Yesterday, the world of investing shifted dramatically, and in large part thanks to a group of people who rolled through Fargo earlier this year. The group, Wefunder, came through on a cross-country quest to meet the startups of underdog cities — that is, everywhere outside of the Silicon Valley bubble.
Seated around the papered table in the Prairie Den‘s graffiti room, the travelers told tall tales of a world where everyone could be investors and venture capitalists. Everyone, “not just rich people,” they said. Not just those making more than $200,000 a year with a net worth over $1 million — metrics that, until yesterday, were required by U.S. law for investors.
Wefunder founders Nick Tomarello, Mark Norman and Greg Belote told us how they, a few Bostonian entrepreneurs, found themselves in front of Congress in Washington D.C., lobbying hard for the bill called the JOBS Act. They ended their trip with watching President Obama sign the bill.
“For the first time, ordinary Americans will be able to go online and invest in entrepreneurs that they believe in,” said President Obama, as reported in the New York Times.
Four and a half years later, that bill, the JOBS Act, is in effect as of yesterday, May 16, 2016. Remember that day, startup world. Now, with Title III of the JOBS Act, startups are allowed to raise up to $1 million in a 12-month period through private crowdfunding. And anyone with $2,000 is able to invest in the startups they believe in.
Wefunder, which is headquartered at a house in San Francisco, has been preparing for this day for years. Since the bill was passed in 2012, they allowed accredited investors to use their platform; in that time they funded over 112 companies, including Zenefits, Checkr, CaseText, Gingko Bioworks, Freight Farms, and Goldbely. They currently have 56,832 registered investors on their platform, according to the website. Now, as they stated on their site, “the fun begins.”
North Dakota startup is early adopter
Already, startups across the nation are jumping on the bandwagon.
Bogobrush, a company created by Jamestown, ND natives, siblings John and Heather McDougall, announced that anyone can now own a slice of their company by investing through their Wefunder page. Bogobrush sells a bio-degradable toothbrushes, “inspired by our dentist dad” they state. The company is raising funds through a Future Equity Agreement (SAFE) round, with a goal of raising $50,000 total.
According to Wefunder, SAFE is an agreement that grants the holder the right to equity at a later date, typically when venture capitalists lead a ‘Series A’ financing.
The minimum a company can raise on Wefunder is $20,000, and the maximum, with regulation crowdfunding,is $1 million per year. However, Wefunder specifies that companies can always raise and unlimited number of dollars under Regulation D from accredited investors, which they will host for free if you pass $1 million.
Initially, Bogobrush won’t pay Wefunder anything — it’s free to create a profile and collect followers. When they decide to turn on fundraising, Wefunder charges a $195 fee. For regulation crowdfunding raises, Wefunder charges a %3 fee based on your online funding total, only if your funding is successful. Any additional processing fees are paid for by the invesotrs.
Similar to Kickstarter, Bogobrush is offering a series of incentives for investments from $250 to $25,000, a hand drawn illustration to a personal tour of the facility — even including an option to “get to know the people creating a thriving startup scene in Fargo, ND.” Hey, hey!
Other companies looking for investors on Wefunder span across a variety of industries; frozen cocktail business, glowing plants home bio-engineering, a shop that serves gourmet donuts with fried chicken and whiskey.
After touring the country and exploring the nationwide diversity of startups, the Wefunder team is betting big on the power of equity crowdfunding.
“People are going to be surprised by the quality of the companies that decide to use regulation crowdfunding,” Tommarello said.
Photo courtesy of Emerging Prairie.
Some debate on the term “equity crowdfunding” from TechCrunch, very interesting: Equity crowdfunding is dead.
Here’s some more technicalities courtesy of the NASDAQ: Crowdfunding and the Jobs ACT, what investors should know.