Tzakhi (00:01.034)
Hi, Johnny.
Jonny @ Wefunder (00:02.914)
Hello, Zachy.
Tzakhi (00:05.025)
So good to have you here. We're here at the Meet.Capital startup podcast and I'm so happy to have you as my guest. We've known each other for a few years now, which isn't itself amazing. We've even met here in Tel Aviv and
Jonny @ Wefunder (00:22.818)
That was a delicious restaurant that you introduced me to. So thank you for that.
Tzakhi (00:27.235)
It was a great day. So I want to say a bit about you and about WeFunder.
Jonny @ Wefunder (00:28.971)
Yeah.
Tzakhi (00:36.977)
which I think is an amazing platform for startups. It's a platform for equity crowdfunding, which means it allows startups to raise capital from investors that are not necessarily accredited. So what's called retail investors, which are basically everyone. Anyone can invest on WeFunder, which means that startups can raise money from anyone on WeFunder, from their community.
Jonny @ Wefunder (00:51.054)
Mm-hmm.
Tzakhi (01:04.745)
and from their customers and from their fans. And that's an amazing opportunity for some startups, which you'll explain. But I think, you know, you guys have done such an amazing job because WeFundr in this space has a kind of vibe of really being for the founders and also for the community and like a very kind of friendly
Positive vibe about the flap form which is amazing and you I think that's what made you the biggest platform, too. So but Can you say a bit about you know what you do at we funder? How you came all the way from the UK to the US to To join it and all that
Jonny @ Wefunder (01:54.786)
Yeah, absolutely. Thanks for having me, man. It's so good to be chatting with you as always. So yeah, at WeFundr, my role is business development basically. So me and my team, I'm leading the team that is responsible for finding founders who want to raise capital on WeFundr. We call it a community round.
So, i.e. raising capital, potentially as well as from VCs and angel investors, also raising capital from your customers and community. Maybe it's friends and family. I think this can be like a pretty awesome way to run a friends and family round in kind of a supercharged way.
get in front of the WeFundr investors. We have 2 million registered users on the platform now. Usually they're accounting for at least some of the capital that everyone's raising on WeFundr. But yeah, my team's responsibility is to find founders who are raising capital and explain the pros and cons of WeFundr, who it might be a good fit for, and then hopefully persuade them to whether this is the only capital they're raising this round,
Jonny @ Wefunder (03:07.268)
community round is a part of a larger round. So there's many examples of companies that are raising from VCs who are maybe leading and pricing the round, but then it's a consumer facing company that's letting their customers invest as an allocation in this round.
So yeah, that's my team's role, kind of business development, pretty high up the funnel. And then, there's another team at WeFund that is responsible for the kind of execution of the raise and the fundraising plan and the legal and compliance and the financial stuff. And yeah, I'm from the UK originally, as you say, I started my career in management consulting out of college, did that for six years. After that, I went to work at a nonprofit
Jonny @ Wefunder (03:53.424)
we were making crowdfunded micro loans. So actually to entrepreneurs all around the world in Africa, South America, Southeast Asia. And then I started a team that brought that model to the US. So we were making $5,000 loans to food truck owners, 0% interest crowdfunded by their customers. And then after seven years running that team.
I found my way to WeFund have been here now for coming up in six years.
And it's similar in that, you know, it's crowdfunding capital for entrepreneurs in the U S at Kiva was small, small amounts at Wefunder as much larger sums. So, you know, the average raise on Wefunder is probably about four or 500 K minimum is 50 K. And then, yeah, if you're a sub stack newsletter platform, they raised $5 million on Wefunder earlier this year in less than 24 hours from thousands of their fans. Mercury bank is a bank focused on startups.
They had two and a half thousand of their customers fund them $5 million in a day. So it goes right up to, you know, series B companies, series C companies. We're speaking to some series C companies right now. It's like we're raising a hundred million dollar round and we're allocating. We're delighted to allocate 5 million of that to let our customers invest. Um, so yeah, larger sums of capital than at Kiva. Um, we fund us a public benefit corporation. I'm a pretty mission driven person. So I like that we're a social enterprise focused on a double bottom
We're a very kind of mission driven company, but yeah, that's how I kind of found my way over to this side of the pond and these days live in Nashville with my wife, wife Ali, and we have three, three young kids.
Tzakhi (05:35.873)
Nice. Yeah, I think, you know, you guys use the term community round, which maybe others have adopted it by now, but like the space was using equity crowdfunding and you guys talk about a community round, which I think is an excellent term and also kind of a very positive impact driven term. So do you want to say something about that?
Jonny @ Wefunder (05:47.676)
Mm-hmm.
Jonny @ Wefunder (05:58.974)
Yeah, absolutely. A lot of people say equity crowdfunding.
One thing, I mean, some, you can raise debt capital on WeFundr as well. So equity is quite common and within equity, there's like price rounds, safe convertible notes, but we also do loans. And so kind of equity is a little bit of a misnomer. So it should be kind of investment crowdfunding. And then crowdfunding is a term we don't really love. One, because it has connotations of Kickstarter and Indiegogo and kind of perks-based crowdfunding. And this is not perks-based crowdfunding.
This is an investment and the investor is hoping to make a financial return. And secondly, just the word crowd, it kind of implies like, I don't know. Um, uh, it's a little kind of foreign maybe, or kind of, you don't have like a connection to a crowd, maybe. Whereas like a community, I think is a better word for talking about what we're doing.
And so yeah, most of the time VCs and founders who was talking to you, it's like, oh yeah, community round. That's a way better way, better way to kind of think about it. And so we rolled out this kind of brand and concepts. We have a website community round.com where we show some examples and case studies. But we wrote that out in kind of April of 2022. So community round as a concept now has been around for kind of 18 months or so. And yeah, as you say, it's been kind of fun. Like we've seen like some of the other platforms in the space.
basically start to use this language. So it's been a fun example of kind of we funder, I think leading the industry.
Tzakhi (07:30.753)
Well, a community is by definition active, right? And a crowd is passive. It's like watching something or participating in something, but mostly in a passive way. So I think...
Jonny @ Wefunder (07:39.71)
Yeah. And I think that's another benefit of the nomenclature as well. And like, if I'm talking to a founder about why they might raise some we fund there, like one of the biggest reasons they would do that is if you're a startup founder,
trying to build stronger community among your customers, among your users, among your community members. My pitch is there is literally no better way to build strong community for your startup than by letting those community members become owners in your startup.
Like the kind of strength in your community is like one of the biggest and best reasons why you would run a community random we funder. So using the term community round versus crowdfunding, it kind of like emphasizes that point, you know.
Tzakhi (08:30.169)
Okay, good. So I think you've touched upon a bit of like, why would someone go for equity crowdfunding? So can you tell us like, maybe there are a few different startup personas that should go for crowdfunding. So can you kind of outline that?
Jonny @ Wefunder (08:49.362)
Yeah, there are. It really is. It has quite wide applicability, I would say. So from a stage perspective, I would say every friends and family round should be done on Wefunder because you don't need to worry about legal compliance. Now, unaccredited investors and accredited investors can invest. We roll it up to one line on your cap table.
Tzakhi (09:15.198)
It's also, you just, it's embarrassing to ask your aunt or your cousin or your army buddy to invest, but maybe if they just know that you have a community round, they'll do it without the embarrassment of actually talking about it.
Jonny @ Wefunder (09:32.946)
Yeah. And also like to get your aunt to invest 25K is like, hmm, that's like, if this company doesn't work out, that's an awkward conversation. Whereas if it's like, okay, we lower the barrier to entry because we're a platform that, you know, can roll up hundreds of investors to one SPV on your cap table.
Tzakhi (09:37.493)
Yeah.
Jonny @ Wefunder (09:50.866)
then it's like, okay, well, great. Sure, I'll invest like, cause I want to support Zaki, but it kind of lowers the various entry. And you get in front of WeFundr investors and it makes the payment processing and the administration, the logistics like super easy. So yeah, for me, it's like, makes sense to do a friends and family round on WeFundr. But then also, like I mentioned, it might be part of a 120 million series B where VCs are leading it. And, and your customers are investing $5 million
So it's a really kind of wide range from a stage perspective. Like I say, minimum is 50K, max is 5 million. Then industry sector as well, you know, it's obviously the sweet spot is B to C, consumer facing companies, because then it's like, okay, if we can get our customers to invest, they'll be more loyal and trendless and spend more money with us and be more passionate brand ambassadors.
But we've also helped a lot of B2B companies raise or biotech companies raise that are like years away from like, you know, having a product on the market.
or movies or soccer teams or, you know, so there's really a wide range of kind of industry sectors as well that have used it. I think in terms of like value proposition of WeFundr, I would kind of highlight two, right? Probably the more common or definitely the more common, much more common use case than WeFundr is. Okay, we're trying to raise around, it's 2023.
It's hard to raise capital in 2023. In 2021, it was a lot easier. You know this, VC is down massively. Angel investing is down massively. It's much harder to raise capital now than it was in 2021. And so maybe you're like, man, you're trying, it's a grind. We found that might accelerate your fundraising because now as well as raising from accredited investors and you can still do that.
Tzakhi (11:26.354)
Yeah.
Jonny @ Wefunder (11:45.046)
But now you can also raise from unaccredited investors. And you can run a marketing campaign. You can push it out on social media or in an email blast. So you can go on a podcast like this one and talk about the fundraise. You can put out press releases. You can, there's no limitation on your ability the different channels that you can market the raise through. So if you're good at marketing, you can now use those marketing skills to raise capital. And anyone that sees the ad can invest, not just the 5% of the population that's accredited.
in front of we funder investors as well who will bring a part of the round as well. So you put all those things together and we may well be able to help make fundraising easier. I always try to downplay expectations. Hey, this is usually not
push a button, like send an email, raise $5 million. For Substack, it kind of was. Occasionally you have a huge audience. And so it really is like send an email and raise millions of dollars from that audience. But that's very, very rare exceptions. Most founders like it's as with most fundraising, it's a grind, it's a lot of meetings, it's a lot of effort. But like this opens up new channels and new things that you can do to raise money. So for most founders and we found her, I think like the main value proposition is like,
to make it a little bit easier for you to raise money because you can do these new things that you can't do in Regulation D.
And then the other use case is, you know, a company like Replet who they, they did it in 2022 as part of a series B. I think, I think Antresen led the series B, Paul Graham was in the series B and they opened up a $5 million allocation to let their customers and users invest in the community invest. And for them, it was, they didn't, they did not need the money. Um, they had a lot of, you know,
Jonny @ Wefunder (13:36.834)
ATO VC is lining up to invest in them and did just invest in them, but they just saw it as a community engagement play and a marketing play. And for me, if you're a consumer facing business, I don't really understand why you wouldn't do this. I guess there's one maybe reason we can get into like the downside of this, or you could probably say other things as well. One that jumps out, we can explore that. But for me, like if you let your customers invest.
then this will delight your customers and as a consumer facing business or any business really, but especially consumer facing business like to delight those consumers by giving them a chance to invest in your company.
that is like, seems like a pretty interesting thing to do. And again, then they're gonna spend more money with you and they're gonna tell all their friends about you because they're an owner and they're proud to be an owner. And so for me, whether it's a standalone, sometimes founders do it as a bridge round, like a safe that converts and they just cancel the next round as a bridge, or as a part of a larger round. Like our vision is that every consumer facing company will start to do this.
Related on that point, Amjad, the founder of Repla, talked about this. We want to let our users share in the upside.
This is a little bit more kind of touchy feely and a little bit more ambitious, I would say, as a sales pitch for YWeeFundr. But for some founders, like, yeah, like the idea that my earliest stakeholders and early adopters and customers should get to benefit from the wealth that I create, as well as some VCs that I didn't really know or some millionaires, like that's kind of cool. So that's kind of a, definitely a secondary one, but you know.
Jonny @ Wefunder (15:24.414)
the marketing benefits, the community engagement benefits. That's kind of the second main use case. The first one being like, can make it slightly easier to raise capital. Ah!
Tzakhi (15:35.061)
So if we kind of try to narrow it down to kind of personas of types of startups that should go for equity crowdfunding, probably most startups, if they're just trying to raise a family and friends round, so just like a convenient way to do it efficiently. And then startups that have a community, that would be maybe
Jonny @ Wefunder (16:02.189)
Yeah.
Tzakhi (16:05.401)
And then I would divide those into two types. So maybe an early stage startup that has a community and needs to raise money and now has a new way of using the community that they've built. And also at the same time, they grow the relationships with their customers and users and fans. And I think you can make a case that if someone that likes the company,
Jonny @ Wefunder (16:23.339)
Yeah.
Tzakhi (16:31.581)
invest money, they'll keep buying, they'll keep telling other people about their company, they'll become like a small marketing engine on their own and basically their investment will be the smallest part of the value they bring, they'll just compound over time as a client and as a referring partner. So I think that's an amazing thing. It does require some vision because short
Jonny @ Wefunder (16:40.994)
Totally.
Yep.
Tzakhi (17:00.269)
you're looking at your ad spend and you're thinking, am I spending it on acquiring a new client or am I spending it on acquiring an investor? And for startups that are building a community and building a following, there's kind of like a long-term value that they need to think of in actually having people invest and become close to them. So that's another type, which is like a startup that needs the capital, but.
and is consumer facing and is also building a community. And maybe a third type of startups is startups are already more advanced and already have a level of success. And maybe they have VCs and institutional investors in, but they want to allow their clients and just general people to also partake in the round. I think once we spoke about companies like
Tzakhi (17:58.741)
SpaceX that could do this is kind of investing in SpaceX is impossible, but just like as a back door, instead of doing an IPO, just allowing a small group of people, but from the general population to join in.
Jonny @ Wefunder (18:00.962)
Hmm, yeah.
Jonny @ Wefunder (18:14.678)
Yeah, that's our vision. Like imagine a world in the future where like it was the kind of the done thing.
almost like you're under kind of pressure. If you're like, Elon, you found in SpaceX, like to let like a bunch of your earliest like supporters and space enthusiasts to like get a piece of the upside alongside like the VCs that are investing in SpaceX. Like, like I think that would lead to a more like equitable if the, if the wealth that's been created by startups like IPOing and exploding, that's like explosive wealth creation opportunities. And for the last 80 years, all of those wealth creation opportunities were concentrated in the
hands of like accredited investors, basically, and institutional investors. Guess you could say that trickles down because some of the LPs and entries in Horowitz are pension funds.
that benefits blah, blah. But like, you know, directly, man, wouldn't it have been cool if like at Uber's IPO, like as well as Jason Calacanis, like making a ton more money, like a thousand drivers had become millionaires. The first thousand drivers at Uber had become millionaires at Uber's IPO. Man, like what an unbelievable like vehicle, no pun intended, for like a more kind of equitable, like, you know, kind of creation
Tzakhi (19:28.053)
Yeah.
Jonny @ Wefunder (19:32.037)
And so yeah, that's kind of part of the big picture idea. Just to circle back on what you said on ad spend, you certainly can spend money on ads to run like a WeFund a community rounds. I think most founders are not doing that. You can, like, it becomes a pretty expensive way to raise capital.
For me, where it can work is if you're a consumer facing company and you're running ads and those ads are like recruiting investors and those investors are like signing up to invest in your WeFund around. If they're also then becoming customers and say $1,000 of ad spend can raise you $5,000 of capital and WeFund it, but also generate new customers who might spend $5,000 of revenue with you guys. And again, if they're an investor in your company, they're going to probably be more likely to become a customer.
And so you're getting like a revenue, like two birds with one stone, revenue and capital from ad spend. I think then the economics can work, but majority of companies that we fund are not, not spending money on ads.
Tzakhi (20:33.945)
Okay, so they're trying to do that more organically. Okay, look, I'm pretty sure that Elon listens to this podcast, but let's talk about maybe the smaller founders or more beginner founders. So two groups that we, yeah, yeah. You know, CEO is a small startup.
Jonny @ Wefunder (20:37.042)
Organically, yeah.
Jonny @ Wefunder (20:45.602)
What up Elon?
Jonny @ Wefunder (20:54.146)
You mean like Sam Altman? Yeah, you know, speaking of Twitter, this was like a revelation I had the other day. I'm gonna throw it out there. This was very encouraging for me working at WeFund. It's like...
Every industry has been democratized, right? Uber is democratization of taxis, Airbnb is democratization of hotels, Twitter is democratization of journalism. You can go through the economy, right? And Robinhood is the democratization of public investing. It seems pretty inexorable to me that early stage investing, angel investing, will also be democratized. And WeFunder is...
the democratization of early stage investing. And so I was like, you know, when I kind of thought about that, I was like, man, that's kind of cool. We're just like Robin Hood for angel investing.
Tzakhi (21:36.557)
it is.
Tzakhi (21:49.769)
Yeah, yeah, you are. OK, I want to address kind of like what would be, I think, the concerns of earlier stage founders before going into crowdfunding. So let's talk about the two groups that we mentioned. One is like just doing a family and friends round. I'm sure a lot of founders would worry about how much they need to deal with.
Jonny @ Wefunder (21:59.415)
Yeah.
Jonny @ Wefunder (22:10.338)
Mm-hmm.
Tzakhi (22:16.593)
regulation, how much they need to put up of their own money, which they don't really have at this stage, to set it up, how much time, you know, maybe it's like two guys or two girls or like one person that's setting up a startup and they don't have a lot of ability and a lot of time to so how difficult or how easy is it to set up a family and friends round on WeFundr?
Jonny @ Wefunder (22:25.247)
Hmm.
Jonny @ Wefunder (22:48.227)
Yeah, I think there's like, I would highlight kind of three kind of potential downsides to weave on the.
Or to running a community around and the first kind of to your point, like it's definitely usually effort, right? Fundraising is usually hard work, whether you're raising from angels and pitching investor after investor, or you're raising from VCs and you're doing a hundred iterations of your pitch deck and then having a bunch of meetings and having, getting a bunch of no's. And especially in this fundraising climate, right? It's like generally pretty hard to raise capital. And like I mentioned earlier, we funders like, if, if.
In a world of like, WeFundr doesn't exist, if you would be struggling to raise capital right now, maybe you're a super hot startup and you're growing like a weed and the time is huge and your last company was that you took Tesla public and your name is Elon. Great, very easy for you to raise a WeFundr as outside of WeFundr. But if WeFundr didn't exist and you were raising from angels and VCs, and it was like, man, this is a grind and this is hard work. It's probably also
Jonny @ Wefunder (23:57.384)
We always try to set expectations around like, yeah, this is going to be hard work. It opens up new channels and new things that you can do to raise money. One of the things I think is cool is like, if you're a founder, it's like really amazing at marketing, then you can now kind of employ that superpower to raise capital, which is kind of cool. So you can do new things. I think we do make it easier. You get in front of we funders investors, but it's still going to be hard. It's going to be effort. And so coming into it with your eyes open, like, okay, this is
is gonna be a grind and like I need to dedicate my time to make sure this is successful. So that's kind of on the, you know, kind of effort side.
One important point there, I think is like, it depends on how much you're looking at raising. Right. So let's say there's a company that if they send a couple of hundred emails to people they know, who they've worked with down the years or friends and family or some of their customers that they have a personal relationship with, is they send a couple of hundred emails and they like put a certain number of hours into writing an awesome deck and making a video and a beautiful page. And, you know, they do, they send an email blast to their customers and, you know,
to talk about it and every time an investor comes in, they write them a thank you note and tell them, okay, here's what you can do to help us get the word out. Whatever, we'll put it another way. Let's say they invest a hundred hours in executing on their WeFund arrays. So, let's say that a hundred hours will get them 500K of investment volume.
If they set a target for their community round as $2 million, then it's like, well, in a hundred hours, I raised 500 K and then man, like there's a diminishing returns. And like, okay, like it's getting increasingly hard because I've already hit up my network and like things are slowing down and I've already gone to the WeFundr investor base and you know, like things are now starting to slow down, like you can still do more stuff and if you invest 200 hours and 300 hours, you can still raise more money. But like.
Jonny @ Wefunder (26:05.228)
man, that's going to be a grind, right? That same founder is investing 100 hours and raising 500K. If their target is 400K, then great. Like they don't even, they're going to blow past that in that 100 hours. And so, well, okay, that was like, you know, relatively easy, right? And so depending on where you set the amount that you're looking at raising, can really be transformative in terms of, was this like actually quite easy and straightforward and not that much of a time,
versus like, whoa, that was like a full-time job for six months. So that's kind of one component that goes into like how much effort and how much work is this going to be.
The other two kind of potential downsides I would say of like a community round. Secondly, the thing I was thinking about earlier was the financials. So the SEC say that because you're raising from retail investors, unaccredited investors, you need to publicly share financials for the last couple of years or if you're a startup like going back to the incorporation date.
It can be a little bit in the rear view mirror. So we're now in December, 2023. So if you launch on WeFunded today, you only need to share 2021 and 2022 financials. So you don't need to share 2023. So it's a little bit like in the rear view mirror, but like, you know, those financials are publicly filed with the SEC. It's like Profit and Loss Cash Flow Balance Sheet for 21 and 22. And so those are publicly filed. And so if you really don't want that information to be kind of in the public domain,
around that, that's an SEC requirement. And so that is definitely more financial disclosure than you need to do if you're raising from a credit and investors in regulation D. So that is like one kind of potential downside, I would say, and some founders like really don't want that information being out in the public domain. Okay, that's like a deal breaker. Obviously, we don't think that's like too much to worry about and the benefits outweigh the costs, but certainly if that's a real thing for you,
Jonny @ Wefunder (28:10.512)
tangible downside of raising through regulation crowdfunding. And I should say regulation crowdfunding is the name of the exemption through which you're raising. It's a SEC exemption. So normally startups in the US are raising through regulation D. And that is what limit seeds are raising from accredited investors. If you want to also raise from unaccredited investors, then you do regulation crowdfunding, which is what WeFund is doing. And then the third kind of downside I would say, and this one kind of annoys me
a little bit, but I do think like some investors will look down their nose at regulation crowdfunding or you did regulation crowdfunding because you couldn't raise from real investors.
That's a little bit annoying because it's just kind of a kind of intangible thing versus a tangible actually, you know, thing. The financials is kind of more tangible. This is a little bit kind of philosophical or intangible. But what I would say to that is if you really care about that, then sure. Like just have a VC lead the round and just like allocate part of the round on the same terms as the VC that's leading it. And that immediately takes care of the negative signal.
Tzakhi (29:02.998)
Yeah.
Jonny @ Wefunder (29:22.128)
2021, it was like, okay, we just raised 120 million from Andres and Horowitz and K2 and other VCs. And that like immediately, it was very obvious that they weren't doing WeFund there because they couldn't raise from real investors. They just raised 120 million from VCs. So that like immediately kind of took care of the negative signal thing. And then for the other founders for whom like, it actually is challenging for them to raise the round, then yeah, like, I guess maybe it is a negative signal.
Tzakhi (29:37.365)
Yeah.
Jonny @ Wefunder (29:52.749)
But in those cases, it's kind of like beggars can't be choosers, which is more important, like preserving the kind of signal or raising the capital you need to grow, create the business.
Tzakhi (30:04.089)
So generally raising money from a position of weakness is not a good idea and doesn't work well because it's just investors don't want to invest in someone that's, they wanna invest in a winner. It's just a harsh reality. So if you're in a position where you're already begging for your life and the investment is supposed to save you, it's not a good position. And
Jonny @ Wefunder (30:20.898)
Mm-hmm.
Tzakhi (30:35.109)
I don't think that equity crowdfunding or a community round is a solution for a startup that's not able to raise money. Probably there's a deeper problem that needs to be addressed. So
Jonny @ Wefunder (30:35.918)
Totally.
Jonny @ Wefunder (30:47.198)
Yeah, I do think it's, it's a little bit of a blurred line. Um, so let's say for example, a company is raising an angel round, a million dollar like pre-seed and they've, and they've been working on it and they've raised half a million from like doing the angel circuit, like we've run it could potentially help them accelerate and close the rest of the rounds. Right. So that's kind of one example that I remember one company just like. By a tech company came out of YC and like, they were pretty early.
lot of science risk ahead of them. And so they were struggling to raise from VCs, but then they were, they went on WeFundr and raised half a million. And that half a million, the founder credits is like basically enabling the company to survive. And now they've gone on to raise kind of grant funding and raise follow on VC funding. So I do think it's sometimes a blurred line, but yeah, obviously like the more compelling your company is to investors, the more successful it's going to be on WeFundr just as the more successful you're going to be kind of
of outside of WeFundR as well.
Tzakhi (31:49.825)
Yeah, I also think that if your company is the type of company that is really consumer facing or a community facing, and you have followers, you have fans, and it really makes sense to raise money from them, then it will not be seen as a downside by the VCs. But if you're raising, if you're obviously, you know, if you're B2B or you're doing
Jonny @ Wefunder (32:05.322)
Yes, that's a yeah, 100%.
Tzakhi (32:18.085)
Basically, if you're a B2B company or you're very kind of innovation driven and you're still all doing R&D, it maybe makes sense for the friends and family round, but for the later round, it really doesn't fit in with what you're going to tell the other investors. So I think it also depends on what you are. If you're a good fit for a community round,
Jonny @ Wefunder (32:26.558)
Yeah, 100%.
Jonny @ Wefunder (32:32.51)
Cough cough
Jonny @ Wefunder (32:39.17)
Totally agree.
Tzakhi (32:43.602)
Nobody's going to frown on that, and opposite, it's going to make you look good.
Jonny @ Wefunder (32:47.458)
Totally agree. The other thing that's a variable is like how quickly the round comes together. Right. So going back to the example I gave earlier, a company that can like relatively easy, easily raise 500K if their target on WeFund is 2 million. It might be on the page for like five or six months and it's going really slowly. And it's like, Oh, that's a negative signal. Whereas like if you've, if you oversubscribed the round in a day, right. Because you set the goal at like 200K.
And like, you can get that in a day and oversubscribe. Then it's like, that's a super positive signal. The other thing, just go back to what you said earlier about like desperation and like, if you're desperate, that's not a good time to raise like fundraising from positional weakness. The other thing I'd just like add into the mix there is that sometimes, like I'm speaking to a number of founders right now who like, they're like planning to do a series A, but they are...
They're looking at using Wefunder for a bridge to basically put more money in their bank account now so that when they come to those like VC conversations for the CUSA, they have more runway and they have more leverage and they're fundraising from a position of strength because they're no longer like under the gun, like economically and like looking at kind of runway that's like rapidly running out. So I do think like in terms of the leverage between founders and investors, sometimes like raising a few hundred grand from your customers to like just
your runway can actually give you slightly more leverage in terms of that power dynamic with investors.
Tzakhi (34:23.885)
What should startups do before going to equity crowdfunding? Is there some kind of analysis that they should do of their audience, their crowd, their followers? How do they kind of calculate their chances of success ahead of time? Is there a way to kind of try things out or to probe? What?
How does it go?
Jonny @ Wefunder (34:55.73)
Yeah, so there's kind of two main ways you can do that. One is talk to our team because we have like thousands of data points at this point around like, okay, audience size and audience passion and who your audience is and the revenue growth rate and you know, who else is investing and how much you're looking at raising and all of this stuff. Um, and it's pretty complicated. And even, you know, the team that we fund, uh, a lot of it is kind of guesswork on how much you're going to raise. Um,
One kind of trick that companies can do is like, let's say they're targeting raising a million, they might start with saying, we're gonna do a 500K. And then if they quickly oversubscribe that, then they can increase the max to a million, right? So you can kind of like game it a little bit like that. But yeah, so the first one is like come to Wefunder and like, you know, just kind of get our.
like expertise, I guess, on kind of trying to help you assess how much you might raise. And then the other one is this, the SEC allows for what's called testing the waters. So you can kind of survey your users. Um, if you want to, I'd say most companies don't do this. Most companies just say, yeah, I'm in, I want to do this. And like, you know, I want to raise this much and we say, yep, that sounds reasonable and okay, we go for it.
But if you are really more unsure or you really want to get more data, then yeah, you can use what's called testing orders. And there's a version of this where we set up a, we found a page and we actually hold the money in escrow and it's, it's a lot more kind of firm, but there's also a version where you just like send an email with a Google form and like, depending on, and you just say, like, would you invest how much? And then based on your, and you send that to, you know, 1% of your users or.
what, how many people to make it significant statistically. And you kind of get a sense for that. And then that's at least some data. And, you know, what someone says on a form is quite different to what they'll do, you know, when it actually comes down to it, but also like sending a survey and a form is like nowhere near the same kind of like marketing push that you would do on like the public launch of your community around, so it kind of cuts both ways, but yeah, if you are looking for more data.
Jonny @ Wefunder (37:16.496)
And that's kind of a legally compliant way that you can try to get a little bit more data before deciding to pull the trigger and how much you're looking at raising.
Tzakhi (37:26.981)
Okay. One last question and then we're done. Just going back about startups that should go for equity crowdfunding, would it be fair to say that startups that are more mission slash impact driven are more prone to be successful with equity crowdfunding because they're.
telling a story that goes wide or any startup basically should have a good story that's exciting to tell and its impact is just a variant of that.
Jonny @ Wefunder (38:00.974)
I think maybe both. I think like definitely the vast majority of companies on WeFundr are not, you know, B Corp or social enterprises. So it's definitely not a requirement or anything like that. But I would say on the margins, yeah, for a few reasons. One, I think oftentimes like social enterprises, right? Or companies that talk about a double bottom line, like they might find it harder to raise from, you know.
most investors who are like, wait, what is this kind of mission thing that you're talking about? This, that doesn't sound like it's going to return money to my LPs. So I'm not sure about this mission thing. So maybe it's a little bit harder for social entrepreneurs to raise capital, which then like alternative ways of raising capital, like we found it become more interesting, you know, for their investors or for their customers, I should say, and community members, like, um, you know, if they're really motivated by like mission and impact, then like,
Maybe that'll make them a little bit more likely to invest in this risky startup. Um, and so, and the other thing that sometimes I find is like.
you know, social entrepreneurs, like the thing I mentioned earlier about like, wouldn't it be cool if like your earliest supporters and users like got to benefit and like got to share in the upside. Sometimes like if, if founders are really like, you know, focused on like community and impact and mission, like that, that message kind of resonates with them a little more. We fund us a public benefit corporation. I think I mentioned that earlier. So we are, you know, you would say kind of a social enterprise. We were a B Corp for a while. We let that.
certification lapse because we're lazy, but we kind of qualified and could qualify again to be B Corp. So I feel like that sometimes attracts like social enterprise founders as well. So there definitely is like a good kind of overlap with kind of mission-oriented founders, but yeah, it's definitely not a requirement or anything like that.
Tzakhi (40:04.981)
Okay, look, I think this is very good because I think a lot of the audience that we have at Meet Capital are early states founders and they're trying to figure out where to raise money and maybe they don't know enough about community rounds and how that might help them and how that might fit in with their story and how that might enhance their story if they want to write type of startup for that. How should they reach you or how should they reach WeFundR? Should we just share a link in the
Jonny @ Wefunder (40:34.25)
Yeah, you can share a link. My email is johnny at wefunder.com, J-O-N-N-Y at W-E-F-U-N-D-E-R.com. So you can just email me, I'm pretty responsive, especially now that I got an executive assistant. All of a sudden my email response time is like crashed. It's great. But yeah, we could put a link as well to Wefunder in the show notes, or if that's okay with you, where the folks can learn more.
Tzakhi (40:34.73)
in the description.
Tzakhi (41:02.361)
Sure. Great. Johnny, thanks so much.
Jonny @ Wefunder (41:04.546)
But we're pretty easy to reach, we're pretty easy to reach like accessible bunch and we'd love, this stuff is like pretty nuanced. Like I was saying earlier, like how much you're gonna raise, like there's a lot of facts that go into it and say generally I think like, you know, when I hear like what's the average success rate for companies on Wefunder or questions like that, it's like, I mean, you know, there's an average number but that is probably quite irrelevant. What you really wanna know is like.
What is the success rate for me going to be? And if you're that like 50 K friends and family deal that there's going to be a very different conversation to if you are sub stack raising 5 million. So stuff's pretty nuanced and pretty complex. Like I say, I work on the biz dev team. So maybe I'm, I'm saying this, this is just like job security for myself. Like I, you know, I need to be able to like talk to people. Otherwise, you know what? Uh, maybe they just go to the website and Johnny's are relevant. So, but yeah, talk to me.
my job security guys. Thank you.
Tzakhi (42:04.405)
Yeah. Okay. So Johnny at we funder.com or just refunded.com. We'll have a link. Thanks so much. This was great.
Jonny @ Wefunder (42:11.318)
Yeah.
You too man, always a pleasure.
Tzakhi (42:16.054)
Thank you. Bye bye.
Jonny @ Wefunder (42:17.752)
Bye.
