[Editor’s note: This gallery is a compilation of several galleries from two different authors covering one subject — WeFunder and its many equity crowdfunding investments.]
Will Ashworth: If you’re like many investors, you’ve probably watched your funds tear through each other like berries in a blender. But don’t give up on private investing, especially equity crowdfunding — such volatility is due to the novel coronavirus outbreak, which systematically brought the global economy to its knees. While we pride ourselves on our financial insights, we’re journalists at heart. As such, InvestorPlace spoke via email with Joshua Ehrig, professor of practice in management at Lehigh University’s College of Business, about the uncertainty public and private investors face:
“The continual uncertainty and volatility from Covid-19 has created a tremendous amount of anxiety in the capital markets. As a result, liquidity has dried up for early-late stage startups. Investors will focus on existing portfolio companies and conserve resources until some form of certainty exists. And for the ‘brave’ investors who invest during this volatile environment, term sheets will not be as attractive for startups. Only after some certainty exists, will we truly see a ‘reset’ between investors and startups. Right now, startups should go into cash ‘lock-down’ during this nuclear winter — execute on various measures to extend existing runway by drastically reducing their burn rate, be agile, and adjust their business models accordingly especially given the structural and behavioral changes that will occur as a result of Covid-19. While applicable to seed stage startups, growth-stage startups with (existing) high burn rates and (increasingly) unsustainable unit economics will have an even more difficult time during this liquidity crunch given investor’s shorter time horizon and hesitation to deploy (even) larger amounts of capital. If history is any indication, startups that survive and make the necessary adjustments given the structural changes could ultimately be the ‘winners’ in a post-Covid-19 environment.”
The natural reaction to this medical scare is to consider ways to diversify your portfolio, so that you’re not entirely as exposed to the correction that’s already started to take hold.
While it might be natural to search for ways to bomb-proof your portfolio, the reality is you should have done so long before the coronavirus gathered steam. And at this point, it might be better to do nothing and ride out the volatility and uncertainty of the markets today.
However, all of these ways to diversify your portfolio are meant to be long-term solutions, not just band-aids for the present. Implement some of these ideas and you ought to be able to sleep easier at night.
Will: Kaffi Coffee
As a lover of coffee, as soon as I saw the Kaffi Coffee equity crowdfunding campaign on Wefunder, I just had to take a closer look. Kaffi Coffee is Icelandic energy coffee. What exactly is Icelandic energy coffee? As the company’s presentation suggests, it is a functional energy drink disguised as cold coffee. The product is good for you and tastes good at the same time. I sometimes have a hard time drinking cold coffee beverages, so I’d really like to give it a try. But for now, I’m taking founder Smari Asmundsson’s word for it.
Here’s a little blurb from BevNET’s March 2019 review of Kaffi:
“Kaffi Icelandic Protein Coffee is a new ready-to-drink dairy-based line that is being launched by the company behind Smári Icelandic Yogurt. Announced in January 2019, the line features three flavors, including Iced Mocha, New Orleans, and Keto Latte,” BevNET wrote.
“The basic premise behind these products is to bottle up the benefits of Icelandic skyr (Smári’s core yogurt product) but deliver it with less tartness to appeal to a broader audience. To that end, the brand has certainly succeeded. The products taste rich but smooth.”
Reading that, now I really want to try it. Being in Canada probably doesn’t help. We always get new products later than in the U.S.
43% of Americans drink coffee daily. And millennials drink a ton of it. Kaffi is going after the refrigerated ready-to-drink coffee market, which has grown by 19% compounded annually over the past three years to $405 million.
As of June, Kaffi is available nationwide through Amazon. Here’s a picture of Kaffi coming off the line bound for Amazon.
To date, Kaffi Coffee’s raised $67,750, with plans to raise a maximum of $1.07 million. If you do invest, you’ll receive a convertible note that entitles you to 5% interest and a 30% discount on the stock you get when converting the note in the future.
Check it out.
Tom Taulli: Mevo, Everydae
According to the CEO and founder of WeFunder, Nick Tommarello, “I started Wefunder because I wanted to invest in my friends — to help them dream bigger, be the best versions of themselves, and reach their ambition. Seven years later, we do that for the rest of America.”
He has certainly done a great job in realizing his vision. His platform has funded more than $125 million in investments. Actually, a large amount of this has been available for any investors.
The average deal raises about $300,000. And some examples include Mevo (a camera designed for streaming live events) and Everydae (a digital tutoring app).
Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling. 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.
Will: Federation Brewing
If you live in the Oakland area and you like beer, Federation Brewing might be just the ticket.
Co-founders Adam Cretan, Larry Cretan and Matthew Hunter sold their first keg of beer in 2014. In March 2017, the partners opened up a taproom in Oakland. They’re on track to produce 1,500 barrels of beer in 2019.
Federation Brewing beer is available in 175 off-site bars and restaurants. As a result of the growth, it’s generating an average of $35,000 per month in revenue.
The company’s currently trying to raise as much as $500,000 to expand its production, increase its brand awareness in the San Francisco Bay area, and open a second taproom.
While I haven’t drunk their product, the fact that they’ve already raised almost $80,000 from 65 investors suggests the Oakland beer market is ready to take them to greater heights.
What do you get for investing?
Federation will set aside 5% of the quarterly revenues for investors. You’ll receive a 1.5x payback multiple, which means if you invest $1,000, you’ll receive $1,500 back as soon as 5% of the quarterly revenue returns enough to pay back your entire $1,500.
Plus, if you invest $1,000, you’ll also get a 10% discount at its Oakland tasting room for two years. If you don’t live in Oakland, maybe you can gift that two-year discount to a friend that does.
Will: 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.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.