Wefunder, founded in 2011 by 2 Y-Combinator alumni, is a crowdfunding platform that allows you to invest as little as $100 in startups you love. The platform is 2-sided: entrepreneurs can accept funding from any source without needing to prepare extensive paperwork until after they have gauged interest; and everyday people get access to equity in potentially game-changing startups at the earliest opportunities.
Start-up investing is risky; however, some of the best returns come from these types of investments. For example, Robinhood Markets’ (NASDAQ: HOOD) lead investor, Index Ventures, was able to turn $500,000 into $3 billion through pre-IPO seed investments as of July 29, 2021. Had you invested $100 alongside Index, your investment would be worth $600,000.
For Investors: As of March 2021, anyone in the U.S. can engage in startup investing with as little as $100 – an opportunity once restricted to wealthy, accredited investors like venture capitalists and angel investors. Similar laws are expected to go into effect in Europe in November 2021. Wefunder is simple to use and an easy way to get accustomed to startup investing.
For Entrepreneurs/Companies: As of March 2021, companies can now raise up to $5 million per year in pre-seed to series A rounds, or up to $75 million per year in regular A+ rounds and later, from unaccredited investors. This feature gives entrepreneurs access to a plethora of untapped capital. Companies can start campaigns in less than 15 minutes and pay relatively little in fees.
- Investors who want access to private markets without a significant amount of capital.
- Entrepreneurs looking for alternative sources of capital.
- Entrepreneurs who cannot pitch to venture capitalists.
- People looking for high-risk, high reward investments.
- People looking to diversify their holdings.
- People who want ownership at the ground level.
- Website and app layout are simple and straightforward.
- All-star management and development team with exceptional credentials.
- A large variety of industries available for startup investing.
- Super easy to sign-up and get started.
- Low or matching fees offered for startups raising capital.
- Startup investing is risky – you experience a much higher chance you will lose your entire investment by investing in a private company rather than a public one.
- Private equity is far more illiquid than public equity.
- Pitches are not fully vetted; however, Wefunder does verify the legality of a startup and vets the founders.
Wefunder Ratings at a Glance
|Startup Investment Options|
|Customer Service Rating|
You have many choices for small business investment, each with a minimum $100 commitment. The platform gives you the option to filter choices by the following industry categories:
- Main Street
You can sort results in order of most recently added (“New”), recently trending (“Trending”), almost fully funded (“Closing Soon”) and most funded.
Some recent startup examples include Token Metrics, a managed crypto-investing platform; UpCounsel, an online legal services marketplace; and SelfDecode, a DNA-based, AI-supported health platform.
Wefunder has a lengthy set of FAQs, each with a succinct and detailed answer. The support (or “FAQ & Educational Material”) page includes a section for startup investor FAQs, founder FAQs, term glossary and additional “stuff to read.” If you cannot find an answer to your question on the support page, you can email Wefunder at firstname.lastname@example.org.
The company also has social media accounts on Facebook (NASDAQ: FB), Twitter (NYSE: TWTR), LinkedIn, YouTube and Instagram.
An easily accessible live chat or customer support phone number would bring the rating to a 5/5.
The Investor FAQ page covers the following topics:
- General questions (“getting started”)
- Lead Investors
- Special Purpose Vehicles (SPVs) & Custodians
- Earning a Return
- Investment Contracts
The Founder FAQ page covers the following topics:
- Why Wefunder
- Lead Investors
- SPVs & Custodians
- Investor Panels
- Investment Terms
- Form C
- After You Raise
The Glossary page covers the following topics:
- Basic Jargon
- Deal Terms
The Stuff to Read page includes the following:
Wefunder is free for startup investors. For companies, Wefunder has 2 fee structures:
- Wefunder charges a 7.5% fee on the capital raised for Pre-seed through Series A funding.
- Any round after a Series A is charged a flat fee of $375,000– 7.5% of $5 million capital raise, the max for pre-seed through Series A funding.
The investment platform will also match competitor pricing.
Creating a company profile is free on Wefunder, and your company will not pay a dime until it begins raising capital.
Wefunder’s pricing plans are highly competitive, especially since the company holds a majority share in regulation crowdfunding.
The Wefunder app is exceptionally well laid out, offering a ton of information without cluttering your screen. The app is very functional, with little to no glitches or jumps, and every page transition is smooth.
All the industry filters, sorting options and search bars are placed at the top of the explore page and are easy to use. The main content of the explore page is sorted in trending order by default. It includes company cards containing the company name, a photo, a 1-sentence company description and 2 bullet points on financials or other relevant business information.
When clicking on a company, you are taken to a new page with a pitch video and investor panel at the top, details on the funding round and a note from the lead investor. The page also has a dropdown menu from which you can choose to look at the company overview, which includes highlights, a team overview, pitch deck and any downloads. Additional dropdown menu items include updates, what people have to say and a question box.
Best of all, you can invest directly from the app.
For Investors: The app offers a wide variety of industries for you to gain exposure to. Each startup has tons of information available to aid you in your investment decision-making process. Investing in private companies is 1 of the best ways to secure the largest gains, but it is also risky. While your investment may go to $0, you do not need to worry about fraud as you try your hand at investing in small businesses through Wefunder. Wefunder is regulated by nearly 1,000 pages of SEC and FINRA regulations, barring these new ventures from falsely taking your money. Instead, when you choose to invest, your money gets held in escrow by a 3rd-party bank and is only released to the startup once the funding round is complete.
For Entrepreneurs/Companies: Gain access to millions of angel investors who share your vision. There are many ways to set up your funding round, and you can raise different amounts of capital at different seed rounds. The fee structure is optimal and will be matched if you can find a better offer.
Signing your company up is super simple and can be done in less than 15 minutes. Before you commit to spending money on drafting legal contracts for a capital raise, you can test the waters and see how many people would be interested in investing in your business. Once you have done that, you can either go straight to filing SEC documents and raising money at a determined valuation or raise money through a “simple agreement for future equity” (SAFE). Raising through a SAFE lets your company skip the arduous process of determining a valuation with a professional investor and lets angel investors buy the right to future equity during a priced equity round.
If you know an entrepreneur or founder looking to raise capital, you can earn $2,500 in investment credit when they open a funding campaign.
As mentioned above, the user experience is impressive. The app is fully functional, meaning that anything you can do on the website can be done from your phone. Each company has tons of information that is presented in a clean and uncrowded manner.
Wefunder vs. Competitors
Wefunder offers the ability to invest in private companies, while most other investment services are limited to public companies and real estate. The service, thus, is inherently riskier but offers the potential for much more substantial returns.
Wefunder was also built on the hope that the U.S. government and the EU would revise laws to grant unaccredited investors the ability to make investments in private companies with low minimum investment requirements. Now that these revisions have become a reality, Wefunder is best positioned to offer a wide variety of exciting companies looking for new capital – as shown by the company’s regulation crowdfunding market share growth from 33% in 2016 to 2020 to 41% in 2021.
Wefunder is excellent at what it does. It aims to offer individuals access to pre-IPO companies, and it has been quite successful in its mission. Wefunder has helped a diverse set of thousands of companies meet funding goals through capital from around 1 million individuals.
The app and website are easy to use and are highly functional.
Wefunder makes money by taking a small percentage-based fee from the companies raising money on the platform, which means your investment is commission-free.
Wefunder is run by a highly skilled team of professionals and is on the precipice of explosive growth, so it is safe to say the investment platform will be around for some time. Additionally, over $5 billion has been invested in startups that were initially listed on Wefunder, so it is likely that some of the companies you may find will be worthwhile startup investments.
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Frequently Asked Questions
Can you make money on Wefunder?
Yes, however, the duration of seeing a return on your investment may vary by what kind of investment you made. Wefunder allows small businesses to offer debt, convertibles, stock with no dividends and stock with dividends.
What should I know before making an investment?
Never invest more than you can afford to lose, and be sure to diversify your investments – i.e., don’t put all your eggs in one basket. If you can invest $1,000, making 10 $100 investments is safer than one $1,000 investment. Returns are binary in that your money will either go to $0 or return a crazy amount. If you are not willing to lose every dollar, do not invest in startups. If you are not willing to wait several years to see a return, do not invest as your shares in the private company are highly illiquid.
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