The bottom line: Wefunder makes it possible for the general public to invest in early-stage startups for as little as $100, and even offers insights from experienced investors through its Lead Investors program. But the very nature of the investments on its platform — startups — remains inherently risky.
2% - 3.5%
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Pros & Cons
Offers access to early-stage startups.
Approachable way to learn about private equity.
Available to international investors.
Relatively new platform.
Limited historical data on potential investments.
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0.50% to 2.5%
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Billed as "Kickstarter for investing," Wefunder brings private equity investment to the masses. Investors can peruse startups, dig into performance, scroll an Instagram-esque news feed for updates from startup founders, and more.
But unlike Kickstarter, investors have the chance to see a monetary return on their investment, either through repaid debt, equity, dividends or other investment structures. However, as in traditional private equity, investors should plan to invest for the long term — at least five years, possibly even 10 or more.
The platform, as it exists today, dates back to 2016, when the Securities and Exchange Commission officially let eligible private companies raise capital through the Regulation Crowdfunding exemption. Since then, the platform says it has helped startups raise over $100 million purely from crowdfunding.
Wefunder says that as of 2020, it is the largest funding portal for crowdsourced investing as measured by number of investments, investment volume and investor returns. But Wefunder aims to be about more than just returns. In the company’s words, it is inviting investors to “join the movement to save the American dream” by letting anyone invest small amounts (over $100) in early-stage startups that may otherwise never receive funding.
Wefunder is best for:
Investors looking for local investment opportunities.
Investors who want to invest in startups but have limited capital.
Investors with a very long time horizon.
Wefunder at a glance
There is no minimum to sign up for the platform. Wefunder does not hold your investment or offer investment accounts, so there's no account minimum to maintain.
$100, though individual startups can set their own investment minimums.
2% of initial investment for Regulation Crowdfunding (3.5% if using a credit card) with a minimum of $8 and a maximum of $100.
Number of companies to invest in
133 (as of September 2020)
Wefunder features you should know
Payment: You won’t need to set up and fund an account through Wefunder as you would with a traditional investment broker, so there’s technically no account minimum. Instead, you’ll purchase an investment through bank transfer, check, credit card or wire transfer. Your funds will be placed into an escrow account with Boston Private Bank until they’re sent to the startup.
Lead Investors: On Wefunder, Lead Investors are individuals who have vetted startups looking for funding and have made an investment based on the startup’s terms. They have an active role in helping the startup grow, offering advice, connections and mentorship. Lead Investors earn a share of the startup’s profits, and are therefore incentivized to see it grow and prosper.
As such, investors on the platform can look to Lead Investors to see where they’re investing, how much they’re investing and why they want to invest in specific companies. This is all highly visible for companies with Lead Investors, although there’s no guarantee every company will have a Lead Investor.
It’s also important to note the Lead Investors are part of a group called the XX Team, which acts as the mentors and advisors to the startups on Wefunder. The XX Team earns 10% of an investment’s profit upon an initial public offering or acquisition. This 10% doesn’t go to Wefunder — it is strictly used as an incentive for the XX Team and Lead Investors to help Wefunder startups grow.
Various investment structures: While Regulation Crowdfunding is what this review focuses on, Wefunder also provides access to other types of investments, mostly grouped by the limitations the SEC places on investors. These distinctions are based on the fundraising structure the startup is using.
Regulation D offerings, for example, are available only to accredited investors and have no restrictions on how much can be invested. Regulation A+ offerings are open to nonaccredited investors, but they can only invest up to 10% of their income or net worth per year (whichever is greater).
Diverse investment opportunities: One of the positives about Wefunder is the huge variety of investment options. You can search the database by category (everything from alcohol to infrastructure), whether the business is local, the type of investment you’re looking for (debt or equity) and more. This screening function also lets you sort by trending companies, those that are closing their funding round soon, how many people have already invested and similar criteria.
Referral program: Wefunder runs a referral program that pays investors $1,000 if a company they invite launches a campaign on the site.
Social platform: Investors have access to a feed of photos and updates from participating startups, and you can get in touch directly with all the companies vying for your dollar. It's an opportunity to learn about early-stage investing and the different types of investment structures available.
You’ll also create a profile based on your personality traits, interests, net worth and income to help you understand which investments might be best for you. (It’s worth noting that Wefunder explicitly states it never endorses any of the companies on its platform.)
Investment portfolio: Every company you invest in is automatically organized in a folder in your Wefunder account, where you can see the amount invested, associated fees, status updates and any action that may be required.
Is Wefunder right for you?
Wefunder is not for the risk-averse. The website is full of disclaimers explicitly stating that investing in early-stage startups is riskier than the stock market, and there is a very real potential of losing all of your investment. Moreover, Wefunder describes the investments on its platform as more binary than the stock market, meaning stock market returns can vary over time, while startups typically see either success or failure. So if you’re new to investing, it may be best to take a more traditional approach as your first step into the market. The same is true if you need the money you plan to invest in the short term — Wefunder suggests a timeline of seven years or more.
However, if you’ve already got a healthy investment portfolio and are looking to diversify long-term savings, Wefunder is an extremely easy platform for getting involved in private equity on a smaller scale than through traditional private equity firms.
Lastly, Wefunder could be a good option if you fully understand the risks but still want to invest in a company you believe in or a cause you care about. From local breweries to scientists working on the next breakthrough in public transportation, you’ll find it on Wefunder. And unlike Kickstarter, you may even return a profit on your well-intentioned investment.