We want to create millions of new angel investors
Our goal is to increase the GDP of America. We believe the more angel investors there are, the more innovation happens, and the wealthier our society becomes.
We want to help fund tens of thousands of founders, all backed by early investors who believe in their vision. We are just getting started.
We're currently working on making it prestigious for even VC-backed startups to raise a Community Round - so their users, customers, and passionate fans can invest alongside venture capitalists and other wealthy well-networked insiders.
Our ultimate goal is to make it normal for startups to raise on Wefunder in a "mini-IPO" before they file for a "real IPO". We want to re-create the market of the 1990s, when investors could get liquidity in a few years - not over a decade.
A decade-long quest to reform the law
The main barrier to our vision has been 1930s-era laws. It used to be illegal for everyday investors to invest in startups. So in 2012, we set out to persuade Congress to allow anyone to invest in the startups. It worked. We were invited to watch Obama sign the JOBS Act into law.
The initial regulations were badly designed. From 2013-2020, we struggled to build a viable business while lobbying Congress and the SEC to fix the regulations. Finally, in 2021, the law was reformed and our growth took off.
With the newly reformed laws, more venture-backed startups - like Substack, Mercury, & Replit - used Wefunder so their customers could co-invest with VCs.
The market leader in an emerging duopoly
StartEngine continues to be a strong competitor. They recently acquired the fourth largest platform, SeedInvest.
Republic's Reg CF volume fell significantly over 2023: we've raised 5X more than them over the last 3 months. We no longer consider them our top competitor.
Over the years, many other equity crowdfunding platforms have fallen by the wayside. We expect the industry to continue to consolidate. Much like Kickstarter and Indiegogo in rewards-based crowdfunding, we expect equity crowdfunding to end up as a duopoly of Wefunder & StartEngine.
Why startups raise on Wefunder
The best way to help investors is to convince more high-quality startups to allow them to invest. We're the market leader because we've been ruthlessly focused on convincing more founders that raising on Wefunder helps their business succeed.
Many of the best high-growth startups can easily raise money from VCs. So why do they also use Wefunder? Here is the Substack CEO in his own words:
We've led the industry on funding startups like Substack. Using an SPV is critical for venture-funded startups and our competitors don't support them. With the SPV, we can also mandate that startups offer our investors the same security that professionals invested under - unlike common stock or a "crowd SAFE".
We have a growing moat with network effects
Wefunder is a marketplace with strong network effects. Our advantage grows larger with time, making it very hard for new entrants to compete with us.
I. Startups go to the platform that delivers the most money. Investors go where the best startups go.
Why have we killed off over 60 competitors, including Indiegogo when they tried to compete with us directly? We focus maniacally on founders – the supply. If good investments are there, investors stampede in. Supply is the crux.
Once a platform is known as the place where the best startups get funded, with the most investors, it's very hard for a new entrant to come in.
II. We rely on word of mouth for growth, not paid ads
We spend close to $0 on paid advertising. Instead, we rely on word of mouth: founders are our best advocates. The more founders that we fund, the more referrals to other founders we get.
III. Economies of scale increase over time
Our custom back-end software is what makes equity crowdfunding economical. The larger we grow, the more we invest in our software, increasing our cost advantage. It is non-trivial for a new entrant to replicate.
How we plan to grow the industry
Increase the prestige of raising a Community Round
A few years ago, a startup that raised online was thought to be 'desperate' and therefore a bad investment. That is changing. Building a startup that customers love so much that they want to invest should be more prestigious than raising from VCs. Some venture-funded startups now brag about it in Times Square.
Help raise rounds up to $150M with secondaries
Currently, we're focused on seed and Series A financings, up to about $10 million. However, as we grow our investor base, there should be one day be enough liquidity to fund rounds up to $150 million. We want to re-create the market of the 1990s, when investors could get liquidity in a few years - not over a decade.
Retail venture funds
Currently, there is no equivalent of a mutual fund or ETF on Wefunder for retail investors to invest in a diversified venture capital portfolio. When we fix this, we expect many more investors will allocate a portion of their portfolio to venture.
Better investor experience
Our focus in 2024 will be on dramatically improving the investor experience. We're building better portfolio tracking tools, better ways to conduct and share due diligence, and ways to build an audience and talk to other investors.
Use of Funds
While we could aim to stay cash flow positive and grow more slowly, we believe we could grow faster in 2024 if we invest in two areas:
- Investor-Focused Product Team. We'd like to hire product designers and software engineers 100% dedicated to improving the experience of investors.
- Legal Structure for Unaccredited Venture Funds. We have over a million retail investors. We'd like to offer them venture capital funds to invest in, to get an instant diversified portfolio. This is legally complex to set up.
Why Invest Now
We believe that we're at the bottom of the macro-economic tailwind caused by the end of the decade-long zero interest rate era. We've absorbed the shock and see early indications that we are about to enter the next growth cycle.
Our two main competitors - StartEngine and Republic - are both valued at over a billion dollars. We believe they are both over-valued now that tech valuations have fallen by around 50% since the 2021 peak.
We don't believe in raising large amounts of capital at super-high valuations. We'd prefer to raise a small amount of money, from our customers, at a substantial discount to our competitors.
A thank you from our CEO
As our founder & CEO wrote in our last investor update:
There are two areas that gave me the drive to start Wefunder and then the passion to stick with it for a decade.
One is giving “normal people” the ability to invest in the best private companies - to help reduce wealth inequality. When I started Wefunder in 2012, I thought it was absurd that the wealthy had a government-protected monopoly on access to the highest-growth investments. We’ve made tremendous strides since then, but it’s not enough. I want to spend 2024 on finding more ways to give Wefunder investors access to high-quality investments that have the potential for high returns - the sorts of returns that only well-networked accredited investors currently enjoy.
The other area is more emotional. I personally find the most fulfilling moments in my life are when I help others reach their potential. That’s what angel investing is about for me - believing in someone, proving it with my investment, and then helping them reach their dream. I can think of dozens of ways Wefunder can make this experience far more powerful - to propagate a social movement where millions of new angels help fund the things that create more wealth for us all.
Almost 10,000 people have believed in Wefunder and invested in it. That motivates us all to do our best to make you proud. We’re grateful to you all. And in many ways, that’s what we want to propagate outwards to tens of thousands of other companies, all funded by those who believe in them.
We hope you join us! We’re just getting started.
- Our business is subject to a complex and rapidly evolving regulatory framework. New regulations could be enacted, or our regulators' interpretation of existing regulations could change, in ways that are unfavorable to us. Our regulators could also take an unfavorable view of our current and/or future activities.
- The development of our platform and technology is still in its early stages, and significant additional time and resources will be required for research and development. As a result, we may experience technical issues with our website, delays in collecting and disbursing funds, cybersecurity breaches, or other technical problems, any of which could negatively affect our business.
- We operate in a competitive industry, and there is no guarantee that we will continue to be a market leader. We could fall behind our competitors in a variety of ways, including our technical capabilities, the products and features we offer, and our customer acquisition channels, any of which could have a negative effect on our business. The broader market for equity crowdfunding could also grow more slowly than anticipated or not at all, which would harm our ability to continue growing our funding volume and revenue.
- Our financial goals and projections are based on assumptions that may not prove to be accurate. Further, in order to meet our goals and projections, we will need to substantially increase the fundraising volume supported by our platform. We may face difficulties in expanding our team, upgrading our technical systems, and improving our processes in order to meet the demands of scale.
- Despite our best efforts, one or more current or future offerings hosted on our platform could prove to be fraudulent, which could harm our reputation and have a negative effect on our ability to attract future offerings to our platform. Further, the companies on our platform could fail to provide returns to our investors that meet their expectations, which could harm our ability to attract future investors to our platform.
- In order to effectively scale our business and execute our business plan, we may require significant additional funding. There is no guarantee that we will be able to obtain such funding on favorable terms, or at all. Further, if we raise additional funding by selling shares of our capital stock, this would result in dilution of the ownership percentage of existing investors. We may also increase the size of our stock option pool in order to attract and retain employees, which would result in additional dilution to existing investors.
- Our future success depends on the efforts and capabilities of a small management team, including our co-founders and other key personnel. The loss of services of the members of the management team may have an adverse effect on the company. There can be no assurance that we will be successful in attracting and retaining other personnel we require to successfully grow our business.
- On May 4, 2022, without admitting or denying the findings, Wefunder Portal, LLC ("Wefunder") accepted an AWC issued by FINRA. FINRA identified compliance issues and violations of FINRA rules until 2021 relating to Wefunder's crowdfunding offerings. To help correct these issues from recurring, Wefunder changed its policies and process related to roles and responsibilities, marketing, disclosure, training, and payment and closing systems. In the case in which FINRA identifies additional violations, Wefunder may be subject to additional penalties.
- Our future success depends on the efforts of a small management team. The loss of services of the members of the management team may have an adverse effect on the company. There can be no assurance that we will be successful in attracting and retaining other personnel we require to successfully grow our business.