It’s very likely to be harder for startup founders to raise capital in 2023 than it was in 2022 and in 2021. Public market valuations collapsed, which put pressure on growth (i.e. late) stage VC, which is trickling down to early stage investing as well. Angel investors have less wealth than they did a couple of years ago – because their stock market / crypto portfolios crashed. It’s a cold and lonely (fundraising) world out there. Yet, great founders and startups can still get funded – it’s just generally going to take a little longer, and you’ll get a worse valuation – “slower and lower”.
One relatively new and alternative option for founders is raising capital from their customers and community – through a community round. Most startups raise capital using an SEC exemption called Regulation D – this restricts founders to raising from “accredited investors” (basically the richest 5% of the population), and usually limits them to “privately soliciting” investors (i.e. no Twitter memes and TikTok videos here).
But with a community round, founders can utilize a different exemption called “Regulation Crowdfunding” (Reg CF). Passed by Congress as part of the 2012 JOBS Act, rolled out by the SEC in 2016, and significantly improved in 2021, Reg CF allows founders to raise capital from unaccredited, as well as accredited investors (i.e. 100% of the population, not just 5%). And publicly promote the offering (e.g. email blast to customers, LinkedIn post, press release, billboard in Time Square, airplane dragging a banner behind it in the sky, etc.).
Platforms like Wefunder also enable startups to get in front of our audience (we have 1.5 million registered users, of whom 30,000 are accredited investors). And we roll all of your investors up to 1 line on the cap table using a Special Purpose Vehicle (SPV).
Our hope is that – while a lot of conventional investors are pulling back amidst macro-economic uncertainty, the customers and community members of startups will be a little more resilient.
To view startups currently raising on Wefunder, check out our Explore page here.
And to learn more about raising capital on Wefunder, you can start an application (and even begin fundraising) easily here.