Wefunder is one of the leading investment crowdfunding platforms in the United States. A FINRA regulated funding portal, Wefunder is frequently the top offering platform when it comes to Reg CF offerings in any given month.
In 2021, Wefunder published an “Impact Report” that highlighted the value created by the online investment platform. At that time, Wefunder reported that it had funded 1759 founders, originating $386 million from 1.35 million investors, while creating more than 24,000 jobs. It also reported more than $5 billion invested in these early-stage ventures following the crowdfunded rounds. These are the type of results that validate the entire online capital formation sector.
Importantly, Wefunder publicly posts the status of issuers that sell securities on its platform. Investors can review the status of firms that have utilized the Wefunder platform. While not every company will hit it out of the park, and many will not succeed, Wefunder claims 9 firms that are now valued at over $100 million.
A few days ago, CI connected with Jonny Price, Vice President of Fundraising at Wefunder. We asked Price about 2021 performance and its expectations for 2022, as well as Wefunder’s plans for its European expansion, taking advantage of recently harmonized EU securities laws. Our discussion is below.
Jonny Price: Great! The SEC rule changes in March have led to significant growth in 2021 — for the year ending November 1st, our investment volume increased from $55M (2020) to $236M (2021), and our Regulation Crowdfunding [Reg CF] market share is the highest it’s been since the rollout of the law in 2016. We now allow founders to roll individual investors to one line on the cap table using SPVs, and we’ve improved our product and operations across the board.
You mainly raise using Reg CF but also Reg A+. Are you still utilizing Reg D? Are you doing side by sides?
Jonny Price: Yes — Reg CF is our primary focus, although we do some Reg A+ as well.
Historically, we haven’t really seen many high-quality startups looking to use Reg A+, but there are some signs that’s starting to change.
We don’t really do stand-alone Reg D rounds, but if a startup maxes out on the $5M Reg CF, we can open up a Reg D to allow them to raise additional capital from accredited investors. Immersed is a good example of that from earlier this year.
As you mention, earlier in 2021 the Securities and Exchange Commission (SEC) improved Reg CF by raising the exemption to $5M (from $1.07M). How has this impacted Wefunder? You leverage SPVs quite a bit (part of the improvement). How has this helped Wefunder?
Jonny Price: The annual cap increase from $1.07M to $5M has been a game-changer for us. Not only can the same startups now raise more capital, but — much more importantly — the very best startups, who would not have considered Reg CF in 2020, are now much more open to running a Community Round on Wefunder, and allowing their customers and fans to invest.
SPVs have also helped here — SPVs are a more familiar (and trusted) legal instrument than Custodians or Crowd SAFEs — so pose fewer problems to startups’ lawyers, boards, and follow-on investors.
Wefunder is expanding into Europe next year taking advantage of the new harmonized European Union rules. How will this integrate with the US operations? I believe you are setting up in Ireland – correct?
Jonny Price: We are still finalizing our decision on geography. There are certainly some synergies — both on the founder side (e.g. dealflow, partnerships, relationships), and also on the investor side (e.g. we’re now going to be able to more easily present Wefunder investors with the ability to invest in startups on both sides of the Atlantic).
Most importantly — we’re looking forward to replicating our Amtrak train trips on the TGV! [Train à Grande Vitesse]
How is your YC initiative performing?
Jonny Price: Delightfully!
As a Y Combinator graduate ourselves, we’re well connected in the YC community, and so helped to launch dozens of YC startups on Wefunder in 2021, which have now raised tens of millions of dollars. Interestingly — whereas the average company on Wefunder typically recruits over half of the capital they raise from their own network and marketing efforts, YC founders have historically raised 75% of their capital from existing Wefunder investors — who are understandably excited to be able to invest in the early rounds of YC portfolio companies.
Tell me about your vision for the pre-NASDAQ Stock market? Do you have an ATS license or will you partner with someone?
Jonny Price: We are still in the early stages of formulating our strategy here. We still see relatively low liquidity for a vibrant Reg CF secondary market, although that is another thing that’s starting to change. This is the future, and we’re excited to build a secondary market in a thoughtful way (e.g. how do we prevent startup founders, who should have a very long-term horizon, from being enslaved by quarterly stock price movement — in the same way that many public CEOs are today?). But that future isn’t here just yet.
What are some of the standout funding rounds that raised capital on Wefunder this year?
Jonny Price: Probably the most exciting one for us was Mercury Bank, which raised $5M in a few hours. They had just raised $120M Series B, and wanted to open up an additional $5M allocation for their customers (startup founders themselves) to invest. For Mercury, it wasn’t about the capital — they were already very well-funded. They just bought into our strong conviction that if you can turn your customers into investors, they will be more loyal customers, and passionate brand ambassadors.
We see this as the future of Regulation Crowdfunding. Of course, it’s a great option for a founder that’s struggling to raise capital — by enabling them to raise from unaccredited investors, publicly promote the offering, and get in front of Wefunder’s audience, now they can raise the capital they need… But the ultimate apogee is where a startup like Mercury doesn’t need the money, but runs a Community Round for the LTV and NPS improvements.
In this blog post, Immad (the founder of Mercury) talks about why he decided to run a Reg CF round on Wefunder.
Predictions for 2022?
Jonny Price: Continued growth in investment volume, investors, startups, etc. And continued improvement in the caliber of startups seeing Regulation Crowdfunding as a great compliment (and maybe sometimes even alternative) to conventional VC and angel dollars.
My expectation is that in 2022, more (especially consumer-facing) VCs will realize that if their portfolio companies open up an allocation to their customers (and potential customers), they will grow faster (and more healthily).