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- Wefunder Talks Some Trash
Gather round to this week’s edition of CROWDSCALE - Wefunder’s feeling themselves and rightfully so. Their investor update dropped:
🌊 Turning Tides: Wefunder’s got charts. Good ones.
⚔️ Narrowing Arena: Can Republic still sit at the adult table?
🏁 The Final Boss: StartEngine vs Wefunder
Before we dive in - I want to very clearly state that I am an investor in Wefunder. Also, I normally wouldn’t disclose private information from investor updates, but with 10,000 investors, Wefunder has said themselves that its updates are essentially public information.
TURNING TIDES
My eyes are over here, buddy.
It’s a pretty graph, and I don’t blame you for staring.
2022 and the first half of 2023 did not treat the equity crowdfunding nicely. While comparatively better than declines in VC investment, crowdfunding investment was still down 30%+.
The above Wefunder chart gives hope that the good days are yet to come for the industry. It’s seven straight months of improving YoY comps.
My only hesitation with this kind of graph is that I would also like to see the actual investment amounts - just because revenue is up relative to last year does not mean that it is actually increasing every month.
But hey - crowdfunding has been looking for wins and I’ll take this one!
NARROWING ARENA
We’re in the arena trying stuff.
3 main players have been battling it out for platform dominance: Wefunder, StartEngine, and Republic. Wefunder is making the pitch that competition has narrowed down to just two - them and StartEngine.
Wefunder kissed Republic on the forehead before zipping them up in a bodybag with this update. I’m surprised at how directly they repeatedly called out their competitor’s struggles.
Republic has become less of a threat in Regulation Crowdfunding. A couple years ago, we were concerned they might be able to poach the highest-quality startups, but that has not materialized.
Wefunder also called out that Republic’s market share of Reg CF barely cracked double digits at 11%. They proceeded to contrast the number of raises on each platform, which stands at 150 to 13. Yeesh.
Ending with the ultimate finisher - that Wefunder maintains this lead despite Republic raising $220M from VCs (10x more than Wefunder).
Republic was given a boatload of cash to take first place in this market and they’ve fallen short of that goal so far.
THE FINAL BOSS
I just gotta beat this level! - Wefunder, probably
Looking forward, Wefunder is aiming to run more efficiently.
Translation → cut costs and reach profitability.
They slashed external costs by 50% and are now cruising with expenses totaling less than $750,000 a month.
This is in stark contrast to StartEngine, which Wefunder claims to be spending $1M+ a month on marketing. Now I actually had a bit of an internal dialogue on whether this was a good or bad sign.
On one hand, it’s obvious to look at this and think Wefunder will succeed because they’re being scrappier - doing more with less.
But on the other hand, is StartEngine just doing more with more?
They might be spending $1M/month on marketing because they have the cash flow to do so.
StartEngine’s masterstroke is in their premium investor tier, called the Owner’s Bonus. It’s $275 a year and costs them almost $0 to run. According to their webpage, they have over 28,000 members, which would translate to $7.7M in revenue.
That is a lot of money coming in, and Wefunder doesn’t have that same cash stream coming.
I ultimately prefer scrappiness in a business, but worry that StartEngine’s heavy marketing budget could put some distance between themselves and Wefunder.
Last week I profiled Painterland Sisters, and how I ultimately passed on their fast-growing yogurt business. Here’s how CROWDSCALE readers voted:
🔒 only viewable to subscribers with at least one referral 🔒
Would you invest in Painterland Sisters at a $15M SAFE valuation?
🟨🟨⬜️⬜️⬜️⬜️ Yes (29%
🟩🟩🟩🟩🟩🟩 No (71%)
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