8 ms·
Wefunder (YC W13): Invest in Startups
- mkeung 14y agoWhen I click "certify as an investor" I automatically get directed to sign up for early access, with Facebook. I am hesitant to enter my information, because I don't know what the certification process is like. It would be great if you could add this information somewhere? I highly doubt I qualify so it would be for nothing.
- jgj 14y agoIncome for 2011-2013, net worth >< 1,000,000 and agreeing that you understand the risk of investing in startups, plus a signature
- mkeung 14y agoLooking more into the law change (congrats btw), it would be nice to tell people a) if they qualify, b) if they don't right now, that you will notify when they can also participate
- jgj 14y agoI don't work for Wefunder, I just went through the application process and typed what I remembered filling out.
- niggler 14y agoI haven't tried it yet, but based on your statement: The requirement is `or`, not `and`: you are still considered an accredited investor if your net worth exceeds 1M and you have 0 income for the past two years. You are also still considered an accredited investor if you have 0 net worth yet have income exceeding 200K/300K The normal way a form is laid out is that it asks you how you are considered an accredited investor (circle one oval) and give the relevant information.
- rdl 14y agoTheir documentation was actually ambiguous until you submitted, too (I used to qualify on income but not assets, now I qualify on assets but not income; I wasn't sure if I'd go through, but did). IMO, I'd probably err on requiring more as an investment market like this, just to avoid the odds of an early lawsuit or other dispute -- $200k/yr AND HNW AND previous investment experience would be totally reasonable. But that obviously makes it harder to recruit people.
- jgj 14y agoI used >< as, literally, "greater than or less than".
- aashaykumar92 14y agoHoly crap, this is true visionary...great idea and excellent execution! Hopefully everything goes through on the government-side so that anyone can invest in these startups. Question, though: Is the plan to allow any company to sign up in 2014 or will there still be some moderation in which companies can sign up?
- npt4279 14y agoWe'll have a self-service platform which founders can use to fundraise privately. We make it easy to accept investments in about 3 minutes with automated legal docs, e-signature, and ACH payments. But it'll always be highly curated for featured startups that are public on Wefunder. We are starting out with one per week.
- tomgallard 14y agoMaybe I'm missing something- but I can't see the valuations the companies are raising at anywhere (e.g. I can see that Company X wants to raise $490,000 - but how much of the business this is for) Surely this is question number 1 when you want to invest in a company? EDIT- Found it once I clicked the "Apply to invest" button". Maybe it should be a bit more up front though
- npt4279 14y agoThanks - we'll consider that.
- deleted 14y ago[deleted]
- dicletian 14y ago"All the small investors (often < $25k) invest in the Crowd Fund, which then invests as one entity in the startup." So your company must create and manage a new investment vehicle for each startup to raise money on Wefunder? I assume so, otherwise the investors in one holding will incur the liability of the fund being sued by the investors/investment of another. According to your FAQ, you are not charging any fees yet and have raised about $500k to support your operations. On top of operating the parent business, for each entity you will have to prepare and send out K1s, make numerous compliance-related and SEC filings, and correctly disburse funds once liquidity arises. As a fund, you'll also possibly have to prepare annual or quarterly mark-to-market valuation reports for your holdings. All told, this could run into the tens of thousands of dollars per entity per year. What happens if your company runs out of money to properly steward the funds you raise? Do you have a strategy to mitigate legal / compliance costs?
- niggler 14y ago"What happens if your company runs out of money to properly steward the funds you raise?" That's a very important question. They can't even accept money from non-accredited investments until early 2014 (SEC period after JOBS act goes into effect is supposed to end in early 2014). I think they have time to sort that out.
- akiselev 14y ago"they have time to sort that out" Not really... There is a big difference between managing the process for one company and doing it for many. The latter will quickly cause costs to spiral out of control unless the team can get some experience with the regulations now. In the world of dealing with regulations, one year may sound like a lot of time for one startup but if you have to handle the paperwork for dozens, it's a whole different ball game.
- niggler 14y agoIt takes a team of 2 people 6 months and 25K to set up a broker-dealer, do relevant background checks, pass relevant exams, pass audits, get personnel exemptions, SRO agreements, etc. (https://www.sec.gov/divisions/marketreg/bdguide.htm https://www.sec.gov/divisions/marketreg/bdguide.htm). That's a one-time process and WeFunder may have done it already. Once that's done, setting up separate legal investment funds is a 1 month initial process (and its fairly simple to scale this up -- the individual investment funds would be set up in parallel). There's some quarterly paperwork and some yearly paperwork, but it's entirely within the abilities of one person to handle "dozens"
- jwb119 14y agoHow are you guys avoiding having to register as a broker dealer before the JOBS act goes into place? (I'm assuming you're applying for Funding Portal status afterwards)
- sochanger 14y agoGreat question. There are a few reasons we are able to do this now, mainly that we are not being compensated in any way. That being said we do have a relationship with a broker dealer to give us flexibility moving forward.
- o0-0o 14y agoCool! What broker/dealer are you partnered with?
- JimWillTri 14y agoThis is what you said on site: How we make money We earn a 5-8% cut from the total amount raised, depending on the stage of funding.
- HockeyPlayer 14y agoLots of new people in this space lately: AngelList via SecondMarket, FundersClub, MicroVentures. I have an investment in a seed fund run by a prominent angel, so I have some insight into recent valuations. I get the feeling that these online investors are getting inferior terms. For example, convertible debt usually comes with a conversion discount and a cap, but the deals I've seen on FundersClub have been missing one or both.
- redblacktree 14y agoAs a founder, more startup-friendly terms sound good to me.
- tuty767 14y agoFundable and RockThePost are also making good noise
- danvoell 14y agoIsn't Funders Club also YC? What's the difference?
- chunknug 14y ago"Startups Fundraising Before YC Demo Day Get first access to hot deals. 7 days left." Taking a page from the LivingSocial playbook.
- rdl 14y agoThis looks great -- nice to see more options for individuals to invest. I don't think you should ever be convincing someone to invest in startups, but I was actually looking for a way to invest in microryza, and they used your system.
- pg_bot 14y agoSeed investing is not something for amateurs, in fact frankly I don't think investing in public companies is for amateurs. I would tell ordinary people to invest in index funds and don't invest in startups at all. You should not be investing in startups because you think it is going to change your life. You shouldn't be doing it unless you're rich enough that your life wouldn't be changed by making lots of money. - Paul Graham
- pg 14y agoWow, that's funny. As I was reading that, I was thinking "what a thoughtful comment for HN." At least I'm consistent. Twould be nice if you punctuated it properly though.
- Mahn 14y agoInteresting. It looks like one can summon PG by just quoting him. We should try this more often.
- phreanix 14y agoYou have to say his name 3x.
- pg_bot 14y agoSorry transcribing from video is a little harder than from an essay. You try to tow the line between the speaker's rhythm and correct syntax to form the natural voice of the person speaking. Here is the video for the actual quote. http://www.bloomberg.com/video/breaking-down-billion-dollar-startup-valuations-1zxUEMyJTYeY8SEMC9Olew.html http://www.bloomberg.com/video/breaking-down-billion-dollar-... skip to 4:47.
- aashaykumar92 14y agoI'm a bit confused by this...why did you fund Wefunder then? "Amateurs" are exactly the people that will be funding startups on Wefunder...
- mrschwabe 14y agoLove the concept, not the name. "Wefunder" comes across as slightly generic with a hint of cheese - the last thing you want as a company specializing in financial investments. Just my 2 cents; some friendly constructive criticism; something to note perhaps in the near future when you are ready to do another brand evaluation.
- deleted 14y ago[deleted]
- SCAQTony 14y agoI am not impressed. You are issued stock or a convertible note after your initial investment and you can cannot convert that note till the company is either bought-out or goes public. What if they don't do either and simply reinvest the "profits" back into the company thereby showing no profits? What happens if the board of the directors of the company you invested in dilutes your shares by issuing more-and-more stock to themselves and others year-after-after till your percentage of the company is practically non-existent?
- deleted 14y ago[deleted]
- nlh 14y agoI hope this doesn't come across as dismissive - but that's kind of the deal you get when investing tiny amounts (relatively) with early-stage startups. You're basically investing in the team (and their assumed honor) in the hopes of a big exit in the future. Or, more idealistically, in the hopes of being part of the Next Big Thing. If you're looking for dividends (ie profit return) or management oversight - as an investor - you're going to either invest more and get your own terms or stick to the public markets.
- wasd 14y agoSeems pretty interesting but after I certified for being an investor I got this: Startups Fundraising Get first access to hot deals. 7 days left. with no start ups listed. It seemed like there were a few presign up...
- wilfra 14y agoJust applied to put $1k into a YC company that I was very impressed with. I hope this becomes the default for YC companies. Fuck the VC's - invite the public to demo day and crowd fund the seed rounds! Quick math: investing $1k into Facebook with the same terms would be worth over $8 million today. For Dropbox, over $600k. For an OMGPOP-sized exit, $25k.
- bthomas 14y agoAre there any estimates for if you put $1k into every company from a batch?
- deleted 14y ago[deleted]
- swalkergibson 14y agoCan you show your work on that math, please? I am at work and do not have the ability to go through it myself, but that seems too good to be true...
- wilfra 14y agoThese are just rough calculations and they ignore things like whether the valuation is pre or post-money and dilution from additional funding etc, but it gives a ballpark idea of potential returns: $1,000 investment at $8,000,000 valuation = 0.0125% Facebook valuation today of $63 billion x 0.000125 = $7.87 million (was a little off) Dropbox valuation currently at least $5 billion (they raised at a $4 billion valuation in 2011) x 0.000125 = $625k OMGPOP sold for $200 million x 0.000125 = $25k.
- swalkergibson 14y agoOkay, thank you. I was wondering if it was just straight division.
- csomar 14y agoFacebook raised a total of $16B. In each round, you get your share diluted. You'll need the history of the funds raising and the dilution your share is taking, but I guess, you'll hardly reach $1m or even $100K after all dilutions take place.
- guptaneil 14y agoThis is interesting. Are the blurred images behind "Mystery YC Company" relevant to the company in any way, or just random backgrounds? The reason I ask is that one of them shows a screenshot for a startup that I know is not a YC company, and I know they aren't raising since they were recently acquired.
- mikeleung 14y agothats awesome, its a crowdfunding site that is crowdfunding another crowdfunding site
- julienmarie 14y agoDamn, I wanted to post that comment :D the other crowdfunding site might launch a research project on how to maximize crowdfunding using machine learning
- irollboozers 14y agoNot machine learning, but actually social network tuning for the stock market. I think it could be adjusted to towards crowd investing. I wish I was joking. I should get that project up...
- jcampbell1 14y agoI really hope uncapped notes are not allowed. If you look at the history, Dropbox turned a $6M investment into a $5 billion dollar company. Google turned a $25M investment into a $250 billion dollar company. I have a feeling, one of these startups is going to turn a $1M uncapped investment into a $1B company, and there are going to be some really hurt feelings. Someone is going to invest $1000 in the next Google/Dropbox/AirBnB and walk away with $1200.
- deleted 14y ago[deleted]
- loganfrederick 14y agoOne of my concerns with this whole crowdfunding model is that if one limits the cap, then surely the expected value of the the returns from crowdfunding will be negative. You need the gains from the uncapped hits to compensate for all the failures. If your downside is potentially losing 100% of your investment and that odds of failure are somewhere (arbitrarily picked) between 70-90%, and your upside is only a 20% gain 10-30% of the time, the math doesn't make it seem like the model is sustainable.
- tptacek 14y agoWait, what company went from uncapped note angel funding directly to a billion dollar valuation?
- jcampbell1 14y agoI never said that.
- ntomaino 14y agoHow were unaccredited investors able to invest in Wefunder even though it is not legal yet?
- npt4279 14y agoWe used state blue sky laws to take a limited number of unaccredited investors legally. We felt it was important to eat our own dog food, and so went through the extra legal hassle. https://wefunder.com/post/16-how-to-legally-crowd-invest-now https://wefunder.com/post/16-how-to-legally-crowd-invest-now
- netcan 14y agoHow exactly do accredited investor laws work? If a private company allows a non accredited investor invests to put in $10k in exchange for stock, who broke the law? If this new law comes in, are foreign investors allowed to take part?