Equity crowdfunding is now less complicated and more accessible, thanks to recent changes introduced by the SEC. This, combined with the added challenge of COVID-19 for CPG startups seeking to capitalize their launch, has driven a lot of business to Wefunder, a crowdfunding platform that specializes on this relatively new capitalization strategy. The company’s Director of Fundraising, Jonny Price, joins Elliot Begoun on this episode to demystify this. If you’re a new brand in the CPG space seeking for a viable crowdfunding option, Wefunder should be at the top of your list. Listen in to learn how you can start working with them.

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Equity Crowdfunding For CPG Startups With Jonny Price Of Wefunder

Let me introduce, Jonny Price with Wefunder. Wefunder is a crowdfunding platform. I felt like it was important to bring this episode into the sphere because of the realities of the world we’re in where many brands are having to figure out how to get further on less and as well, needing to figure out a way to not only build their tribe but further monetize the tribe. Wefunder had some successful raises in the CPG space, which I’ll let Jonny talk about a bit. We want to demystify it. This is still a relatively new form of equity crowdfunding.

It’s not something that’s been around for all that long and it’s evolving quickly. It’s important as a brand owner that you are aware of this as one of the options that may work for you and be a part of your capital strategy going forward. Let me turn it over to Nashville Jonny, as I’m calling him as a Brit who relocated from San Francisco to Nashville and is living a life of leisure. Jonny, thanks for joining. Why don’t you give everyone a bit of your background and talk a little bit about Wefunder?

Thanks for having me. It’s great to be with you. I’m in Nashville, Tennessee where I moved with my wife and three young kids. I’m from the UK originally. I started my career in management consulting then since. I did that for six years then went to run the US team of a nonprofit called Kiva.org. We were making 0% interest microloans to US entrepreneurs. I did a lot of loans in the food and beverage sector, for example, someone starting up a food truck. Average loans were $5,000 or $10,000. It’s super small, but then I grew that team for seven years. I’m proud of the work we did there, lots of loans entrepreneurs of color, women.

In early 2018, I joined Wefunder which is an investment crowdfunding platform. It’s similar to Kiva and that with getting crowdfunded capital to entrepreneurs, but whereas on Kiva, the average loan was $5,000 to $10,000. On Wefunder the average company raises $300,000 mostly equity. We do some debt capital as well rather than the startups raising from Angel investors or institutional investors. On Wefunder they can raise from their funds and their customers. Wefunder is an investor base as well, their friends and family. One of the cool things about the exemption that we use regulation crowdfunding is that unaccredited investor and invest as well as accredited investors. We’re excited about using democracy to get more capital flowing to startup founders. I’m personally interested in the F&B space. It’s great to be here.

The two important aspects I want to make sure I highlight is, one, it gives access to those who are not accredited investors. It gives you access to them and them access to you. One of the great ways for people to build their own wealth is through investing in early-stage businesses and if you do that, you can build a very small but smart portfolio through crowdfunding, regardless of where you are in your own personal wealth building activity. I want to talk about a few things and one of those is what’s changed in crowdfunding because so much was made in the early days about, what about voting rights? What about cap table complexity? What about the different facilities in which they can invest, save convertible notes? Can you talk about some of those developments and how some of them have now streamlined some of the more complex aspects of it?

It took the SEC four years to roll out Title III of the JOBS Act in 2012, which is called Regulation Crowdfunding. This is the exemption whereby startups can raise now $1.07 million a year from unaccredited investors, as well as accredited investors. In May 2016, the regs went live and it’s like go for equity crowdfunding and there were some major challenges to how it was structured. Individual investors couldn’t be rolled up to one SPV on the cap table the way that companies got around that.

You mentioned SPV and investor speak to demystify that special purpose vehicle and that’s how a lot of investments are bucketed and bundled outside of the typical straight fund system.

Earlier in 2020, at Wefunder, we fixed a lot of these problems. The most obvious one was we now roll up individual investors to one line on the cap table. The cap table complexity concern that you mentioned, which was very real, has now been taken care of. Related, we rolled out a structure called lead investors where there’s one lead investor on the Wefunder campaign. They’re putting in a minimum of $1,000 to the average who is coming out at $20,000. Bill Nye became the newest lead investor. He invested in the American Ultimate Disc League. This lead investor then is not only adding that credibility for the campaign page and hopefully, helping share the campaign with their network, but that also voting for the shares of the individual investors.

The way the crowdfunding platforms over the last few years put around the one on the cap table concern was that they gave the voting rights of those investors to the founder, which at least helped to mitigate the downside of the one on the cap table. You didn’t have to collect 1,000 signatures then, but then the problem is that the investors don’t have voting rights. That’s the worst deal for them. Now with this lead investor who votes for the shares, but they are an investor. They are voting on behalf of investors as opposed to the founder. Now the investors are more protected. On Wefunder, we allow safe, convertible notes, price drowns, we focus on preferred stock. StartEngine, which is one of our competitors, is more focused on common stock. Preferred stock is what normal investors are used to investing in and what they expect to invest in where the public user crowd safe which converts an exit.

We use a Y Combinator safe which converts at the next financing round. It’s quite subtle, but also important way and we’ve made some structural changes to how investments are structured on Wefunder, the lead investment, voting rights, one line on the cap table through a custodian. A lot of these structural changes make crowdfunding a much more viable option both for founders and investors in 2020 than it was in 2019. On top of that, you throw in COVID. For me, it’s harder for founders to raise capital in 2020 than it was in 2019. We’ve seen a lot of growth as a result. We’re probably going to do $8 million of investment volume in October 2020.

That was $2.5 million in February 2020. It was more than three times growth through the pandemic. It truly counts as cyclical if you look at what else is going on in the economy. I think the market is more conducive to Wefunder. The product changes we’ve made have accelerated our growth. The other thing that’s around the corner is Regulation Crowdfunding is limited to $1.7 million. The SEC is looking at lifting that cap to $5 million. If and when they do that, then I think that the growth of Wefunder here is going to explode. It’s becoming more and more common for founders to raise capital through equity crowdfunding.

In my belief around this too, and you use the same word I’ve used, it democratizes the whole process. It puts the onus on the power of the brand, the power of the founder of the brand to be able to tell the story and make it compelling. Not the story of the brand as it relates to the product itself, but as it relates to its path to monetization and the opportunity of the brand over the life of it. That democratization and access is something that needs to be at least considered. It’s not right for everybody and it does take a lot of work to do it well on Wefunder.

I did a blog post with this CPG company Neurohacker that has done four raises with us. They sell exclusively direct to consumers through their website. They have very rich sales data and they anonymize that sales data and then shared it with me. I can map the customer transaction data to the Wefunder investigator. This is the first data-based study that I’ve ever seen of the concept that you’re talking about, but I saw two clear trends. First, people that were not previously their customers who invested in the Wefunder the campaigns then went on to become their customers spending tens of thousands of dollars a month with them. Secondly, their existing customers. If they invested in the Wefunder campaign, then churned less and had a higher LTV going forward, but then those customers that didn’t invest. These two effects, new customers engagement and retention of existing customers, are exactly what you’re talking about and this is an evidence-based example of that.

You go from being a customer to being a stakeholder.

You are financially incentivized for the company to grow.

I’m going to start with the first question here, “If I’m interested in raising capital on Wefunder, what’s the process and how do I start?”

The first step is to send me an email at [email protected] and we’ll get you taken care of. That’s the most important thing to get out of the gate. You can also go to Wefunder.com, click on the link to raise money and read up. We have some great FAQ’s. It’s clear language and well-written that explains the whole thing as well. At a high level, it takes a month to launch a campaign and then you’re running the average company in three months. We’ve had companies raise $1 million in a week. It can get very quick and it can go slower. It can be harder to raise and some companies apply Wefunder for 8 or 9 months and it’s trickling in. The average is three months.

In a month to launch a campaign, we have a number of steps that we go through. You file what’s called a Form C with the SEC, which is what legally allows you to run a regulation crowdfunding campaign. You applied two years of financials or if you’re a startup and going back to the incorporation date for the company, you put together a campaign page, a fundraising plan and figure out the terms of the investments so as the equity of that. What’s the evaluation? You line up a lead investor. Someone who’s going to put in $20,000 is featured on the campaign page to help to promote the raise and who’s going to vote for the shares of the individual investors.

We’re financially compensating the lead investors with 5% of investor profits. If there are any, if there’s a nice exit in a few years’ time and the investors make profits, they pay 5% of those to be the lead investor for representing their interests and for voting for them. This is quite a nice incentive for a lead investor. If you have an awesome Angel that you would love to have a new cap table, this might be a little nudge to help you close them.

Explain the process for finding that lead investor. Is that the responsibility of the brand? Does Wefunder participate in that at all? I think that’s an important thing to call.

That’s usually the founders that are bringing in investors that’s doing outreach to Angel investors, typically, that they’ve been cultivating relationships. Maybe they’re existing investors in the company who are reappearing in this round. Let’s say, the founders overwhelmingly finding those lead investors. That’s a good point to raise because I think sometimes people have the misperception that you launch a campaign on Wefunder and the money rolls in. On average, the Wefunder investor base might bring a third of the raise. That is a good illustration of how the onus is on you as the founder to get the ball rolling on the campaign and build momentum. If you can bring $400,000 from Angel investors, from your friends and family, from your customers, from a marketing campaign that you run against the Wefunder campaign, then maybe we bring $200,000 from our investor base.  

If you’re only able to shake the trees and persuade people to invest $40,000 then on average, our investors are only going to invest $20,000. It takes effort and work. You, as the founder, are driving the campaign, and then the value proposition that we provide is we accelerate, catalyze, multiply the amount that you can raise. One, you cannot raise from non-accredited investors. Two, you can publicly promote the raise in social media, email blasts or the press. Three, we put you in front of Wefunder investors. You typically have accounted for a third of the raise.

One thing that I try very hard to do on this show is to cut through all the techno jargon bullshit that exists in this. One of the things we probably should talk about quickly is the difference between what an accredited investor is and what an unaccredited investor is. I’m happy for you to take it. I can take it, but I’ll let you do it.

This is a definition that the SEC where an accredited investor is a rich person, technically, it’s a household income of $300,000, an individual income of $200,000, or a net worth of $1 million excluding your primary residence. The meaning of that is roughly the top 5% of the population is accredited investors and normally, if you’re running a Regulation B round which is how the vast majority of startups raise capital is Regulation D, you can only raise from accredited investors and you can only privately solicit. What Regulation Crowdfunding does, which is the exemption we used that was made legal in May 2016, this allows you to personally raise from unaccredited investors to the 95% of the population that isn’t super-wealthy and invest in new as well as accredited investors.

There’s no cannibalization. The accredited investors can still invest, still go and pitch the rich guys and Angels to invest in your Wefunder campaign. That can be complimented and catalyzed by unaccredited investors as well. The other cool thing about regulation crowdfunding is you can also now publicly promote the offering. When you launch the Wefunder campaign, if you have a big Facebook audience, you can put your company an investment opportunity in front of that Facebook audience, or you can go on a show like this one and talk about the company and the investment and get the word out. It made sense that rather than pitching a tiny number of white men in a room, you can now open it up to everyone publicly, and everyone can then invest. It’s the more logical transparent certainly democratic approach to raising capital.

That leads to the next question which is, “What’s the process like for an investor who’s never been on it? How difficult is it?”

Honestly, I think our technology is super slick. If you’re reading this, test it out, go to Wefunder.com and then you can click on Explore and there are about 150 startups that are raising capital. Browse through them. Maybe you search for F&B and find one that you like the look of. Even if you don’t convert and invest, go through the flow. It literally will take 1 or 2 minutes to invest and the minimum is $100. This is opening up who gets to play at being an Angel investor and we’ve had over 100,000 people make an investment and Wefunder. That number is growing quickly.

Tanya asked a good question here, “I have a CPG company with one product that contains CBD. Can I still do equity crowdfunding?”

You can. The CBD is fine.

My more genericized version of that question is if any restrictions are there as to what kinds of companies or what structures have to be in existence in order to raise on Wefunder.

Relatively few. You have to be a US-based company. I’m sure the audience here is CPG and F&B, which is fine. There are some industries, you can’t be an investment company, for example. Finance companies are not allowed to raise, but I’m sure the majority of this audience will be fine. You can be an LLC, you can be a C corp. There are probably some minor advantages to being in a C corp. You can be an S corp. There are relatively few restrictions. There are criteria around what is an investible company. If you have a CPG company and your pre-launch, it’s going to be harder for you to raise money than if you have traction, MVP to product launch, been getting some pickup from customers and you’ve been selling a farmer’s markets and iterating on the product.

For investors, you’re so much more de-risked than if you’re pre-launched. Not to say you can’t raise money as a pre-launch company at Wefunder, it’s more difficult. Sometimes people think equity crowdfunding behaves differently from normal investing. I don’t think it does. There are some differences, by the nature of the fact that you can even market the investment to everyone publicly. Ultimately, if you have a company that’s very investment-worthy and if you’re pitching Angels, they can’t wait to write you a check, then you’re going to find it very easy to raise money at Wefunder.

If you have a company where you’re pitching 100 investors and no one’s giving you the time of day, you’re also going to struggle to raise money on Wefunder. For me, it’s rare that it’s the opposite experience. Usually, we’re like a magnifying glass. What we can do sometimes is if these conversations with accredited investors are going slowly, it’s taking time, there is some interest, but it’s gradually a sign to build, we can supercharge that.

There’s an important point to that. One is that good business is what wins investment. That’s fundamentally true. The other thing that’s somewhat unique is that there is a little bit more of a benefit of beginner’s mind when it comes to Wefunder and the fact that “savvy investors,” people like myself who’ve been in this space for a long-time, sadly have a dose of cynicism and our own paradigms get shaped by being narrowly focused in a space for a while. You do have some benefit of being outside of that.

That’s a very astute point. A big part of a vision is allowing for more outside the box thinking, but another important example of that is around equity, in the sense that most people are more familiar with diversity inclusion. Less than 3% of venture capital in 2019 went to female in Wefunder teams versus 80% male on Wefunder teams. That stat blows me away. One percent of venture capital went to African-American founders. You were giving the example of like, “I have this kind of viewpoint. I’ve seen pattern recognition over the last years that it’s quite hard for me to think outside that box.”

If all the investors are a white male in Silicon Valley, then enabling women of color in Cleveland, Nashville, and Baltimore to be the Angel investors, might also enable us to get more capital flowing to founders that look like those investors. That’s what we’re seeing on Wefunder. We’ve seen more capital funds for women and more capital finds that entrepreneurs of color. We certainly still skew towards men, and white men in California is our number one state, but we’re doing a lot better than a conventional investment capital. We aspire to be better still over the coming months and years.

The comment is anytime you want to interrupt me and tell me that one of my comments was astute, you don’t have to ask it.

There’s time for everything.

I’m in need of those. The second is a question that I had asked to me via our community, which is, “What is Wefunder doing to support, or how is it supporting JEDI, Justice, Equity, Diversity and Inclusion?” I think that’s top of mind for lots of reasons and very important to many of our founders and brands. You were speaking to it a bit but maybe elaborate a little bit more on that.

I’m not sure if I have the best answer to this. We’re a public benefit corporation and a B corps. The base at the foundation, the best answer to that question is if you are at Wefunder.com/charter, you can read our public benefit corporation charter and we talk about this. Most C corps are mandated to maximize shareholder value. We are mandated by our PVC charter to do what’s in the charter, which talks about increasing access to capital for underrepresented founders. We were legally obligated to do this in a way that most companies are not. I love how our founder set us up as a BPC in that way and a B corps. That’s one onset, which in some sense is abstract and another was quite fundamental and concrete. In terms of programs, I don’t think we have any explicit programming there.

All of us on the team, my background at Kiva. I’m super proud of what we did there, 75% of our loans went to women, 75% entrepreneurs of color. A lot of us on the team are very mission-oriented. That’s naturally trying to level the playing field for underrepresented founders. We have an X accelerator. It’s like a sister company to us. The first two accelerator cohorts they did were for immigrant founders and female founders. That is a powerful example of a program that was specifically aimed at delivering more equitable allocations with capital. On the Wefunder core side, it’s not like we have a specific program, but I do think we are delivering decent outcomes. We want to be better, but it’s a natural orientation that a lot of us on the team have.

In some ways, the platform can work cohesively to create better access and opportunity. When equity crowdfunding first stated, I was somewhat skeptical because of the complexities we talked about at the onset. I don’t want to bullshit anybody reading that this is the panacea or this is right for every brand, every early-stage brand, or every mid-stage brand should be considering this. We’re going to talk a bit about more what it takes to be successful on a platform like this. I do think as those complexities have been removed, as this democratization has been increased, if you think through your cap strategy and the overall ethos of your brand and ask yourself, “Is this an element that should be included in my capital strategy?” It’s something that should be considered and brought to light for many founders. Anthony has a technical question, “Is there not an official audit required other than providing two years of financial? If there is an audit, do you have any idea of what that cost usually runs?”

If you’re raising normally $107,000 but the SEC increased it to $250,000 because of COVID and they haven’t reset that yet, then you need two years of cap financials that have been reviewed by an independent CPA. It’s a review, not an audit, which is a lot cheaper than an audit, but usually, that’s going to set you back a few thousand dollars depending on how complex and clean your financials are. We have a bunch of CPAs that we work with at Wefunder that we can connect the founder here if they’re interested. That’s a requirement. If you’re raising less than $250,000, you still need two years of cap financials that need to be reviewed by their independent CPA.

On Wefunder, the one cost that you incur before launching is doing that CPA review. At least, if you’re using our standard that converted when a contract for standard safe. If you’re using a price ground contract, usually you want to pay a lawyer to draft the custom subscription agreement. If using are convertible note contract from Wefunder or use our standard template, then usually, the only costs you incur before going live is the independent peer review. We only charge you a percentage of the amount you raise if you’re successful. If you miss your goal and it doesn’t work out, you don’t pay us anything.

That’s the technical question which is, how does Wefunder make their money in this process?

The fee that we charge is 7.5% of the amount raised. If you raise $1 million on Wefunder, we keep $75,000 and send you $925,000. We’re a Silicon Valley tech startup that is profitable, which feels uncomfortable.

What is the technical name of the Form C that needs to be filed with the SEC?

Form C is filed with the SEC and the exemption that you will raise under is called Regulation Crowdfunding.

The technical name is Form C. Our government is creative in the naming of their forms. They have large committees and in this one, they came up with Form C. Let’s talk about pitfalls. You’ve seen a lot of successful campaigns at Wefunder, but you’ve also seen some that have not been successful. What are the learnings, best practices, the things that work and where are the mistakes made?

The companies that don’t succeed on Wefunder, to be honest, they’re not great investments at least in the eyes of most investors. We’ll see some examples where a company will launch and they’re cheering and won’t get anyone to invest. With startups, is it the product or is it the marketing? It’s those things too on Wefunder. If a company doesn’t raise money on Wefunder, it’s because it’s a bad product where the product is the investment. Maybe that’s too early and seen as too high risk by investors. Maybe the evaluation is way too high.

Oftentimes, we’ll be pleading with founders before they go live like, “Are you sure you want to go with an evaluation cap of $7 million? That seems high for the stage you’re at.” It’s egregious where retail is, but at the end of the day, it’s like, “That is your raise. You’re in the driving seat. You’re a grownup.” Sometimes then, if they go live, they might have a disappointing raise. On the marketing thing, it takes work in the vast majority of cases. If you have a huge audience and a fan base that loves you and you bend sometimes quickly and be easy, but it takes work.

You’re unable or unwilling to put that work in. The best founders are endlessly resourceful, creative, and energetic, figuring out, “Who’s the perfect lead investor? How do I leverage them to bring in other investors behind them? How do I get in front of more Angel investors before the campaign goes live so I can get them in on day one? How do I get in the press? How do I get on this podcast? What’s going to be my cadence of outreach to my customer base emails? How are we going to coincide that with a social media campaign? What updates am I going to do on the Wefunder platform? As investors come in, what’s going to be my strategy for thanking them for investing, and then trying to leverage them so that if I have 500 investors on my campaign, how can they bring the next 500 so it makes it less work for me?”

Some founders that are running Facebook ads, especially the readers, that CPG founders, what’s cool is an average return on investment on ad spend for Wefunder is about 7 to 1. If you’re spending $1,000 in Facebook ads, you might get $7,000 of investment volume. That’s uncomfortable for us. We don’t like that. That’s quite an expensive way to raise capital. Normally, if you’re raising from Angels, you’re not spending for $140,000 to raise $1 million. That makes us a little uncomfortable, but if you’re a consumer-facing company and the return on that ad spend is not $7 investment for $1 of ad spend, but it’s also, potentially $20 of lifetime revenue from that customer that you’ve recruited.

All of a sudden, the return on ad spend might start to work out because you’re killing two birds with one stone because two birds being raising investment capital and recruiting customers. That whole diatribe would say, one, do you have a company that people are going to be excited to invest in? Two, do you have the ability, drive and creativity to run an awesome marketing campaign? Another aspect of that is putting together an amazing Wefunder campaign page, a great video. We have 7 or 8 reasons on why you should invest bullet points. Making the text and the copy super punching and grabbing people’s attention. This all goes together. Interestingly, these things are compound. If you’re good at writing copy on the campaign page, you’ll probably also have a better video. You’re probably also better at pitch deck. You also are probably better at Facebook posts and email marketing.

You mentioned the word campaign, and that’s what the mindset has to be. The mindset is, this can’t be a field of dreams where if we show up on the platform, the money comes. You have a platform and some investors that are there, but the onus is on the founder to leverage that platform to build it. If I’m a founder sitting here and reading this, trying to go through a mental checklist to decide, am I a candidate? Am I ready? Will I succeed on Wefunder? What are some of those subtexts? What’s on my checklist that I need to check?

The most obvious thing that jumps out, is the business investment-worthy? If Wefunder doesn’t exist, you have a decent shot of raising money from accredited investors, which is what you’re normally going to do. Having some of those conversations and starting to get a feel to invest to us, think you’re ready to raise this capital. If you’re starting to get some encouraging noises, then we can help you magnify that and accelerate that. If every investor is saying, “No, we need you to do this,” I think you’re probably going to struggle in Wefunder. The one thing I would say another application of Wefunder is friends and family rounds where it’s streamlined.

Everything’s in one place. It’s systematized in that every one of the friends and family you get to invest. The investment contracts through the Wefunder platform are clear what they’re getting and they’re one line on the cap table. Some of the messy like cap table implications of early friends and family round, I think we can help clear up. We can put you in front of the Wefunder investors, plus we can let you raise from a larger network in a compliant way. The same would apply as if you’re trying to raise from Angels. If you’re trying to raise from friends and family, you’re able to raise some money from friends and family, we can help to accelerate it. If it’s like, “I can’t raise any money. I can’t raise a cent.”

One of the other things around that too is like any investment, you have to be able to show a path to monetization to the investor. Even though you theoretically can recruit to your Wefunder campaign, the less sophisticated, less savvy investor, they’re still savvy enough to understand that they need to see how this money that they’re about to put in is going to make them money.

That’s a cool thing about Wefunder. It’s rare for us to see investors, having a wool pulled over their eyes and technically, non-sophisticated investors, but to your point, maybe at the margins. In the vast majority of cases, if it’s not an investment-worthy business, it’s not going to do well in Wefunder.

I’ll speak to a couple of the mistakes that I see because I’ve witnessed a few. One of those is that is immediate. “It’s taking me so long to raise some Angels, especially now in this post-pandemic situation. I’m sure on Wefunder it will come in because I’m going to run out of cash in two weeks.” That’s not the case. It takes time, effort and hard work. The other is the fact that you still, as a founder or as a founding team need to be the catalyst for your own investment. It’s like a gig musician being invited to perform at a cool venue.

You still have to bring the chops. You’ve still got to make the music happen and still have to be involved. It’s not going to come. There is some uniqueness to it and the fact that you’re also learning. I always say this to any founder, to any brand that one of the jobs that you have, especially in the earlier days of your life stage as a brand is to get to the point where you can confidently and consistently separate consumers from their cash. This is another form of validating your brand because you’re putting your brand, burying your brand, soul, full kimono, financials and all to interested people and asking them to validate the fact that they believe in your vision and your dream.

You’re separating investors from their cash. Pick it up on the first point you said. You’re talking about like, “It’s taken time to raise from Angels.” I’ve had many founders over the last years saying, “Raising this round was a full-time job for me, the founder, for six months.” It’s probably the worst-case scenario, but it takes time. Even hot startups coming out of YC. I’m talking to them and they’re like, “I met with 100 investors and meetings in person to raise this round.” My point is still do that on Wefunder. Don’t see this as either/or. “Either I raised from different investors through the standard meetings and investment process or I do Wefunder.” Do both, still have those meetings.

You still have that expectation that however you would raise the money if Wefunder didn’t exist. A lot of meetings, a lot of warm intros and pitching people on Zoom these days to try and get them through a $25,000 check. You can also do the crowd thing. This is a powerful thing, which we haven’t talked about is that maybe the hit rate as well. I had 50 meetings with Angel investors and five of them wrote me a check. In Wefunder, you can go to the 45 that would have passed in Reg D rounds where you were asking for a large investment amount. You can go to them and say, “What about chipping in a smaller amount, $5,000, $1,000 on Wefunder?”

You can often turn a lot of those noes into yeses, grow gurus, an ad tech company that raised with us. He had a lot of connections to investors and he was able to go to them and hoover up a lot of smaller checks and raise $2 million in a month. I think that aspect as well. By lowering the minimum, especially in COVID where people are a little bit more skittish about their wealth these days than they were in 2019. Allowing you to raise in smaller increments can also help to accelerate on their fundraising.

Can you give us a few examples of successful natural product brands or CPG brands that have raised on Wefunder and anything that comes to mind in terms of what they did right?

There are few that are live right now. If you get to Wefunder.com/explore and scroll through. Future/Proof is an alcoholic CPG company. JJ Pfister Distilling Company is a spirit company in Sacramento. Ron Artesano is a rum in Puerto Rico. I think that’s our first campaign in Puerto Rico, which I’m stoked about. 3 Some Chocolates is live as well. ReGrained is a cool company that’s both CPG, but it also has a B2B platform play, that upcycling food. Spent grain from breweries, that upcycling and turning it into hops and bars. It’s a very cool company, that’s plus $535,000 on Wefunder which was their max that they were going for. A number of companies in the F&B and CPG space. We’ve done a lot with alcohol.

Historically, Lost Spirits is a distillery in LA at raised $2 million in a couple of weeks in March 2020. Copperworks is a distillery in Seattle that raised $1 million in April 2020. Seattle was the epicenter of COVID in the US and this is a brick and mortar distillery that raised $1 million at that time. I think a big part of that was the community of Seattle coming together at a very difficult time for that city. We love this small business in our city, and we’re proud to be owners of this company.

If you have 100,000 avid social media followers and customers you have a direct relationship with, it’s not intermediated through a retail customer, but you have a direct relationship with the customers as a brand, then the bigger that audience and the more passionate they are about your product, your company and your brand, that’s a very competitive advantage that you have in raising in Wefunder. One of the reasons I think B2C tends to do well with us is that it has a big audience. They’ve raised $500,000 quickly since they went live. Their existing customer base is a big part of how they’ve been successful.

You need to have a tribe. It’s one of the many reasons why every brand should always be cultivating their tribe. If you remember reader, we had Jono Bacon and he talks about the three different types of community that every brand should have. The community of consumers, champions and collaborators. What happens is that you can take your community of consumers and move them into champions as they become investors and stakeholders.

Hopefully, adviser-investor as well.

This founder is asking that they’re raising a convertible note round. They want to keep that same note open and raise under that same note, but can they also raise simultaneously with those same terms on Wefunder?

You can convert a Regulation D round to a 506(c) round which allows for public solicitation, and then you can empower all, keep that going, but also open up the Regulation Crowdfunding round on Wefunder. We always encourage people, if you’re raising $50,000 checks from accredited investors, it’s awesome for that to come in through the Regulation Crowdfunding campaign on Wefunder because then it builds momentum and social proof. That will mean you have a higher conversion rate from any kind of retail investor traffics that arrives on your Wefunder campaign page.

What’s cool is that because we would rather those larger checks come in outside of Wefunder and you would rather that happens too because of that momentum building effect, we waived the fees on checks of $25,000 over that you bring. We wave for 7.5% fee as an incentive because otherwise, it’s like, “Why would you want to play Wefunder public round when you can take that money and put the platform that would waive the fees on budget checks?”

There are other questions here that I’m reading through. One of them is related to overall getting started and the elements of the video. Can you talk a little bit more in specific about how it starts from, “Yes, I’m going to do this on Wefunder. How long does it take until I’m up and going and able to start raising?”

One thing, to make it very clear, our team is good, experienced and helpful in doing this. Don’t try to do it alone. Get in touch with us and we can help to do this for you and work with you on putting together the campaign page in terms of the video. If you want to make an awesome video, great. If you go to Wefunder.com/genius. It’s a coconut smoothie CPG company. They were on Shark Tank. It’s a cool team. Alex and his team in that video is probably the wackiest video in the history of Wefunder. I watched that and was like, “This is amazing.” If you want to go that route, by all means, I’m not going to stop you.

My recommendation is that the founder is talking into a camera for a few minutes about the company and where they’re at. For me, if you’re in the CPG space, you’ve got to be good at marketing. If you make it a great glossy marketing video. That’s a good data point that an investor is going to look at as well. At the end of the day, they’re investing in the founder. If you can be compelling and know your stuff in a video, talking straight at the camera, oftentimes, that can be the best. That’s certainly, then be easy and cheap to put together. That’s on the video, but then the whole campaign page, the legals, financials, our team will work with you to do that so you don’t do it alone.

The average time to launch a campaign is about a month. From the moment we first engage with a founder, we have got them live on the site in a few days. Usually, the long pole in the tent is the financials. If you already had a financial review done, and it’s 1 or 2 weeks to get everything together in live. If your financials are in a bit of a mess and you need to get the CPA to come in and review them, the board ends up playing the launch. Sometimes, the financials are stuck in accounting land for 2 or 3 months before we’re able to launch a campaign.

One of the things you pointed out that I want to come back to is about the video and about when do you stick and when do you not. That comes to mind in terms of thinking through who you’re going to recruit to be your investors. If it’s going to be investors that appreciate humor and stick and want that, then great. Make your video crazy, fun and polarizing. For the people you’re trying to be marketing to are going to want to look at this as a serious investment and then you probably need to be less sticky, more clinical and more like you would be meeting with any other investor laying out the argument as to why you represent the best place for them to put their money. That’s ultimately what you’re trying to do. In my opinion, that has nothing to do with whether it’s Wefunder, you’re sitting on a Zoom call or sitting in an investor’s office or having an Angel conversation in May 2021 when we have Expo West again. You have to lay out a good prosecutor, the case that makes you the most compelling investment for them.

You are the brand. You’re planning on communicating the brand through in this case, the video. If you want to be appealing to conservative, serious old men, then maybe don’t go the genius route. One example of what I’m talking about and what we recommend which is the founder talking the camera in this space is Modern Times. This is one of the most successful CPG companies we’ve had on the platform. Modern Times is a pretty big craft brewery down in San Diego. I think their campaign is Wefunder.com/moderntimesbeer and their video is their founder talking into an iPhone. It’s very compelling and it’s two minutes or so, but that’s it. They raised $1 million in less than a week on Wefunder.

Is there anything that we should have talked about that we haven’t yet?

One thing which I like always to highlight. I think this has come up with a couple of things we said, but to be explicit. You do need to publicly share financials on a high-level P&L cashflow balance sheet for the last two years, but you do need to publicly share those. If for whatever reason you are reticent for your financials to get out there into the public domain, then that would be certainly a consideration on whether or not this is a good fair fee.

I think that is a good point, but I think you have to do that with any investor and that’s the reality of winning investment. You already offered your email address, but for those people who want to further investigate, learn a bit more, what’s the best way to do that?

Go to Wefunder.com. If you click on Raise Money at the top of the page, you can see the sales pitch as it were. If you click on the FAQ‘s at the top, there’s some good information there which has a lot more detailed information. Email me at [email protected]. What our team is here to do is to answer your more detailed questions. Your audience are legit founders, and we’d love to have as many one-on-one conversations with your readers as possible.

The only thing else I want to mention or suggest is that go to Wefunder.com. Explore, see what’s out there, see who’s in there, who’s having successful campaigns. Don’t be afraid as a founder to reach out to another founder and ask them what they’re experiencing, what it’s been like for them and what they recommend. That’s going to be your best source of unvarnished information. Jonny, I want to thank you for doing this. I wanted to make this known as a potential resource and a potential arrow in the quiver as every brand thinks about their cap strategy. Ultimately, this comes down to having your growth hypothesis clarified, making an investible growth hypothesis and knowing what your investment horizon, investment needs are over at least a five-year period.

Once you know those two things and feel you have an investible proposition, then you can think about, is equity crowdfunding the right mechanism and then look at the various platforms. I wanted everyone in the audience to know that this exists, that it’s become less complicated, more accessible, and it’s a viable way to raise money in the world that needs to be considered as part of your cap strategy. Thanks, my friend, for joining.

Thank you for having me. This was a good conversation.

Everyone, thanks for joining this episode. I appreciate it.

Important Links

• Wefunder

• Kiva.org

• Neurohacker

• [email protected]

• Wefunder.com/charter

• Wefunder.com/explore

• Future/Proof

• JJ Pfister Distilling Company

• Ron Artesano

• 3 Some Chocolates

• ReGrained

• Lost Spirits

• Copperworks

• Jono Bacon – Previous episode

• Wefunder.com/genius

• Wefunder.com/moderntimesbeer

• Raise Money tab – Wefunder

• FAQ tab – Wefunder

About Jonny Price

Connecting founders with money and customers.

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