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Wefunder Review 2021: Best Startup Investing Platform?

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Wefunder
  • Minimum Investment
  • Accessibility
  • Transparency
  • Investment Fees
  • Offering Selection
4.6

Summary

Wefunder is by some measures, the largest startup crowdfunding platform on the market. With over 40% market share in Regulation CF offerings and over 1.6 million investors, Wefunder is certainly a giant in their own right.

Through the platform, investors can allocate as little as $100 to different startups that they find interesting. In return, you’ll receive ownership in the company and potentially unique perks depending on your funding amount.

Wefunder is open to all investors and has a strong track record of funding successful companies over the last decade.

Pros

  • Reasonable fee structure
  • Successful track record
  • Wide variety of companies offered

Cons

  • No secondary market
  • Startups are not vetted for quality

Only a couple of decades ago, it was virtually impossible to start investing in startups unless you were a millionaire. And located in Silicon Valley. And happened to have connections to the right people.

The everyday investor was essentially completely shut out from this asset class.

As a result, we missed out on investing in companies like Facebook, Amazon, and Google. Early investors in these companies were able to turn thousands of dollars into millions, but only if they had the connections and resources required to gain access to these deals.

Today, the landscape is completely different.

There are now many startup investing platforms aiming to make investing in high-growth private companies available to the masses. One of the largest and most well-established of these companies is Wefunder.

In this Wefunder review, we’ll break down exactly how this platform is democratizing the world of startup investing and whether it’s an effective way for investors to start diversifying into startups.

Wefunder Review: Platform Highlights

  • Wefunder is the largest startup crowdfunding platform by most metrics
  • The platform allows anyone to become an angel investor and begin investing in startups
  • A minimum investment of $100 makes the platform highly accessible to all
  • There are a wide variety of companies listed on Wefunder from robotics, to games, to art, and more
  • Wefunder fees are highly reasonable when compared with many of their competitors
  • Startups on Wefunder offer both debt and equity investment opportunities

Wefunder Logo

What is Wefunder?

Founded in 2011, Wefunder is one of the market leaders for startup crowdfunding. The platform boasts over 1.6 million investors making it 3x the size of StartEngine, another leading startup investing platform.

Self-described as a new kind of stock market, Wefunder allows investors to allocate a portion of their portfolio to private companies. These are typically newer ventures that are not large enough to be listed on a major stock exchange.

Through the platform, investors can purchase and manage shares in these companies.

Similar to Kickstarter, you are supporting projects that you find exciting and may receive perks based on your contribution amount. However, unlike Kickstarter, you are making a donation or buying a product. Instead, your capital purchases shares in the company, making you a partial owner.

Wefunder investors can both generate financial returns and support projects that align with their interests and values.

How Does Wefunder Work?

As the largest Reg CF startup investing platform, Wefunder can provide functionality above and beyond what many competitors can offer. This is first illustrated in the vast selection of startups Wefunder offers investors.

Currently, there are 354 companies actively fundraising on the platform. Compare that to smaller platforms like Title3Funds that may offer fewer than 10 startups at a given time. With this variety, investors can find companies in their interest areas or areas of expertise.

However, one of the reasons that Wefunder is able to offer so many different companies is the minimal vetting process. While platforms like SeedInvest utilize a strict screening process and allow fewer than 2% of companies to be listed, Wefunder is far more relaxed.

Provided that a startup publishes their financials and agrees to Wefunder’s terms, there is a very good chance they will be listed on the platform.

Depending on the company and their goals, they can choose whether to issue equity or debt to investors. The choice that the company makes will significantly effect the investor’s return profile.

Wefunder Active Offerings

Wefunder Returns

When investing in startups, many people immediately think of equity investing. An equity investment is the type of investment you make in the stock market and grants you partial ownership in the issuing company.

With an equity investment, you can profit from both dividends and appeciation. Most startups do not pay dividends because they are reinvesting all of their cash into growing the business faster. Instead, the bulk of startup equity investor returns come from appreciation.

You are banking on the fact that while the startup is only worth, say $10 million today, it will go on to be worth $1 billion and you will 100x your investment.

While this type of investment is available on Wefunder, it is not the only type of investment the platform offers. Additionally, investors have the option of purchasing debt and essentially making a loan to a startup.

This can be a more attractive option when investing in local businesses that may not have as much growth potential as a tech company.

In these instances, you’re loaning a fixed amount, say $1,000, to a company and they promise to pay you back $2,000. Typically this will come in the form of a revenue sharing agreement and the rate at which you are paid back will depend on the company’s profits.

Depending on the types of investments you choose, your returns will likely vary substantially. However, it’s important to keep in mind that with any startup investment you make, the risks are substantial.

Startups have a 90% failure rate and so it’s likely that your investment will go to $0.

It’s also important to keep a long term time horizon as it will take 5-10 years for many of these companies to reach the point where they may experience a liquidity event.

Wefunder Fees

On the Wefunder platform, both investors and startups pay some fees.

Investors will face payment processing fees that go towards Wefunder’s cost of accepting payments. Startups will pay platform fees that allow Wefunder to continue operating, marketing, and upgrading the platform.

The payment processing fee for investors depends on the payment method used. Unlike many other startup investing platforms, Wefunder accepts a wide variety of payment methods. These include ACH transfer, wire transfer, physical check, or credit card.

When paying with a physical check, ACH transfer, or wire transfer, investors pay a 2% payment processing fee. Credit card transactions will face a higher 3.5% payment processing fee.

These are the only fees investors pay on the Wefunder platform. There are no other hidden fees or costs.

On the other side of the equation, Startups pay a 7.5% platform fee to Wefunder. This fee applies to the total fundraising amount on the platform. For example, if a company raises $200,000 on Wefunder, they pay $15,000 in platform fees.

However, the 7.5% fee assumes that the startup is raising money under Regulation Crowdfunding. While this is the most common type of raise on Wefunder, there is another option that comes with a different fee structure.

Companies can also choose to raise under Regulation A+ on Wefunder. If they make this choice, they are able to raise a larger round, however, they will also face a larger fee.

There is a flat $375,000 fee for companies raising under Reg A+ on Wefunder. This number was selected because it is 7.5% of $5 million.

In general, these fees are comparable with other startup investing platforms.

Wefunder Successful Startups

Wefunder Pros

  • Hundreds of startups to invest in at any given time
  • Open to non-accredited investors
  • Low $100 minimum investment to start investing
  • Reasonable fees compared to other platforms
  • Successful track record of successfully funding companies for over a decade

Wefunder Cons

  • Investors required to do significant due diligence
  • Wefunder does not offer a secondary market for selling shares early

Wefunder Review: Final Thoughts

As far as startup investing platforms go, Wefunder is certainly one of the most well-known, and for good reason. The platform has successfully raised over $300 million for 500+ startups, and has over 40% market share for all Regulation CF offerings.

Through the platform, investors can diversify across sectors, industries, and investment structure. Unlike many other startup platforms that only allow equity investments, Wefunder also offers debt and convertible notes allowing investors to build a portfolio that better matches their goals.

On top of that, the simple interface, low minimums, and reasonable fees create an easy place for beginner angel investors to get started.

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