Wefunder for Investors and Startups
A Review of WeFunder and How It Works for Startup Investing
What is WeFunder?
WeFunder is one of a collection of sites that have been spawned on by the JOBS Act which was passed in 2012. WeFunder is a crowdfunding marketplace for startups to raise money, and investors to invest in startups, hopefully the best startups. I want to also tell you that we have used WeFunder and we'd never recommend a product, platform, website at Angel Kings unless we've used it.
What are the pros and cons of WeFunder? First off, the deal flow is top notch. WeFunder has spun out of the Y Combinator era in the last few years, and they have provided for deal flow into some top startups. To give you an example: Zenefits and Checker. Zenefits and Checkr.
What are the pros and cons of Wefunder?
Zenefits is an HR company that started out with a valuation on WeFunder with less than twetny million dollars. I was not part of that deal but I can tell you that Zenefits has taken off and is absolutely astronomically worth more than it was when they first were listed on WeFunder. That's just an example that WeFunder does have access to some great companies.
They also have invested in a company called Checkr. And Checkr is a background check API that is used by sites such as Instacart, Uber. That company is reportedly worth in the realm of three hundred to four hundred million dollars as of early 2016. That could obviously change. Do your due diligence before investing. Angel Kings is actually are an investor in Checkr.
That gives you an example of one positive is that WeFunder does get awesome deal flow. Also, I like the fact that they give clarity of terms for both the startup and the investor. In other words, when you log in after you've signed up, you'll see the due diligence that they've done and the information they've provided you about startups.
When you log in to WeFunder, you'll see the due diligence that they've done about startups you're interested in.
Their FAQs, their information on startups carry investing and all the things related to investing in startups are phenomenal. I mean they have one of the best FAQs and resources page that we've ever seen. So it's actually been a resource for us as well at Angel Kings.
What are some cons or things that WeFunder has to improve if they want to win the race past the Jobs Act and into the hearts of startup investors. There's three things.
One, the evaluations on many rounds should be down rounds instead of up rounds. Their valuations are just too high on most of the investing opportunities on WeFunder and that should be a red flag for investors.
Second thing is you're not able to, although they have just instituted clubs which I absolutely applaud them for doing, but it would be nice if they gave an opportunity or way to connect in more social ways with other WeFunder investors. Once you've started investing more than twenty-five, fifty, a hundred thousand dollars in start ups, if they realistically want to accept those larger investments, people need to meet face to face. There is that touch time, that face time that's required. I'd recommend that they create something of that nature. I do applaud them for the clubs but there could be more done.
It would be nice if they gave an opportunity or way to connect in more social ways with other WeFunder investors.
They also advertise, and this is something that's a bit confusing, because they advertise a hundred dollar investments on their interface and then at no point have I actually seen the ability for a startup investor to invest at that low level. Not necessarily recommending that because the less investors usually a bit better in your company before you're public. But if you're going to advertise a hundred dollar investments you have to actually practice that. They need to fix that if they are going to stick true to their word in advertising.
I would absolutely use the site. We continue to use it. I applaud it. It's a great website. At WeFunder it's a solid team that they've got. There are clearly some things that I would recommend they have to improve in order for not just Angel Kings but also other startup investors who want to be part of the movement to do. And by the way the founders are Nick, Mike, and Greg. Nick Tommarello, Mike Norman, Greg Belote. I hope I didn't butcher his last night, but they're all excellent founding team there at WeFunder.
What do they need to do? It's very simple. If they want to beat Fundersclub, Angellist, and be the platform where people go to invest in startups you've got to negotiate better terms.
There's two things that matter in Brad Feld's book Venture Deals. He mentions this as well. It's the economics and control. I don't really see the economics. I see decent terms. They're decent in the sense that their valuations aren't crazy in most cases but I would like them negotiating better economics and potential control opportunities.