Founded in 2011, WeFunder is one of the largest platforms for equity crowdfunding. Consider that the company’s mission is to fund 20,000 more startups by 2029 and to achieve investment returns that beat the S&P 500. OK then, so how does the platform work? Well, let’s do a WeFunder review.
The founders include serial entrepreneurs Nick Tommarello (the CEO), Mike Norman and Greg Belote (the CTO). They actually helped lobby for the passage of the JOBS Act, which legalized equity crowdfunding.
The founders also were able to get the backing of Y Combinator, which is Silicon Valley’s premier incubator. It has funded breakout companies like Stripe, Airbnb, DoorDash and Dropbox (NASDAQ:DBX).
As for WeFunder, it would go on to raise $9.1 million. Yet the company has remained fairly small, with only about 18 employees. Despite this, WeFunder has been able to create a vibrant crowdfunding community.
All About the Marketplace
WeFunder allows companies to set up a profile on the site and makes it possible for any investor — regardless of income or net worth — to participate. The minimum is a mere $100. Note that WeFunder does not hold any of the gross proceeds. They are instead placed in an escrow account with Boston Private Bank.
While there is some vetting on the profiles, there is no WeFunder review as to the merit of the investments. This is up to the members. Although, WeFunder does provide some disclaimers about the potential risks. After all, many early stage companies fail. This is why WeFunder recommends to go slow, engage in due diligence and make sure you have a diversified portfolio.
To get a better sense of the platform, here are some of the recent investment opportunities:
- Rentberry: This is a rental system that automates the standard tasks, such as submitting personal information, making offers and hosting virtual tours. The goal is to bring more transparency to the process.
- Albi: This is a digital personal assistant for employees and it uses sophisticated artificial intelligence approaches like natural language processing. The app essentially helps with tedious tasks.
- Quadrant Biosciences: This is a biotech startup that identifies and creates epigenetic biomarkers in saliva, with a focus on RNA and the microbiome. The first candidate is a test for autism. But there are also initiatives for Parkinson’s disease, concussions and anorexia.
- Beta Bionics: The company is developing a bionic pancreas. The focus is on those people who have type 1 diabetes.
- Sleep Better Foundation: The company’s app allows you to schedule sessions with virtual sleep coaches. Keep in mind that over 20 million people in the U.S. suffer from chronic poor sleep.
As for a WeFunder review of the prior investments, there are certainly some big wins. For example, Zenefits has gone on to raise $581.5 million (this was the first company listed on the platform) and has generated a return of 206x. Checkr has raised $149 million, with a return of 34x.
WeFunder Review: Final Takeaways
Then how does WeFunder make money? There are several ways. First of all, the company gets roughly 7.5% of the total money raised for each company. Then there is a 2% charge from the investors.
Note that the average company raises about $300,000. In fact, the acquisition cost for each listing is a mere $200. In other words, it does look like WeFunder has an engaged community.
And as for the traction, the company has facilitated $125 million in investments since inception and the annual revenue run-rate is $4 million, up 2x on a year-over-year basis. What’s more, a variety of the startups have had much success with follow-on financings — over $2.2 billion with an internal rate of return of 40%-plus.
Tom Taulli (@ttaulli) is an advisor and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s. As of this writing, he did not hold a position in any of the aforementioned securities.
