Crowdfunding the Future of Storytelling

Early last year we decided to give crowdfunding a try. We had passionate users that we knew would invest… and we needed the capital. So on a recommendation from Gill Holland , a connection who used Wefunder to bootstrap Harlan County Beer Company, we went with WeFunder to manage a Reg CF raise.?

Reg CF is a law that went into effect in 2016. Before that about ~90% of the US was excluded from participating in private company offerings based on their income/net worth. This had been the case since The Securities Act of 1933, a law intended to protect people after the great depression.

There are still limits, but Reg CF has opened the door for the vast majority Americans to make real investments in all sorts of companies. WeFunder is one of several companies that facilitate these investments by streamlining much of the legal and monetary side of things for both parties. In the end you get a landing page that makes it easy for folks to familiarize themselves with your opportunity, dig into the details as they wish, and invest.

As a company, there is quite a bit of flexibility in what you can offer investors (SAFE, convertible note, revenue share, loan, etc.). We opted for a SAFE, which is an increasingly popular alternative to a convertible note for early stage companies… With a SAFE, the investor doesn’t know exactly how much of the company they will end up owning. Instead, the conversion of the investment to ownership is delayed until a subsequent round of funding, avoiding the complication of trying to value the company at the current (early) stage.

Under the hood WeFunder sets up and manages a SPV (Special Purpose Vehicle). Instead of investing directly in Prewrite, investors are effectively buying into an LLC, which then invests in Prewrite on their behalf. From our perspective this is quite nice, because it means only one new shareholder, and only one new entry on the cap table.

Raising money can be hard, and it often takes money to raise it… Reg CF is no exception. There were some up-front legal and accounting costs, and we spent measurable time and money creating content and promoting the round. Added to that, WeFunder does take a cut of what’s raised, but by my calculations it’s been worth it… I’d say roughly 10-20% of our raise came from investors already on their platform. And with few exceptions, WeFunder has been very helpful and responsive, providing assistance both actively and as-needed along the way.

How did this all turn out in the end? Well, we were authorized, and hoping, to raise $1M… today, after one year, and with less than 24hrs remaining until close, we’re just over $160k. We were able to do something called a “rolling close”, which allowed us to draw on the funds before the close. This means we were able to start putting the capital to work during the raise, which has been great for building momentum.

Outside of simply raising capital, there is something very special about crowdfunding… it fosters community. We have always been close with our users, their feedback has been critical to our success, and we have become a solution that many of them are quite passionate about. Being able to own part of a tool that they love draws them even closer, it gets them more involved and accelerates network effects.

Crowdfunding is certainly not for everyone, but would we do it again? Yes. Would we do it differently? Yeah, a bit. But overall we’re very happy with the results. In the start-up world, at least in my start-up world, things don’t usually go exactly the way you plan. Like many things, it’s about rolling with the punches and making the most of your current position. With crowdfunding, we’ve done just that and we’ve learned a lot.

If you are considering crowdfunding, or already embarked on the journey but could use some guidance, I’d be happy to share more of what we’ve learned. Our campaign is active through Sept 23rd 2022, but you’ll still be able to poke around on the page after that. Check it out! https://wefunder.com/prewrite