Join Nate Matherson as he sits down with Jonny Price for the sixty-second episode of the Optimize podcast. Jonny is the VP of Fundraising at WeFunder, a platform that empowers startup founders to raise capital from their customers and community. With a background in management consulting and experience at Kiva.org, Jonny brings a wealth of knowledge to his role in democratizing angel investing.
In our episode today, Nate and Jonny dive into the underreported growth tactic of community rounds, exploring how startups can leverage them to build stronger customer relationships and enhance their go-to-market strategies. Jonny also speaks to the regulatory landscape, expressing insights about SEC rules and the impact of allowing unaccredited investors into startup funding. Listen to hear why he suggests setting an attainable allocation for community rounds to create a positive signal.
In this week’s deep dive, listen to Jonny share everything you need to know about conducting community rounds in 2024. Jonny gets tactical, sharing multiple examples of successful community rounds, including companies like Mercury and Beehive, and how they achieved rapid funding success. Rounding out the episode, Jonny and Nate cover topics like the benefits of engaging community investors, potential pitfalls to avoid in fundraising, and innovative marketing strategies used by WeFunder to support startups. Closing the episode is our popular lightning round of questions!
One growth tactic that I feel is just underreported on or talked about is community rounds. Could you first tell our listeners what a community round is?
It's a way of raising money where you're opening up the fundraisers to let your customers and community invest. So most startups, when they're raising capital, they're using an exemption called regulation D.
What this means is that they're limited to raising from institutional investors and accredited investors. So rich people basically. And what a community round does is enable you to raise capital also, maybe as well as raising from VCs and angels, but now you can also let your customers and community invest.
So an angel round, you're raising from angels or friends and family around you're raising from friends and family, right? A community around you're raising capital from your community. And there's kind of two benefits to this, right? One is it's another kind of way for startup founders to raise capital.
This is a relatively tough time to raise capital. So a lot of founders are kind of interested in exploring other avenues, other pools of capital that they can kind of draw from, e. g. your customers. But the other thing, and I think probably the focus of this conversation is our pitches. If you're a consumer facing company, well it can work for B2B as well, but B2C tends to be the sweet spot.
If you're a consumer facing company, you're trying to build community. Most startup founders are looking for ways to delight their customers. Most startup founders are looking for ways to build a stronger community. And our pitch is there is no better way to delight your customers and build community than by letting those customers and community members become owners and investors in your startup.
Hi, and welcome to the optimized podcast. My name is Nate Matherson, and I'm your host on this weekly podcast. We sit down with some of the smartest minds in growth and go to market. Our goal is to give you perspective and insights on what's moving the needle. Today, I'm thrilled to sit down with Johnny Price.
Johnny is the VP of fundraising at WeFunder, a platform that enables startup founders to raise capital from their customers and community. This week's episode is a little bit different. We're going to talk about what I think is an underreported growth and go to market strategy. That'd be community rounds, a type of funding round that more startups are using as part of their go to market strategy.
Thanks for listening to this week's episode of the optimized podcast. It's brought to you by position. If you don't know by now, my name's Nate, and I'm one of the co-founders of positional and we've built what I think is a pretty awesome tool set for content marketing and SEO teams. We've got tools for keyword research, internal linking, content optimization, and even a couple of tools for analytics.
We'd love for you to check it out at positional. com. Johnny, thank you so much for coming on this week's episode of the optimized podcast. Thanks for having me, man. Great to be here. Could you tell our listeners a little bit about you and the work that you do at WeFunder?
Yeah, absolutely. So if you believe my LinkedIn title, I'm the VP of banter at WeFunder.
Um, although I would, another way to describe it will be VP of fundraising. I've been at Wefunder for six years. Before that I worked for a non profit called Kiva. org. Uh, before that I was in management consulting from the UK originally, lived in SF for 10 years, now I'm in Nashville, Tennessee. But yeah, what we do at Wefunder, um, as you mentioned, um, we're a platform that helps startup founders raise capital.
Normally when you're raising capital, you're raising from VCs and angels, right? At WeFunder we allow you to raise from unaccredited investors as well as accredited investors. So open up the raise to let your customers and community invest. So we call it a community round. So that's like on the startup founder side.
Um, and then on the other side of the marketplace, We're enabling anyone to invest in startups. They love not just rich people. So for 80 years in America, you had to be an accredited investor to invest in pre-IPO private companies. Our founders back in 2012 thought this isn't very fair. This isn't very American.
They were actually serial entrepreneurs themselves. They wanted to invest in their friend startups and they weren't legally able to. So along with other people, they helped to lobby to change the law. And since 2016 now unaccredited investors have been able to invest as well. And so one, one way you might kind of think about, we fund is like democratizing angel investing.
So just as with Robin Hood, you know, democratizing public investing or like Airbnb democratizing hotels, Twitter, democratizing journalism. So when we fund, we're trying to open up. So anyone can be an angel investor, not just the richest 5 percent of the population who are accredited
You know, I've been excited for this conversation all week.
Um, on our podcast, we typically talk about content marketing and SEO, uh, but wait, lately we've done a few episodes in the growth and go to market space. More broadly, uh, one growth tactic that I feel is just under reported on or talked about is community rounds. Could you first tell our listeners what a community round is?
Yeah, so the idea is, um, it's a way of raising money where you're opening up the fundraisers to let your customers and community invest. So most startups, when they're raising capital, they're using an exemption called regulation D. What this means is that they're limited to raising from institutional investors and accredited investors.
So rich people basically. And what a community round does is enable you to raise capital also maybe as well as raising from VCs and angels, but now you can also let your customers and community invest. So an angel round, you're raising from angels or friends and family around you're raising from friends and family.
A community around you're raising capital from your community. And there's kind of two benefits to this, right? One is it's another kind of way for startup founders to raise capital. This is a relatively tough time to raise capital. So a lot of founders are kind of interested in exploring other avenues, other pools of capital that they can kind of, uh, draw from your customers. But the other thing, and I think probably the focus of this conversation is our pitches. If you're a consumer facing company, or it can work for B2B as well, but B2C tends to be the sweet spot. If you're a consumer facing company, you're trying to build community. Most startup founders are looking for ways to delight their customers.
Most startup founders are looking for ways to build a stronger community. And our pitch is there is no better way to delight your customers and build community than by letting those customers and community members become owners and investors in your startup, oftentimes on the same terms as VCs that are leading the round.
So a great example recently was this company's beehive newsletter platform. They raised the 32 million series B led by NEA. They announced that on April 30th. And then on May 1st, they announced that they were opening up a community round allocation for an additional million dollars. And they were opening that up to let their, their customers and newsletter writers, uh, readers invest.
They oversubscribed in two hours. And so now that their newsletter writers, like our kind of stakeholders, owners, investors, and be hive on the same terms as this VC NEA, who led the round.
Yeah, it feels like, uh, I, I'm seeing this more and more, uh, especially on platforms like Twitter and X, where, you know, companies are mentioning that they're opening up an allocation for a community round.
And, uh, I guess it serves like an initial bang to the customer acquisition strategy because everybody is talking now about this community round that's available. And, as you mentioned in two hours, the beef beehive round was oversubscribed, uh, but then it seems like there's also this, like , prolonged.
Effect where like I see, you know, mercury, for example, I think you guys did a community round with mercury. I feel like I see people on Twitter X saying like, Oh, I am an investor in mercury. And it's like some guy that like you've never heard of before, but like he's, he's preaching great things about mercury, maybe because mercury is a great product, but also too, because now he has some skin in the game.
Would you say that it's accurate that a community round Is not, um, around that, uh, the company necessarily needs to raise, like they don't need this capital. It really is just a way to build support and community and, uh, help supplement everything there else are doing on the go to market side of things.
Yeah, I think it could be both. Right. Those are usually the two use cases. I think the sexier, cooler use case for refunder is in the case of beehives. Like they did not need the money. They just raised a 32 million series B right for them. It wasn't about the capital for them. It was like, we just want to give our customers and community the chance to invest.
Um, so, and there's much mercury that you get. An example you gave a couple of years ago, there is 120 million series B, I think code to let Andreessen Horowitz invested. And then they opened up a 5 million allocation. 5 million is the most that you can raise through this regulation crowdfunding exemption every 12 months.
So then Mercury opened up a 5 million allocation, let, I think it was two and a half thousand of their customers invested again, oversubscribed in 24 hours. So for them, again, it wasn't about the money. They didn't need the money. It was just a customer engagement. But there's this other use case for WeFunder where actually, you know, it would be helpful to like, you know, raise additional capital and, you know, have other investors that I can pull from.
We have 350, 000 people now who have made an investment in WeFunder and we'll put startups in front of those people. So, you know, a lot of the money in raises will come from WeFunder investors. A really good example here is this company, Lea Labs. So they're a YC company, they're trying to cure cancer in docs.
And they went through YC a few years ago. And they talk about this on their WeFundA case study. If you go to the community around. com, you can find some cool case studies. LeoLabs is one of them. And so they went through YC. They were pretty early. They had a lot of science risk ahead of them. And so a lot of VCs were saying, Hmm, we want to see more kind of progress first.
They then ended up raising half a million on Wefunder from a community of dog lovers. And they weren't B2C, right? They're a biotech company. And then they went on to use that money. They've gone on to raise follow-on grant funding, VC funding. Um, so they're an example where The use case was less around kind of customer engagement and more around like, Oh, this is an interesting avenue to, to kind of make it a little bit easier to raise capital.
Yeah. I have a few really tactical questions. So in the case of like a beehive where that round, like got oversubscribed in two hours from the community, uh, like, what do you do if you're like the founder of that startup? Do you like, Squish everyone down in terms of check size to let more potential community members in, or do you, do you run the risk of just telling some folks like they missed out?
Yeah, I don't know if that's a risk, right? That's kind of a, that's, I mean, I guess you could say it's pissing bluff. I would say like, uh, It's better to invite your customers and community to have a chance to invest in you. And some of them get to participate. I think in the case of Beehive, it was around a thousand investors.
I can double check that, but I would say it's better, better to invite them to like, not invite them at all. But yeah, there's a few options, right? You can kind of pair everyone down. Um, to keep kind of under the allocation or you can say, you know, first come, first served, or you can do something like, you know, the, the people that signed up on our platform, like the earliest we'll get kind of precedence or like, yeah, some other kind of criteria.
So we can do some prioritization based on, you know, are they an existing customer? You know, what's their spend on our platform? Yeah. Uh, things like that. And to kind of pick out who we want to give allocation to and around like this. Okay. And as far as like, maybe a stupid question, logistically, like, it sounds like these are a lot of very small checks.
Like I think you mentioned before, like a 500 check. These are all like one line item on the cap table for founders, right? Like they don't have to report to a 500 check holder.
Correct. Yeah. We use a special purpose vehicle and SPV. So we'll have the investors to one line on the cap table. And yeah, the average investment we fund is a thousand bucks.
It looks like a beehive. Um, they had 889 investors. They raised a little more than a million bucks. So a little more than a thousand bucks for them across all companies. When we find it, the average is a thousand bucks, but the median is two 50. The minimum, you can set a higher minimum if you want to, anywhere up to a thousand dollars, but most companies will go for a hundred dollar minimum.
I think Beehive went for a hundred dollar minimum. So for them, it was just about, we want more of our community to have the chance to participate. So we'll lower the minimum right down to a hundred bucks. Um, but yeah, from a cap table perspective, it's like a pretty simple SPV, like a reg D syndicate.
Yeah.
And so once one of these community rounds closes, we've got like the initial social bang from promoting this community round. Hopefully some of these investors are now going to talk more positively about our company and then on social media and wherever else and to their friends, uh, as like founders.
Should we do anything to, you know, stay in touch with these folks or like, how should we like to work with these new investors on an ongoing basis? Is that even important? Or is that something we just don't need to really worry about?
You don't need to worry about it. There's no kind of obligation, obviously, generally, I think it's good practice to like to keep investors abreast of what you're doing and update investors.
Um, and yeah, hopefully. As a founder, like if you're engaging that community, they obviously love the product, love the brand, love your company. Um, so I would say you want to kind of nurture that. Um, and so I would recommend quarterly, you know, updates that go to those investors. Don't need to share sensitive financial information or anything like that, but just keep them engaged and hopefully excited about what you're building.
And ask them for their help, right? They're like literally financially invested in you now, you can like to put them to work for you. So you need help with hiring or you have a, you know, kind of marketing, like an announcement that they can help amplify for you on social media, or they can help make an intro to an enterprise customer.
Like, Yeah. Just get creative and like asking them for help and they should be willing to provide that help.
Yeah. I know you've done some pretty high profile community rounds with companies like Mercury, which we mentioned also Substack. Um, does it ever make sense for like a Substack to do multiple community rounds or is that something you've seen like, you know, a community round for the series B and then also maybe another community round for the series C?
Does that work in practice or have you seen any companies do that?
Yeah, definitely. Levels is a good example of another Andreessen Horowitz back company that, um, they raised a community around with us a couple of years ago, and then they just did another one recently. Um, say, and L mix is a CPG company, a haircare brand out of Chicago, black female founder, Kim.
She's awesome. She was raised. I think it was 3 million a couple of years ago and then did another, um, multimillion dollar raise. I think earlier this year. Um, so yeah, definitely. And I'm biased. Obviously I work for Wefunder. Um, but for me, especially if you're, you know, consumer facing, or especially if you're trying to build community, then do it every round.
Like pre-seed, seed, series A, series B, series C. I don't think we've had any series C companies yet, although we're talking to a few right now. Um, he would do this as part of a larger series C round 5 million with 5 million is the annual cap. So it starts to be relatively small as a percentage if it gets like super large amounts of capital, but yeah, like, you know, do 200 allocation as part of your pre seed.
500k is part of your seed, a million dollars is part of series A, etc.
I've seen like, you know, RUVs out there, like roll up vehicles, uh, which, you know, still require, uh, accreditation. Um, but like the, the big difference here with like a community round is that it doesn't require accreditation. And so anyone of any net worth, Or the amount of dollars in their bank account can participate in one of these rounds.
Is that why the cap is 5 million? And it couldn't it couldn't go above that due to that difference in accreditation?
Yeah, exactly. It's, uh, the SEC exemption, um, that founders are raising capital through. We're talking here with community rounds and we fund regulation crowdfunding. Whereas most startups are raising through regulation D regulation, D limited to accredited investors, no upper limit on how much you can raise regulation.
Crowdfunding allows non accredited investors, but the sec app it at 5 million per year.
Yeah. Are there any other downsides that founders should maybe be aware of? Like I've heard, and you can tell me if I'm wrong, that you need to like to release a lot of. Financial information like publicly as part of facilitating one of these rounds from the company.
I mean, is that accurate? Like, what sort of information do you have to provide in order to allow one of these community rounds to happen?
Yeah, I would say that's the biggest downside. Of reg CF. So the SEC says, because retail investors here are investing, we need to protect them a little more. And the way that we're going to protect them is to kind of force companies to share financial information.
And so you do need two years, or if it's a startup, then just going back to the incorporation date of the company. But if you've been around for longer than two years, and you need two years of financials, P& L, balance sheet, cash flow, and then if you're raising more than a certain threshold, more than 1. 2 million, they need to be audited by CPA.
So there's also a cost to getting that CPA audit done. And then that is kind of publicly shared with the SEC database in the legal SEC filing, Form C filing. So I would say if you are really sensitive about, you know, competitors seeing that financial information, then that's sometimes a deal breaker.
It's a little bit in the rear view mirror. So if you were to launch a refund, uh, uh, community round today, which is, you know, July, August, 2024, um, you only need to share 2022 and 2023. So it's a little bit in the rear view mirror. Um, but yeah, if you're super sensitive about not sharing your P&L for the last couple of years publicly, that might be a reason not to do it.
I know I'm bouncing around a little bit, but can I, if I'm the company, offer, like, perks or, like, incentives to participate, for example, like, and I'm using a fictional example here, but say I was, like, beehive and I was raising a new community round, could I give, like, You know, a discount or, you know, like a free month or an upgrade to like the community members or customers that invest into the round.
Yeah, totally. We see that a lot with like CPG companies, like spirits companies or breweries where it's like, okay, get a, get a discount. At an online checkout or something like that. But yeah, perks are fine and usually different levels. So if you invest a thousand bucks, you get a certain perk. If you invest 5k or 25k, you get kind of the next level of perks for sure.
You don't need to do that, but it's quite common.
Yeah. Well, I imagine it's probably more common for like the, the earlier stage startups, maybe, or like the, the consumer facing startups where you actually want to give, like the customer, the product that they've invested in. I guess you can do that too with software, but it's maybe not as tangible as a bottle of whiskey.
Jonny Price:
Yeah, I don't know if like, you know, Subcycle Beehive or Mercury or Applet, I don't, I don't think these guys were doing too many perks, um, and yeah, didn't, didn't stop them from raising 5 million bucks in 24 hours.
Yeah, definitely doesn't seem like a requirement. As far as mistakes we could make with a community round, are there like one or two like mistakes that I could make if I'm a founder launching a community round?
Yeah. Yeah.
Yeah, I think one thing would be kind of setting an allocation that's too high and being kind of overreaching in terms of like how much you're looking at raising, because, you know, especially if you're not doing this to raise the money, if you're just doing this to let your customers invest, then, you know, if you set a goal of 5 million, and then you kind of Over three months, like slowly limp towards 1.
4 million. It's not a great signal. So sometimes folks will kind of start with a lower allocation. And then if they oversubscribe that they can always kind of increase it from a position of strength. So I think I like getting the allocation right. I think partly the reason the beehive was such a strong signal.
To oversubscribe the million dollars in two hours, following on from the series B announcement, it was just beautiful, like optics, I think. And so from a signaling perspective, like don't overreach with the amount, the allocation that you're looking at opening enough. I think the other thing would be like, I always recommend leaning into the execution.
So, you know, how can you really make a big bang of this? Like tell everyone about it, like, beautiful page, really awesome. You don't need a video for it, but if you have great creative assets, I think that can really help. If you go to the Replit page, we fund that. com slash Replit. I think the video of their founder Amjad on there is just very compelling.
So just kind of executing, it's going to take time and resources and investment, not so much on the monetary side necessarily, um, but more on the kind of financial side. Time investment for me, like your marketing team should really be leaning into this. I say this is, and not just me, but like Rich White is the founder of Fathom.
I don't know if you know Fathom. It's like a kind of video, like, um, AI note taking tool. I'm a customer. I'm a very happy customer. He did a community round. A couple of years ago, we raised 2 million from VCs and 1 million we funded from his customers. And he described this as the best marketing campaign he's ever run.
Um, and so if that's true, then like really lean into it, like get your marketing team to, you know, kind of make the execution of the campaign as awesome as possible. And then not just with raising the money quickly, but to your point, like on an ongoing basis. Hopefully you're going to reap a lot of marketing customer engagement benefits from that down the years.
And now just a quick word from one of our sponsors, actually our only sponsor that is positional. com positional has what I think is an awesome tool set for content marketers. We've got everything you need to take you from start to finish and help you scale this channel as I've done over the last 11 years of my career.
We'd love for you to check it out at positional. com. So just to play it back, it sounds like we should pick a round size, at least initially, that's that we can feel fairly quickly, then we can always increase it later if we need to, um, and, uh, in the case of fathom where this community round was, you know, a third of their total round size, like maybe we need to be a little bit more polished and thoughtful about the marketing to the community round itself versus like a beehive who just Threw a link on Twitter, I would assume, and subscribed it in two hours.
Yeah, and it's a really good point, right? Like, depending on how much the allocation and how much you invest in demand, there are a kind of changes that need to be polished. Like, Substack didn't have a video. I don't think Mercury had a video, right? And they have subscribed 5 million bucks in a day. So if, if, but if they've been trying to raise 25 million, then maybe they would have needed to invest a lot more on the kind of marketing and the polish side.
Yeah. You know, company is like. Mercury and Beehive and Repl. it. Like if they ever need 5 million bucks, I feel like they could just throw up a link given that people already love their product so much.
Superhuman is my love, I love Superhuman so much. Like it's literally my favorite product. Um, the iPhone maybe will push it, but right now superhuman, it just saves me so much time.
And yeah, superhuman. They could just spin up. We found a superhuman contact, sent an email, boom, 5 million from 5, 000, like happy customers. And so Rahul, if you're listening, do it.
Well, so I want to ask about the growth side of things for us funders, like, do you have to go out and ask these companies to come onto the platform or is it mostly sad to you?
Yes, you do. Oh no. Sadly. Yeah. But yeah, we, no, we get a lot of inbounds, right. And, um, more and more, I think our growth is coming from referrals, which is really cool. Whether that's like founders that have been really happy with the experience and. You know, it's sending us, uh, referrals of other founders or like increasingly from VCs.
Um, and I think especially in the last couple of years, right, it's been harder to raise VC capital way, way down, like VC dollars deployed in 2023, 24 on where things were in 2020, 2021. And so, yeah, VCs and especially VCs with consumer facing companies in the portfolio. Like saying, Oh, actually this worked pretty well for other portfolio companies.
Like, you know, Hey, like, I think this could be an interesting fit for these guys. So we're seeing more referrals come in these days.
Yeah. For consumer facing companies it is. Is WeFunder almost like a replacement for Kickstarter? I, I, I'm feeling kick. I don't know. Like if Kickstarter was started before WeFunder, I don't even know if Kickstarter is still in business because you don't hear about it anymore.
Um, but as like a Kickstarter for a consumer facing company, very competitive in theory with a WeFunder.
I don't really think so. Actually, I think it can be both. Like if you are a consumer facing, yeah, Kickstarter can be, can be good. You know, it tends to be that companies will raise more money on WeFunder.
It's just a different thing, right? Kickstarter is a kind of crowdfunding like perks or like a product discount. It's almost like revenue or perks, whereas WeFunder is like investing in the company. So I would actually say they're pretty complementary and like there's quite different things.
I have a really tactical question.
Um, I'm friends with like a handful of investors and you know, they'll kind of joke to me that sometimes when you bring on like unsophisticated LPs, they'll ask for their money back in like three years from now. And you know, it's a 10 year fund. Like there was, there was no capital to be, to, To be returned in three years, but they didn't really understand that.
I guess when they invested, uh, do these investors, uh, understand that it's going to take a long time and like that there's not going to be liquidity, like, you know, in the next two, two years, likely it's going to take a while.
I think so. I had always thought that would be a real, valid concern of like, am I just going to have to answer a ton of annoying questions from, you know, all these kinds of small investors, but I don't think I've had one founder.
He's done. A community around them. We found a kind of voice that concerns me. Maybe it's happening and they're just not voicing it, but I think I would have kind of got wind of that. So yeah, I actually don't think we're kind of having that, um, issue. Yeah. And like, you know, the, the SPV, like the, the shares in the SPV are voted on by a lead investor that the founder designates.
So from a governance perspective, if there's a follow-on financing or Position that requires the vote of shareholders as a founder. You just go to the SPV lead who votes on behalf of all the individual investors.
Gotcha. So we don't have to round up like 500 signatures. Yeah, exactly. Okay. Uh, well, you mentioned you do a little bit of outbound.
It sounds like to bring some companies on for, uh, these community rounds. Is there a single company besides superhuman, which you already mentioned that you would love to have on, uh, for like their next round and, and supplement it with a community round?
Liquid death came to mind, you know, like people love that brand. Like I just think that the whole messaging is about engaging the community, right?
And so sustainability like I Kind of mission oriented companies impact oriented companies. I think we do well and we fund as well. So yeah liquid death we want um superhuman we want yeah any kind of custom company that you know has a You A kind of passionate audience that is really passionate about building community.
It's sometimes frustrating to me. I like to hear founders talk about, Oh, it's really important to us to build community. Right. But then it's like, okay, cool. You should let your community invest. Wouldn't that be an awesome way to build community? So hopefully our vision is like in 10 years time, if you're building a community orientated or, you know, consumer focused company.
Like the standard the default like mo will be of course Why wouldn't we invite our customers and community to become stakeholders and owners with us alongside our VCs? Um, that's the kind of future we're trying to build. I think it's going to be a few years for it to be very very common and normalize . Every bdc company will allocate 10% of every round to let their customers invest but Yeah.
More and more case studies. We're crossing the chasm. That's the future. We're trying to usher in as fast as possible.
Yeah. I'm sure you can fill that liquid death round in, uh, under two hours.
Yeah. Oh man. I just dream of like the, the kind of, you know, the marketing and the creative and the assets will just be so fun.
Yeah. Maybe it's top of mind because we talked about mercury, but also like a ramp that feels like another one where, you know, ramp customers love ramps.
Jonny Price:
It's still banking like Monzo is a digital bank in the UK that actually did, um, a community around, um, actually before we coined the term, we funders came up with this term community round.
So you guys invented this term community round. Yeah. And talk about going to the market, man. That's been such an interesting insight for me into the power of naming and kind of branding. So before that, we would call it equity crowdfunding or investment crowdfunding. And a lot of people still call it that, but we always hated crowdfunding because to your point earlier, everyone's like, Oh, you mean Kickstarter?
It's like, no, there's a different thing to Kickstarter. Also crowdfunding doesn't really sound that prestigious.
It doesn't sound good. It sounds, it actually sounds kind of bad, like equity crowdfunding.
And it's literally like for a VC or founder, it's like, Oh, you want to do crowdfunding? No, you want to do community rounds?
Let your community invest? Sure. It's literally like just changing the name. And so we rolled out a community round. com in 2022. Um, and we, we had some, we had some fun with the rollout of that. Um, but yeah, so this has been kind of a really interesting example of like, you know, naming and branding and kind of we funders own go to market.
And that was only like a couple of years ago that we kind of coined that concept.
From the founder standpoint, community round feels a lot more comfortable than equity crowdfunding, because, you know, you, you've got your investors who are like, if you do an equity crowdfunding, maybe that's not the right signal.
Like, whereas a community round, it feels like I'm doing something proactive to acquire customers and support my community. Um, I realized that they're the exact same thing. They're the exact same thing, yeah. But
Yeah, it's just such a powerful example of changing a name and it changes the signal and the kind of perception of it.
But yeah, and it can be a negative signal, like I said earlier, right? Like if you set that allocation too high and you're out there spamming people and you kind of fall short of the goal, like that ain't great, right? But then it can also, I tweeted when Beehive did that raise, like just kind of went through exactly what they did.
It's like, this is an emphatically positive signal. We oversubscribed this in two hours. We are inviting our community and customers to become owners of beehives. Um, alongside this VC that's leading the round, they really did it for a position of strength. So my argument is this can actually be a positive signal, you know, if you, if you execute on it, well.
Yeah, totally. I agree. We, uh, well, that's some, uh, incredible branding work. Uh, and I want to talk a little bit more about like the go to market strategy of like a we funder. Like, how do you think about new investor acquisition, uh, or like, how do you, what are those primary drivers to get new investors, uh, onto the platform?
Yeah. So it's pretty interesting. We're a two sided marketplace, right? We have founders and investors and on the investor acquisition side, pretty emphatically, the strategy is. Find awesome companies like Mercury and they will bring the investors. So you have Uber, right? It's like we're signing up drivers and we're also signing up riders.
Well, we funded the drivers, brought the passengers to the founders, and brought the investors. We've had 350, 000 people make an investment on. We have found it there over the last few years. Um, and the vast, vast majority of them were brought to the platform by, you know, the company that's raising.
That's interesting. So for you guys, it sounds like bringing on those like high profile, like high intensity deals, like then just adds to your customer base who might then also be interested in all of the other, I'm assuming tens or hundreds of deals available on the we funder platform.
So like, in theory, if you guys were to go and get like liquid death and like, you know, I'm talking theoretical here, like charge them like no money. Yeah. To do this community round, that's just going to be like bringing a whole new cohort of potential customers to then take a look at all of the other community rounds happening on a platform like we fund. Is that right?
Exactly. Right. Yeah. The only caveat I would say, yeah, there's the high intensity ones. Like, you know, sub stack, I think signed up 8, 000 new we fund investors the day they launched, but also. You know, our fund is doing investments into local neighborhood coffee shops and restaurants. So there's a company in Nashville where I live, a restaurant called Bad Idea.
They raised 700 grand. I think it was like a couple of hundred investors. That's like 200, like, people in the Nashville community who are now also on WeFunder, and if we have like hundreds of, of those, you know, kind of maybe smaller or local businesses, they're also bringing a lot of the investors here.
So it's not only the mercuries and the levels of this world that are kind of driving the investor acquisition.
That's really interesting and that's a good point. You know, people love their local coffee shop and they might also be interested in investing in a cure for their dog's cancer.
So it makes complete sense to me. Are there any other growth marketing channels that you guys have been really excited about here in 2024?
I mentioned the founder referrals, the kind of referral partners of like VCs, angel groups, fractional CFOs, lawyers, folks that are working with startups that are kind of sending folks our way, accelerators, um, we get a lot of inbounds, we've never really done much in the way of paid ads.
We actually have some love. Facebook, Instagram ads that are running right now focus on breweries as a channel, like we wondered if that as a kind of industry vertical would do a little bit better. I don't really see, you know, um, the kind of series B tech founder, like signing up for, we found it from a Facebook ad, but, uh, we're actually seeing some interesting early results on the brewery side.
Like you might see, um, Think of economics. Like, um, if the average company and we found a raise of 400 grand, typically we might make eight, 8 percent of that. So that's like 32 K of revenue. Like we have, that's a pretty high LTV. So we have some room to play in the, the kind of funnel conversion is quite low and the cycle times are quite long.
So it's quite hard to kind of understand the economics of digital ads, but we are running some Facebook, Instagram ads as a test right now. We've kind of experimented down the years, never really found anything conclusive. So it's never really been a big channel for us up until this point. Uh, we've kind of played around with some content marketing. We have a podcast adventure capital where we like to highlight the stories of founders that have That have done.
We fund. Um, one thing I think that's really useful for is like, if there's a, you know, uh, CPG founder, that's looking at launching on we founder, then I'll share with them the interview where I interviewed like the founder of Kelmix for an hour. And that's like a really awesome way for them to understand her experience and like how she executed it.
So I think that's more around kind of funnel conversion, I would say, than kind of top of funnel. Um, we've had like, uh, yeah, we do a lot of kind of cold outbound emails, like, um, social DMs. And then, you know, we have a BD team that I lead, which are like going to events. Actually, this is really cool. You will like this one.
We just did a two week entire company train trip across the U. S. So if you go to Wefunder. com slash train, you'll see it. Did you hear about this?
Wait, you did what? You like, you went across the country in a train. This is fun, why don't you lead with this? This is, this sounds like a fun go to market strategy.
Yeah. Um, this is very like, we fund the thing. So, um, we literally just last week concluded this two week Amtrak trip where we left San Francisco. So. Yeah. And two weeks later, it rocked up in DC and we're taking Amtrak trains along the way. And then every city we stop in. So we stopped in Portland and then we stopped in Whitefish, Montana and Grand Forks, North Dakota.
And then on the east side of the country, it was a little bit more concentrated, but like we had an event for founders in, in Grand Forks, North Dakota. And just earlier this week, I chatted with one of the founders that was there. They've raised 18 million from VCs in North Dakota. I think they're one of two companies that raised a series A last year, maybe.
And now they're looking at doing a 5 million, uh, we fund a race. I give, so that, that was a really fun, kind of outbounds like strategy. I'm not sure that would work for every, every company, but, um, it was a fun one for us.
Heck yeah. You, so you guys got on a train, went to startups where they are like in North Dakota.
And, uh, yeah, I mean, 18 million bucks in North Dakota. That's, that's, that's maybe like. All of North Dakota, you know, for any listeners of this pod that are in North Dakota, you're welcome to come on the podcast.
North Dakota. We love you.
I think that was like the impetus for the job site, which was the, the, the law that allowed us to do this.
We've under regulation crowdfunding legally allows non accredited investors to invest in startups, not just rich people. The impetus for the law was like. Right now, 77 percent of venture capital goes to three states, California, New York, and Massachusetts. So wouldn't it be cool if we could get more capital flowing to founders throughout the country or and so Yeah, the kind of we've kind of going to North Dakota It's like very much in line with the spirit of the the regulations that we're kind of
Nate Matherson:
Yeah, I spent like six months in Iowa actually and I Loved my time in the Midwest, uh, very different venture ecosystem in a place like Iowa, you know, you've got your small angel groups that want to invest, you know, 100, 000 at a 300, 000.
I was literally just going to say for like 30 percent of the company. Yeah.
Um, but I love how you guys are democratizing, um, you know, capital to all different places across the country. Um, and, uh, and as far as you mentioned regulation a few times, uh, is, is that an important part of the business in the sense that like you're, you try to change laws or do you have lobbyists?
Like, are you trying to like, you know, open up the floodgates in terms of the amount of companies. The amount of capital companies can raise or how they can do it. Is that an important part of your business?
Yeah, that's an interesting question. It's not, we don't have any lobbyists or we don't spend that much time lobbying regulators or anything like that.
The start of WeFunder back in 2012, our founders basically started a petition to lobby Congress to change the law that helped to result in the 2012 jobs act. Which then the sec rolled out in 2016. So the start of the company was actually really entirely about a kind of regulation, like change. The sec made some rule changes to rec CF in 2021, where they increased the limit from a million to 5 million.
And they allowed us to use SPVs from a cap table perspective. So, but that wasn't really us that you did actually write a letter to the SEC saying, Hey, we think you should make the adjustments in this direction, but it's not like we're flying to DC or paying lobbyists to make these changes. Maybe we should.
Sometimes I think we should be investing in that, but I don't know. These things take so much time. We're like a small startup. I think we're maybe 30 or 40 people. So it's like, doesn't really seem like a good time investment of our limited resources to, Kind of tried a lobby for regulatory reform, which may never come.
Yeah. Well, you know, there's at least five senators that listened to this podcast. So they've heard a little bit about Wefund today. Now I'm just, I'm totally messing with you.
You're totally messing with me. It's actually more like 35.
Yes, all of Congress. It's mandatory listening. This has been so much fun.
I've got some lightning round questions. Does that sound good? Hit me. So, uh, we were talking about Nashville before we started recording and, and you and I joked about Hattie B's, love it or hate it. Is there a restaurant in Nashville that our listeners should check out if they're in town?
Oh, this is a beautiful setup because I'm just going to highlight Bad Idea, which is a new restaurant, La Ocean Food, uh, the founder used to be the sommelier at this other restaurant called Bastion.
The wine selection is incredible, unbelievable food, crowdfunded on MuyFunda, sorry, community rounded on MuyFunda. Thank you, Nate. Um, but yeah, um, my wife's an investor. We love, we love the spot and it's, it's really, really good food. It's in East Nashville. Cool. Cool. Part of East Nashville called five points.
Well, we will include a link to the menu in the show notes of this episode. So all of the listeners definitely check it out next time. And then we fund the community around a page. Are they still fundraising? They concluded their race. Oh, good for them next time. If there is the second community round for location number two, you know, I'd seen on Twitter, uh, recently there's this company called Carrie.
Uh, I think they're in like the, you know, IRA investment space. I don't know exactly what they do, but they announced a community round as part of their series a, um, and I went through the questionnaire. I didn't complete it. But, uh, one of the questions they asked was, um. Like, do you have a large social media following because, uh, you know, allocation will be given to folks that have large social media followings.
Is that a good approach? Should we allocate to folks in our community that might have a lot of followers on Twitter?
Yeah, I mean, I think it depends on what the allocation is. I saw that carry raise as well. Um, I, I like that they use that term community around. Um, I think they were using an angel list.
Um, and I think it was limited to reg D and accredited investors. So that's the big difference versus what we do at WeFunder and RegCF. So if you just want to limit it to a smaller number of people, maybe investing larger amounts, all of whom are accredited, then you definitely should not do WeFunder. You should, you should go to AngelList.
What WeFunder and RegCF is about, um, is, is opening it up so that anyone can invest. They don't need to be accredited, i. e. a millionaire. And yeah, to the point earlier with the Beehive example, if you're oversubscribed. Then, yeah, you can kind of, you could, uh, do it based on, based on, you know, social media followers of the investors.
If you want. I don't know if anyone on WeFunded's done it in that way. I think like that, that could be a little, um, I dunno, I could imagine some people being a little miffed about that if they don't have enough social media followers to make the cut. Also logistically that just becomes a little challenging to figure out and manage.
Yeah. Okay. Well, you know, I should probably also mention that one of the other prioritization factors was, are you a current carry customer? So they are doing both like, are you a customer or, or do you have a large social media following? So don't, don't, you know, carry them. Looks like a cool product. Um, I don't know that much about it.
Uh, as far as your two sided market goes, uh, you've got to acquire customers. Investors and then you've also got to acquire customers who are companies. Uh, is it harder to acquire one versus the other?
I don't know. I would say no. I would say it's kind of, you know, there's a relatively decent balance.
Um, yeah, uh, I don't know. Don't have a better, better answer than that. It's kind of hard to acquire both, right? You know, um, yeah, but on the investor side, It's, it's kind of mostly the founders, like I mentioned earlier, that are kind of bringing, bringing the investors. So the focus of our company is more on the, on the founder side of the equation.
Looking back, like what was the most memorable or most fun place that you stopped on, that train ride across the country?
Well, I actually was only on it for a couple of legs. So, uh, I have a wife and three kids who were on vacation at the time. So I was like, On family vacation from Tennessee and California.
And then I was like, Oh, by the way, can I leave our family vacation to go across the country on a train trip with my colleagues? Not so much. So I flew to Portland and then to Portland to Whitefish. Both were cool. Like Portland, we had a really fun, like pickleball event with founders there. Had some great conversations with founders in the Portland community and then did an overnight train to Whitefish, slept for zero hours on the overnight train, which was not so fun, but then I'd never been to Montana before.
Absolutely beautiful town like Glacier National Park right there and had a really awesome conversation with a VC who's a partner at Quiet Capital who'd invested in Substack and Mercury at this happy hour that we organized for folks locally in Whitefish. So. It was really cool to find, you know, a very awesome person in the startup space to meet with, you know, even in a town that is pretty small and you wouldn't necessarily have thought, um, you would kind of find someone like that.
So, um, yeah, both those places were really fun. Um, but yeah, sadly, I didn't get to participate in too much of the train trip.
Yeah, well, you know, you've made it as a VC if you're at San Francisco VC now in Montana, right?
Yeah, that's like ultimate status, right? You're like so much of a baller. You can go to Montana Yeah, I invest out of Montana now.
I'm sure there's some great Montana VCs though, too, but, um, anyways, Johnny, this has been a lot of fun. Thanks for coming on the optimized podcast. Is there anything else you'd like to say to our listeners?
I would say like, obviously if you're a founder listening, you're interested in exploring this further, would love to connect. Um, I'm Johnny and we fund them. com and then we fund them. com slash raises where you can go to kind of learn more and, um, start an application. And then also like. You know, if you're someone listening, you love startups, you want to invest in startups.
You can do that when we fund a hundred dollars as the minimum, you can browse through hundreds of companies that are raising right now. Some YC companies are there, some cool like venture backed companies. Maybe it's like a restaurant in your neighborhood. Um, the idea for us is like, yeah, democratizing angel investing, getting more and more, like hopefully over time, millions of Americans investing in.
Early stage private startups as well as late stage public companies. We think that'll be good for America, good for the startup ecosystem Um, so yeah, if you want to you know, maybe it's your first angel investment or kind of browse through investments and we Funder check that out Um, but yeah, thanks so much for having me on nate.
This has been a really fun fun conversation And yeah, I love the idea of like Community rounds as a kind of tool in the go to market arsenal.
You know, I've got one more bonus, like a last minute lightning round question. Did you guys trademark community rounds?
I didn't think so. We don't really do trademarks.
Uh, yeah, we just, yeah, we'll, we'll out compete by execution and speed versus trade. Now, Nate's going to go and trademark it. I don't know. We may have not, not to my knowledge.
I don't think I can trademark it. I think I have to like being, maybe I'll throw up a landing page and then trade.
Now you're making me want to go and trademark it.
The way you're talking is making me immediately want to go and trademark it. We may have done it. I don't know.
Mine will spend the 600 bucks and get the trademark. You'd at least print it out and put it on the wall.
You sound like one of those angel investors in Iowa, man.
Don't say that. 300k posts. Here we go.
But, uh, Johnny, this has been a lot of fun and we'll put a link to your LinkedIn in the show notes as well as a couple links to the WeFunder site, uh, the, you know, the raise landing page, uh, uh, the page for investors to, uh, take a look at some startups. So, uh, check out the show notes if you want those links, uh, and, uh, Johnny.
Would love to have you back. Thanks so much. Take care. Love it, man. Cheers, Nate.
And that's a wrap. And I just want to thank our sponsor, Positional. They've got what is a pretty awesome tool set for content marketers and SEOs. They've even got a couple of tools for social media. We'd love for you to check out Positional and the tool set that we've created over the last 15 months at Positional.
And you can always reach out to me if you have any questions. My email is Nate at positional. com. Whether you've got questions about our tool set or comments and complaints, uh, or even positive feedback about this podcast, I'd love to hear from you. Um, and don't forget to hit the like and subscribe button, uh, wherever you are listening to this podcast.
Uh, thanks so much for tuning in.
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Positional's tools are an essential supplement to any search-driven content effort. They help us save time and produce better content for both our company blog and our clients.
We used to create outlines for our posts, either by paying a consultant $75+ each, or by spending 1-2 hours researching and creating each one ourselves. With Positional, we can create the best outlines for our target keyword clusters and get alternatives within a couple clicks.
Positional has proven indispensable in our SEO strategy. Its rapid optimization capabilities for our blogs led to noticeable improvements in search rankings within a month. From planning to making our content better, it’s like having a teammate. Our team loves it!
Positional is a must-use tool for any growing startup that cares about SEO. It's simple and easy to use but as powerful as anything out there. Plus their customer support is next level.
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Positional has been an amazing addition to our SEO and Content team's workflows, enhancing our overall efficiency. We particularly love using AutoDetect and Internal Linking on a daily basis!
Nate and the positional team are the best of the best in SEO, content marketing, and helping you grow your organic traffic. The combination of their expertise and the SEO and content tool they’ve built has allowed us to build a scalable content engine. Reach out to me anytime for a testimony. They are truly phenomenal.
As an SEO novice, Positional makes it easy. I can quickly go from keyword research, to clustering, to content outlines, then go focus on just making good content. I felt like it helped bridge the gaps between what would’ve taken 3 or more tools in the past.
The first time we used Positional's toolset was to revamp an older but important piece of content. We used Optimize for optimization, and Internals for internal linking suggestions. We went from position #6 to #1 with the changes and increased our organic search traffic to the page by 400%. Today, Positional is an integral part of our blogging strategy, from topic generation to blog renovation.
“We’ve been moving up the search rankings. When we first started using Positional, we had about 1,000 visitors from organic search per month, and today, we have over 12,000 visitors from organic search per month. And obviously, Positional has played a large role in our growth.”
Positional takes the guessing game out of our content and SEO strategy. It allows me to do extremely quick keyword research which I can then turn into detailed instructions for our content writers through their Optimize tool. I love the speed new capabilities are being added!
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Positional's tools are an essential supplement to any search-driven content effort. They help us save time and produce better content for both our company blog and our clients.
“We’ve been moving up the search rankings. When we first started using Positional, we had about 1,000 visitors from organic search per month, and today, we have over 12,000 visitors from organic search per month. And obviously, Positional has played a large role in our growth.”
Positional takes the guessing game out of our content and SEO strategy. It allows me to do extremely quick keyword research which I can then turn into detailed instructions for our content writers through their Optimize tool. I love the speed new capabilities are being added!
I've been using Positional since its closed beta, and it boosted our SEO results so far! We've published over 80 articles with Positional and it has gained traction very well. The "Optimize" tool is my favorite — it ensures we use the right keywords for better rankings. The "Content Analytics" tool is also great for showing us exactly where we should improve our content.
Positional's tools are an essential supplement to any search-driven content effort. They help us save time and produce better content for both our company blog and our clients.
