Meet WeFunder, the Crowdfunding Platform for Would-Be Investors
“Entrepreneurship is what we pride ourselves on in this country,” said Mike Norman, himself a serial entrepreneur. “Though most people are too risk-averse to strike out on their own.”
Thus the premise of WeFunder, the most recent startup from Norman and co-founder Nick Tommarello. WeFunder aims to open up the process of raising money for startups outside of just the usual, traditional investors found in Silicon Valley, the East Coast and the like.
The platform, which launches on Tuesday to certain accredited investors (more on that in a minute), ostensibly allows anyone who sees promise in one of the startups featured on WeFunder’s platform to invest in it, pitching in a mandatory minimum amount of cash (currently $1000, but as little as $100 when the site rolls out to all). The idea, according to CEO Tommarello, is to “fill the funding gap between angel investors and that first major round of capital.”
The site will feature one new, carefully vetted startup per week, which outsiders can apply to fund. But they’ll have to make their case, as the startup can pick and choose exactly which investors can contribute money to their fund. The idea is, each small-time investor can bring their individual skill set to the startup in an advisory role, and can communicate via WeFunder’s dedicated social channels to share their experience with the founders.
As you’d imagine, all sorts of regulatory hangups have kept small businesses from raising money outside of the traditional private equity venues, including pursuing other options, like a site such as WeFunder. But Tommarello and Norman were instrumental in helping D.C. regulators draft, construct and ultimately pass the JOBS act, which allows small businesses to raise up to $1 million in crowdfunding backed by actual investors. So, instead of it working like a Kickstarter, where contributors pledge money to receive some sort of end product or service, WeFunder contributors actually receive a slice of equity in the company itself.
Which, Tommarello argues, is pretty cool for an armchair investor who doesn’t want to keep track of the Dow. “As an experience, living vicariously through an entrepreneur is pretty thrilling,” he said.
Now, one would think this would make traditional angel investment outfits upset. After all, part of the allure of being an angel investor is getting in on a startup’s ground floor before other, larger VC firms are able to put their money in. Not to mention the headache of having untold numbers of shareholders in a startup who could muddle up the advisory process.
WeFunder protects against this. Those who invest through the platform are limited in voting power, and can’t negotiate their contract. It’s a simple yes-or-no proposition when pitching in; accept the terms of the deal or move on. And all those numerous investors will actually just operate as one, as Norman, Tommarello and VP of engineering Greg Belote have registered a separate LLC for them all to reside under. It’s a lot of legalese, but it essentially acts as a way to keep other angels and future firms from getting freaked out by too many cooks in the kitchen.
Right now, WeFunder is only open to “accredited investors,” which means the majority of normal folks still can’t contribute. But since the JOBS act has already gotten through the House, Senate and the President’s desk, it shouldn’t be long before the platform opens up to all (it’s currently in the SEC waiting for approval, but is being held up due to new administration appointments).
For now, the accredited and the prospective small-timers can visit the site’s front door to see more new startups appear in the coming weeks.