decision. I believe this to be true. The main job of CEOs is to make high-quality decisions, fast, with limited information. I've learned that the clearer my mind, the more likely I will make a good decision.