Wefunder is an equity crowdfunding platform that enables startups to raise capital from a broad base of investors, including non-accredited individuals. Here’s how it works:
For Startups:
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Profile Creation: Startups begin by creating a detailed profile on Wefunder, providing information about their business, financials, and investment terms. This profile acts as a pitch to potential investors.
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Campaign Launch: After profile creation, startups can launch their fundraising campaign. They set a funding goal, which must be at least $50,000 for the campaign to go public.
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Community Building: Founders are encouraged to leverage their existing network to raise initial funds. Wefunder suggests that startups should aim to raise this amount from friends, family, and early supporters before making the campaign public.
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Regulatory Compliance: Wefunder assists startups with the necessary legal documentation, including filing Form C with the SEC for Regulation Crowdfunding (Reg CF) campaigns. This allows them to offer securities to the general public.
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Investor Engagement: Once the campaign is live, startups engage with potential investors through updates, Q&A sessions, and by showcasing their progress or product.
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Funds Access: If the funding goal is met, startups can access the funds after a mandatory 21-day period post-Form C filing, ensuring all legal obligations are met.
For Investors:
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Investing: Anyone can invest with a minimum of $100 in most cases. Investors choose startups they believe in, often based on the company’s vision, market potential, and team.
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Types of Investments: Wefunder offers various investment structures like equity, convertible notes, revenue shares, and SAFEs (Simple Agreement for Future Equity).
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Due Diligence: While Wefunder provides a platform, it does not endorse or verify the accuracy of company information. Investors are encouraged to perform their own due diligence.
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Returns: If the startup succeeds, investors could see returns through dividends, stock value increase if the company goes public, or upon acquisition. However, investing in startups is high-risk, with the potential for total loss of investment.
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Transparency: Wefunder aims to offer transparency by showing how Lead Investors, experienced investors who vet companies, are placing their funds.
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Post-Investment: Investors receive updates from the companies they’ve invested in through the Wefunder platform, keeping them informed of progress or issues.
Wefunder operates under SEC regulations like Reg CF, which caps how much a company can raise ($5M/year), and Reg D for accredited investors. This structure democratizes investment but also comes with inherent risks due to the speculative nature of startups.
