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Why Wefunder?

  • What is Wefunder?

    We are like "Kickstarter for investing".  Your friends, customers, supporters, and local community can invest in your company - with only one entry on your cap table.

    We help you raise more money, faster, so you can get back to what matters: building your startup.  Plus, you'll have an army of evangelists motivated to help you succeed. 

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  • How are you different than Kickstarter?

    Wefunder lets investors own a small stake in your company, while Kickstarter allows you to sell products.

    We think Kickstarter is super cool, but a customer is very different than an investor. A customer just expects a product – an investor wants to help your company long-term.

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  • Who are the best startups funded by Wefunder?

    Prestige matters: the best platform places you alongside the best companies. We’ve funded 4 startups now worth over $1 billion and 12 over $100M.

    In total, over $2.2 billion dollars of venture capital has been invested on companies first funded on Wefunder.  

    Wefunder itself was the first startup to raise funding on Wefunder, raising over $10 million from about 1000 investors. We've since funded millions of dollars into hundreds of companies, including Zenefits, Checkr, Meow Wolf, Gingko Bioworks, Freight Farms, Everipedia, and Goldbely. Many are alumni of Y Combinator.  Check out our results.

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  • Why raise funds from the crowd?

    Make your most loyal customers into owners. They are often your most passionate evangelists.

    Investors have a financial interest in helping your business succeed. For instance, if you own brewery and your customer is also your investor, she'll likely drink more beer there, and bring her friends more often. 

    Need help recruiting an an engineer?  Looking for an intro to a key VP at a big company?  Want feedback on your product from an industry insider? A crowd of investors can help increase your "luck surface area".

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  • Do you group all investors into one shareholder on the cap table?

    Yes! All investors on Wefunder are treated as one shareholder: XX Investments LLC.

    Even if you raise funding from 2,000 investors on Wefunder, only XX Investments  LLC will appear on your cap table. 

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  • Do all these investors vote?

    No.  

    You only need to talk to one person to sign off on any corporate actions:  your Lead Investor.  You choose the Lead Investor. 

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  • How are you better than your competitors?

    We deliver more money, faster.  We're the largest funding portal by dollars raised, number of companies funded, number of investors, and most follow-on financing by venture capitalists. 

    We work with better companies measured by returns.  Because we know what it takes to work with good companies, we have one of the best portfolios in the industry. You want to raise funds on a website alongside other good companies. Over $2.2 billion of follow-on financing has been invested in our companies.  

    We are tech founders, not finance people.  We understand that founders are busy running their startup, so we do all the grunt work for you. More than that, as founders ourselves (not finance guys or bankers), we know exactly what you are going through. We're a friendly team.

    We'll beat anyone on price.  We charge no fees up-front, and, if you can find a better offer, we'll match it.  

    We're a B Corp and Public Benefit Corporation.  Our values are important to us.  We are legally required to follow our Charter to help more founders get off the ground.

    We started this industry.  We helped Congress pass the laws that legalized equity crowdfunding back in 2012, and were invited to watch President Obama sign it into law.  Check out the Wefunder Story.  

    We have the best community of founders. We believe belonging to community of other helpful founders will help your company succeed.  That's why we started the XX, a community of founders who have built companies collectively worth billions of dollars. 

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  • Besides money, how else do you help?

    Wefunder created the XX to help founders get off the ground and succeed, by immersing them in a community of other founders.  XX is now a separate company, but all Wefunder alumni are members who get:

    • A Lead Investor who will help when asked
    • Access to an online community of other founders and mentors
    • Ability to request office hours with XX mentors
    • Invites to fire-side chats and dinners (on Zoom and in SF)
    • Help with fundraising after Wefunder
    • Invites to S'more Club & Wefunder Workaway
    • Review of Y Combinator applications 

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  • What's the downside of using Wefunder?

    The main downside of using Wefunder is that the law requires that you disclose your financials to the public.  If you are not comfortable doing this, you can't raise money on Wefunder.  

    Otherwise, most of the other potential downsides have been solved:

    • One entity on your cap table 
    • You choose a prestigious Lead Investor to direct the vote of all shares
    • Startups first funded by Wefunder have since raised over $2.2 billion from VCs
    • Accept unlimited unaccredited investors with no concerns about going public due to the 12(g) threshold
    • Only one annual report required that we can help you fill out in an hour.  If you don't file your annual report, the penalty is you can't raise again using Regulation Crowdfunding until you file it.  However, you can raise money under Reg D from Venture Capitalists without filing your annual report.  

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Basics

  • Can a non-U.S. company fundraise on Wefunder?

    No. Unfortunately, we can only accept companies in the United States.

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  • Is my company a good fit for Wefunder?

    We've funded everything from coffee ships to flying cars.  Companies that fit one of these categories often raise money successfully:

    • Do you have a strong community of friends, supporters, fans, or customers? Most companies bring in ~50% of their investors. 
    • Are you doing something really cool that no one has ever done before? Investors get excited about being part of something ambitious.
    • Does your product directly improve people's lives? People like to invest in things that do good in the world. 
    • Do you have at least one investor investing on the same terms?  
    • Do you have some traction?  Investors like proof you can execute.

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  • What kind of businesses can fundraise?

    We accept nearly any type of company, be it a brick-and-mortar restaurant or a high-tech software startup. However, we do not fund marijuana, porn, gambling, banking, or investing companies. 

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  • Am I ready to fundraise on Wefunder?

    Before raising from the public, we recommend that you reach out to some potential investors you already know, and get them to make a commitment. Why would a stranger invest in you if the people who know you best won't?   

    We made this easy to do.  After you create a profile on Wefunder, you can use our software to individually invite people you already know to make a non-binding, refundable commitment to invest in your company.  We'll hold their commitment in an escrow account.  Since it's refundable anytime, no sale of a security has occurred.  

    It's important that you invite only people you have a pre-existing relationship with, or you are violating the law. For this use case, Wefunder Inc. only supports Regulation D, Rule 506(b), which prohibits advertising.

    If you can raise $10,000 or more from people you already know, it is much more likely you can raise money on Wefunder successfully.

    If you can raise $10,000 or more, you have three options.

    1. Decide to close a Regulation D round. We'll verify that all investors who made a commitment are accredited investors. Only accredited investors will sign an investment contract and execute an investment contract.1 We charge a flat $2,000 per offering.

    2. Start a Regulation Crowdfunding round. If you can raise $10,000 in commitments, a dedicated account manager will help you file your Form C. After the Form C is filed, you can advertise to the public and accept funds from an unlimited number of unaccredited investors. We'll invite all the investors who made a commitment to invest in your company under Regulation Crowdfunding, and waive all fees for these investors.

    3. Refund the non-binding commitments. There are no fees if you decide not to go through with an offering. All potential investors will receive a refund. (Wefunder will also automatically refund commitments that are 30 days old if no decision is made.)

    1. It's legal to accept up to 35 unaccredited investors under Regulation D, Rule 506(b).  However, there are prohibitive and costly state laws that vary in all 50 states, which make it very rarely a good idea to do.  Wefunder Inc. will only close a Regulation D round with unaccredited investors if a letter is provided from your law firm that attests that state laws have been followed.  Otherwise, you must file for a Regulation Crowdfunding round. 

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  • Let's do this! How do I start fundraising on Wefunder?

    That's awesome! We're excited to help you raise money.  Get started.

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  • Can I use Wefunder if I'm not fundraising?

    Yes!  You can create a profile for your company and collect followers who care about your mission.

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  • How long will it take until my fundraise is live?

    It'll take a couple of weeks for us to get your compliance and accounting in order.  We can help you fill out almost all of the compliance in about a day.  However, the bottleneck is usually accounting.  The law requires that you disclose two years of financials in GAAP format.  We will introduce you to accountants who can help with that, but it generally takes 1-2 weeks for them to do it.  

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  • What do you charge?

    It's free to create a company profile on Wefunder.

    Wefunder charges 7.5% of the total fundraise, only if successful.  For instance, if a company raises $100,000, we charge $7,500 upon close.  There are no other fees. If you find a better price, we will match it.

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Lead Investors

  • What's the TLDR?

    Wefunder has partnered with XX to help make Regulation Crowdfunding much better for founders.

    1. One Line on Cap Table. When you raise on Wefunder, your cap table only has one entry: XX Investments LLC.

    2. Wefunder investors never directly hold your shares. XX Investments LLC is an SEC-registered transfer agent that serves as a custodian.  The custodian holds all of the securities in "street name" on behalf of your investors.This means your investors do not actually possess any shares, convertible notes, or SAFEs in your company. Instead, the custodian holds them on behalf of your investors. The custodian signs any documents on their behalf, as directed by your Lead Investor.

    3. Your Lead Investor is the only signature you need. To raise on Wefunder, you must choose a Lead Investor who invests on the same terms. If you don't already have a Lead Investor, we can introduce you to an XX Partner.  Your Lead Investor is the only signature you need to authorize corporate actions like converting a SAFE or note, initiating a follow-on financing, or getting acquired.

    4. XX Partners Are Ready to Help.  In addition to your lead investor, XX will help your company grow. Your Lead Investor and XX are compensated by Wefunder investors to help your company succeed. The XX receives 10% of any profits that Wefunder investors earn on their investment (such as when you get acquired or IPO), and shares it with those help.

    5. It's the same outcome as an SPV and a Syndicate Lead. From the standpoint of startup founders, this works like an SPV and Syndicate Lead like on AngelList, except the legal structure is not a fund. When using Wefunder, your company will have one line on your cap table, a single Lead Investor you choose to sign any corporate documents, and a network of mentors you can call upon for help.

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  • What is a cap table?

    A "cap table" is startup jargon for "capitalization table".  This keeps track of exactly who owns equity in your company - for instance, each founder, employee, and investor.  

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  • Are all Wefunder investors one line on my cap table?

    Yes! All investors on Wefunder are treated as one shareholder: XX Investments LLC.

    Even if you raise funding from 2,000 investors on Wefunder, only XX Investments  LLC - a SEC-registered transfer agent  - will appear on your cap table. 

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  • If I raise on Wefunder, what name will appear on my cap table?

    XX Investments LLC will be the single line on your cap table, representing all investors on Wefunder.  

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  • What is XX Investments LLC?

    XX Investments LLC is a SEC-registered transfer agent that also acts as a custodian on behalf of your investors for all securities sold on Wefunder, so your company has only one entity on the cap table.

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  • What is a Custodian?

    A Custodian is an entity (such as a broker-dealer, bank, or transfer agent) that holds any securities you sell on behalf of your investors (who are the "beneficial owners" of the securities).  

    This means your investors do not actually possess legal ownership of any shares, convertible notes, or SAFEs in your company. Instead, the custodian is the legal owner on behalf of your investors. The custodian also votes these securities and signs any documents on their behalf, following the direction of your Lead Investor.

    The custodian (XX Investments LLC) is the one entity on your cap table, because it is the legal owner of all the securities.  The finance lingo is that the custodian holds these securities in "street name" on behalf of the "beneficial owners".  

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  • Do I still use Carta or another transfer agent?

    Yes!  The custodian only holds investments offered on Wefunder. You should still use Carta or captable.io or other software to manage the rest of your cap table - such as your founders, employees, or non-Wefunder investors.

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  • Who signs any corporate documents?

    XX Investments LLC signs corporate documents on behalf of your investors at the direction of your Lead Investor - a single individual you choose who can make decisions on behalf of your Wefunder investors on SAFE conversions, follow-on financing authorizations, acquisitions, or any other corporate action.

    XX Investments must follow the direction of the Lead Investor in all circumstances.

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  • What does a Lead Investor do?

    If you are familiar with an AngelList syndicate lead, the Lead Investor acts similarly.

    As your company grows, your lawyers will eventually ask you to get signatures from every investor on your cap table, even if you don't explicitly need their permission.  

    These signatures will authorize corporate actions like expanding a stock option pool, converting a SAFE or note, initiating a follow-on financing, or getting acquired.  

    The Lead Investor is the single person who makes decisions with respect to these documents on behalf of your investors on Wefunder and then directs the custodian to take a specific action, such as directing the signing of the documents.  

    The Lead Investor is also compensated by your investors to maximize the value of your securities and, by extension, to help your company succeed.  

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  • Who chooses the Lead Investor?

    You do, with our approval. Before you close a fundraise on Wefunder, we must mutually agree on who the Lead Investor is.  

    Your investors on Wefunder must know who the Lead Investor is before they finalize their investment and are no longer eligible for a refund.  

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  • Who is qualified to be a Lead Investor?

    We will almost always approve a Lead Investor that invests $20,000 or more on the same terms as other Wefunder investors, provided there is no conflict of interest or family ties. We will also always approve an XX team member.

    If you recommend someone to be a Lead Investor, we will approve after a 10 minute interview based on if:

    • They invest at least $1,000 in your company on the same terms as other Wefunder investors
    • They are not a family member
    • They are founder-friendly (as the best investors in Silicon Valley are), but they also understand their fiduciary duty to the investors.
    • They have enough basic sophistication to understand how venture financing works
    • They are willing to provide a quote (text or video) to Wefunder investors about why they have agreed to be the Lead Investor

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  • What if I don't yet have a Lead Investor?

    We will help introduce you to one.  

    We may find someone suitable among the Wefunder investors that back your company during your campaign. 

    We will also ask if any XX Partner wishes to serve as your lead investor.  In this case, they will be interviewing you as much as you are interviewing them.

    If we can't find a single person that is willing to be your Lead Investor, then you are not eligible to raise money on Wefunder.  

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  • How should I go about choosing a Lead Investor?

    If you have multiple options for a Lead Investor, that's great!  Here's how we recommend choosing, in this order of priority:

    • Are they smart and do they get your business?  You want someone who groks your long-term vision. 
    • Do you think they can offer good advice?  When times get tough, it's good to be able to call on someone who has been there and done that.  We think former founders often make the best seed investors.  
    • Do you like them personally?  Life is better if you follow the "no asshole" rule.
    • Do they have an audience on Wefunder?  We just launched this, so it's early yet.  But as time goes on, we expect certain Lead Investors to be followed by a large audience, and to invest when they do.  You'll raise money faster if you pick a prestigious lead.
    • How strong of an endorsement will they give? This will appear on your Wefunder profile. You want passion over lukewarm. 

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  • How is a Lead Investor compensated?

    The Lead Investor is compensated by XX to help your company succeed. Investors on Wefunder pay 10% of any of their profits on their investment to XX.

    XX then shares these profits with the Lead Investor and any other partners at the XX who may help your company with office hours, connections, and advice. Typically, a Lead Investor receives 50% of the profits received by the XX (equivalent to a 5% “carried interest” stake).

    The Lead Investor only makes money if your company increases in value and investors on Wefunder get a return. This compensation works like carried interest, except it is taxed like ordinary income. Lead Investors are incentivized to help your company succeed.

    Your Lead Investor may also earn 5% carried interest from any SPVs we may form to invest in your company during follow-on financings.  

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  • How much is a Lead Investor compensated?

    Wefunder Investors compensate the Lead Investor - not you.

    A Lead Investor earns 5% of all the profits made by investors on Wefunder after an acquisition or IPO (this is like a 5% carried interest stake, but taxed as ordinary income).

    What does 5% mean in terms of money? Let’s pretend your startup is the next Uber and you used Wefunder to raise your $1M for the seed round.  That $1M would be worth $5 billion at IPO (based on Uber's return multiple from seed through IPO).  The Lead Investor would earn $249,950,000 - 5% of all profits from Wefunder investors.  

    The Lead Investor can also earn 5% carried interest in any follow-on financing rounds that may or may not be offered.

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  • How do SPV Rights work?

    When you raise follow-on financing (such as your Series B), SPV Rights will allow an SPV advised by Wefunder Advisors to invest up to the amount you raised through your Regulation CF offerings (at the valuation and terms at that round that the VC's negotiated).

    The SPV will be a Venture Capital Fund specifically meant to only invest in your company.  Only eligible accredited investors may invest in it, including eligible accredited investors who invested in your prior Regulation CF’s offerings.  

    The Lead Investor will act as portfolio manager of the SPV on behalf of Wefunder Advisors and can earn an additional 5% carried interest on the SPV, providing an additional incentive for them to help your company grow.

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  • What contract does a Lead Investor sign?

    A Lead Investor is an independent contractor, hired by XX.  

    XX earns 10% of profits of the investment upon acquisition or IPO, and then shares 50% of those profits with the Lead Investor.  

    You can send a potential Lead Investor the Lead Investor Agreement to review.

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  • What kind of help can I expect from the XX Mentors?

    Besides your Lead Investor, a pool of XX partners are also available to help.

    In the spirit of under-promising and over-delivering, you should not expect help from any particular XX partner who is not your Lead Investor.  These are all busy people - many of which are actively running their own companies - who are making different time commitments.  

    However, these are all experienced founders who love helping other founders. If you make a reasonable ask every now and then, there is a good chance someone will help.  If you form a real human connection with one, they will likely help even more. 

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  • Does XX act like a Single-Purpose-Vehicle (SPV)?

    From the standpoint of a founder, the services provided by XX work the same as a SPV. Exactly like if you had raised from an SPV on a site like AngelList, there is only one entity on your cap table, and there is only one person who needs to sign any documents.

    However, legally speaking, an SPV is an investment fund, and XX is comprised of two entities that together provides the services of an SEC-registered transfer agent, a custodian, and a Lead Investor.  

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  • How is XX and a custodian better than the Crowd SAFE?

    The Crowd SAFE and most other crowdfunding securities used in Regulation Crowdfunding from 2016-2019 are worse for both founders and investors then using XX. 

    From the standpoint of founders, the Crowd SAFE is not one line on your cap table:

    • With a Crowd SAFE, you could choose to aggregate all investors in one line on Carta. However,  you are in charge of keeping track of this spreadsheet of who your investors are. That spreadsheet can be called a cap table. With XX Investments, as a SEC-registered Transfer Agent and custodian, XX Investments simplifies the cap table and manages the record of beneficial owners.   

    • With a Crowd SAFE, all of your investors - even if they have not converted their SAFE to own equity - still count towards the 12(g) threshold. This means if you have more than 500 unaccredited investors and more than $25 million in assets, you are subject to SEC public company disclosure and reporting obligations.  With XX, - as with a broker-dealer that hold securities in “street name” – XX Investments will hold Wefunder investors’ securities in “street name” and will be your only record owner for the purposes of 12(g). 

    • With a Crowd SAFE, you are only postponing the problem of getting signatures from every single investor.  One day, you might want to take an acquisition offer.  The lawyers - in order to prevent your investors suing you for of a breach of fiduciary duty - will ask you to get a signature from all of your SAFE-holders, even if they don't have equity. With XX, you only need one signature. 

    • With a Crowd SAFE, there is no concept of a Lead Investor who is financially incentivized to help you. With  XX , there is a Lead Investor - who you choose - who is incentivized to help your company succeed, along with other XX mentors who you can book office hours with.

    • With a Crowd SAFE, you will raise less money, because experienced and larger-dollar investors will not accept the Crowd SAFE terms.  With XX, you can use an investment contract that professional investors use - such as the Y Combinator SAFE.

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  • How much does XX cost?

    XX Investments LLC charges companies $10 per investor per year, capped at $1,000 per year.  

    If you raise on Wefunder, we will pay XX Investments LLC for the first three years of transfer agent services on your behalf.  In the fourth year, your company will be responsible for annual payments, of no more than $1000 per year.  

    If the annual fee is not paid to XX Investments LLC, the transfer agent may discontinue services to your company.

    The services provided by XX Team, your Lead Investor, and any XX mentors are paid for by your Wefunder investors, who also benefit from these services which are intended to maximize the value of your securities.

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  • Do I have to use a Custodian to raise on Wefunder?

    If you are raising with equity, practically speaking -  we require a Custodian and the XX team.  However, we would make an exception for any company that would prefer to offer an investment contract a professional investor would use (for instance, a standard YC SAFE instead of a Crowd SAFE) directly to every single investor on Wefunder who invests as little as $100, with voting rights, pro-rata rights, information rights, and no proxies. 

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  • Can I pick some investors to invest directly in my company?

    Yes.  If you'd prefer that your grandmother - or some angel investor you respect - be directly on your cap table, you can send them a special link that will bypass the Custodian and the XX.  This means these investors will hold their securities directly, and you will need to obtain their signatures to authorize corporate actions like follow-on financings.

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  • Can I replace my Lead Investor? What if they quit?

    You can't fire them. The Lead Investor is meant to advocate for investors. You should choose your Lead Investor carefully - pick someone you like working with.  

    However, if you have evidence of bad behavior that is against the best interests of your company, Wefunder can intervene in extraordinary circumstances. We can replace your Lead Investor by organizing a vote of all Wefunder Investors. We'd lay out all of the facts and let them decide.

    (We'd also replace your Lead Investor by organizing a similar investor vote if the Lead Investor quits or was incapacitated).

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  • Do I need to give up control of my company to the Lead Investor?

    While the Lead Investor should have normal rights that professional angel investors enjoy, we don't advocate that founders lose control of their companies.  

    We believe the best investments come from founders who remain in control, driven by a long-term view of the impact they want to make.  It is now common for founders to remain in voting control of their companies at the Series A, so they can't be fired.

    However, to use Wefunder, founders must now offer investment contracts that a normal angel investor in Silicon Valley would sign.

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  • What is the relationship between XX and Wefunder?

    XX Team and XX Investments LLC are separate companies run by former Wefunder team members. Our alumni are awesome.

    Wefunder Inc, Wefunder Portal LLC, and Wefunder Advisors LLC do not have any equity stake in the XX companies. Our officers, directors, and associated persons also have no equity.

    Since they are different companies, Wefunder receives no fees from XX Investments related to its transfer agent and custodian activities. And Wefunder also receives no performance based compensation from the XX Team. 

    Wefunder's motivation is to help create an ecosystem of other companies that make equity crowdfunding work better for both founders and investors.

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  • Do you have some legalese I can send my lawyer?

    Sure! Morrison & Foerster LLP (MoFo) set this up. You can send your law firm the MoFo Memo which turns our layperson explanation into appropriately dense legalese.

    You also can review the custodian agreementstartup agreement, lead investor agreement, and the lead independent contractor agreement.

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Profiles

  • How do I start a profile?

    Visit the Raise Money page, put in your company name, then hit that green button.

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  • How much does it cost to create a profile?

    It's free.

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  • How do I build a good profile?

    We wrote a guide for that!

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  • Can I include projections in the profile?

    When building your profile, avoid future promises and forward-looking numbers like: "We plan to make $5 million next year." Instead try: "We hope to continue growing by doing x, y, and z." If you decide to fundraise on Wefunder, you are legally liable that every statement on your profile is 100% true, and that you have not omitted any important information investors should know about (for example, a lawsuit). Read the Legal Primer for more information.

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  • Can I share my profile before filing with the SEC?

    If you are not fundraising, you can share your profile publicly.

    However, until your fundraise is enabled on Wefunder and your Form C is filed, it is not legal to publicly say that you are fundraising now, or have a concrete plan to do so in the future.  You can ask people to "follow" your profile to show their support, but are not allowed to say things like: "We are going to fundraise on May 16th" or "as soon as we file with the SEC, we'll be raising at a $4 million valuation."

    However, if you invite people you already know and have a relationship with (using a special link), Wefunder can help you collect money under Regulation D.  This will help you see if your friends and existing network are willing to invest in you before you start a Regulation Crowdfunding Campaign.

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  • How do I delete my profile?

    Deleting your profile will delete all traces of your company on Wefunder, including any disclosures you've filled out. If you're sure you want to delete your company, navigate to the profile editor and look under the "Misc" tab. 

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Investment Terms

  • Can I use any investment contract on Wefunder?

    Yes.  While we have template SAFEs, convertible notes, revenue shares, and loans, we can support any investment contract your law firm provides.

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  • How do I choose the contract and set the terms?

    Your investment contract is the most important part of your fundraise.  If you choose the wrong contract, or have bad terms, no one will invest, and you will have wasted a lot of time.  It's like trying to sell a dozen eggs for $100. People are not stupid. 

    We recommend using Wefunder after a Lead Investor has invested $25,000+.  This makes it far more likely you chose the right investment terms.  

    That said, we know in some parts of the country, there are just not many angel investors who invest in early stage companies. So we'll try to help figure out what are good terms if that's the case.

    The right terms is very specific to your company, but here's some general advice for two kinds of companies that are more unlikely to have prior investors:

    • For an early stage technology startup that has as a reasonable chance of getting funded by venture capitalists, we recommend either a convertible note or a SAFE.  Valuation caps for early-stage technology startups with no prior investors can range from $2 million to $5 million.  It's possible for the very best early-stage startup (such as a Y Combinator startup) to raise at closer to a $12 million valuation cap.  However, if that's the case, then you will be in a position to have at least one prior professional investor who set the terms.  

    • For an early stage brick and mortar with expected cash flow, we recommend a revenue share contract.  We recommend offering at least a 2X return multiple.  Then, make a spreadsheet of all your projected cash flows for the coming 6 years.  We recommend choosing the percent of revenue to share that would investors a predicted 10%+ annual return.  

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  • What's the difference between debt and equity?

    The biggest difference is the risk & reward.  Debt is slightly less risky for investors, but there is also much less upside. Equity is riskier, but potentially much more lucrative.

    • Debt. Investors lend the company money today in exchange for more money tomorrow. Investors are not shareholders, although they do have a right to company assets if the company goes under. We have two template debt contracts: Simple Loan and Revenue Share.

    • Equity. Investors buy shares or units in the company in exchange for ownership. Investors earn a return if the company is acquired, goes public on the stock market, or pays dividends. We offer two template equity contracts, a SAFE and a Convertible note.  There are other ways to structure an equity deal; if the SAFE doesn't fit your needs, your lawyer can draft a custom contract for you. Some examples include Preferred Stock or LLC Ownership Interests.

    While there are exceptions, we've seen equity offerings perform better on Wefunder.  About 90% of our investments are in equity agreements.  

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  • Who should use a SAFE? How does it work?

    Created by Y Combinator, a SAFE (Simple Agreement for Future Equity) grants an investor the right to purchase equity at a future date. 

    A SAFE is best used for startups in Silicon Valley that intend to raise venture capital eventually, and have a chance to be acquired or file for an IPO.  It should not be used by lifestyle companies that do not intend to raise follow-on financing.  

    Unlike a convertible note, a SAFE is not a loan. As such, it does not accrue interest or have a maturity date. This makes things simpler and negates much of the need to amend the agreement in the future. For example, it helps startups not waste time extending maturity dates or revising interest rates, if a Series A financing takes longer than you first expect. It also better aligns with the intention of most equity investors, who never intended to be lenders.

    Wefunder offers the Y Combinator SAFEs as part of our default contracts you can use out of the box, modified only to allow unaccredited investors.  We also created versions for an LLC.

    The following terms are customizable:

    • Valuation Cap. The Valuation Cap is the most important term. It entitles investors to equity priced at the lower of the valuation cap or the pre-money valuation in the subsequent financing. Typical Valuation Caps for early-stage startups currently range from $4 million to $20 million.
    • Discount Rate. The default is 0%. This term is now rarely used and not recommended unless a major investor asks for it. It gives investors a discount on the price of stock, when the pre-money valuation is less than your valuation cap. Typical discounts range from 0% to 10%.
    • Governing Law. We default to Delaware, but you may change to any state.
    • Most Favored Nation (MFN) provision.  The default is false.  However, if you add this provision, investors will match the terms of any better terms you may offer other non-Wefunder investors.

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  • Who should use a Convertible Note? How does it work?

    A convertible note is a loan that converts into equity after the company has a bit more operating history under its belt and there is more information available to establish a fair price.

    Startups in Silicon Valley typically use a SAFE.  However, a convertible note might be a better option for startups located in other areas of the country with more traditional investors.  

    If you raise on Wefunder, you can upload your own convertible note, or use our convertible note created by CooleyGo.  

    Our CooleyGo Convertible Note chose the options that were most founder-friendly:

    • When calculating the denominator for the converting securities, the option pool is not included (this matches the YC SAFE form)
    • If a qualified financing has not closed by maturity date, there is no auto-convert provision
    • Qualified financing does not  need to convert on/prior Maturity Date;
    • Notes may convert into a shadow series;
    • Noteholders do not  receive premium in connection with a change in control transactions; and
    • Noteholders do not have a right to convert to common.


    The following terms are customizable:

    • Valuation Cap. The Valuation Cap is the most important term. It entitles investors to equity priced at the lower of the valuation cap or the pre-money valuation in the subsequent financing. Typical Valuation Caps for early-stage startups currently range from $4 million to $20 million.
    • Discount Rate. The default is 0%. This term gives investors a discount on the price of stock, when the pre-money valuation is less than your valuation cap. Typical discounts range from 0% to 10%.
    • Interest Rate. The default is 3%.
    • Maturity Date. The date the note is due.
    • Governing Law. We default to Delaware, but you may change to any state.
    • Most Favored Nation (MFN) provision.  The default is false.  However, if you add this provision, investors will match the terms of any better terms you may offer other non-Wefunder investors.

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  • Who should use a Revenue Share?

    A revenue share is best for early stage brick and mortar businesses making cash.  This is a promissory note that is paid back from a share of the revenues of the business. It's typically more exciting for investors than a standard loan. Since the payments vary based on revenues, it can also be safer for a company with less predictable cash flows.

    Here's how it looks on the profile: 

    To preview a sample, download the Revenue Loan Agreement.  By default, the following terms are customizable in our template:

    • Gross or Net Revenues. Net revenues exclude returns or shipping costs.
    • Revenue Percentage. This is the percentage of revenue that is shared.
    • Repayment Amount. Typically 1.5-3.0X, this is the maximum amount you will be paid back.
    • Quarterly or Annual Disbursement. Companies choose to make annual or quarterly payments.
    • Defer Payments. By default, every company can miss one payment without being in default.
    • Secured. Some loans may be secured with all property of the business.

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  • What is a Disaster Loan?

    Wefunder developed Disaster Loans for the coronavirus crisis.  The intention was to help save small businesses by allowing their customers to give a very low interest loan, with flexible repayment options based on revenues.  

    The Disaster Loan is best for small businesses with a passionate customer base who wants to support the companies they love during a crisis.

    Like a mortgage, a disaster loan has an interest rate.  However, unlike a mortgage, there is no fixed repayment schedule - the time it takes to pay back is an unknown, as it is based on the revenues of the business.    

    To preview a sample, download the Revenue Loan Agreement.  By default, the following terms are customizable in our template:

    • Interest rate.  The annual return investors will receive by the time the loan is paid back.
    • % of Revenue Shared. This is the percentage of revenue that is shared until the loan is paid back.

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  • Can I do a priced round on Wefunder?

    Yes!  However, due to the complexity of priced rounds, we don't have a default contract out of the box.  We believe it's more wise for a founder to work with a law firm on these documents.  We can upload into our system any custom agreements your law firm provides.  

    For an earlier-stage company, we typically recommend a SAFE or a convertible note.  Besides being a dramatically simpler agreement, it allows the founder to do high-resolution fundraising.  

    However, if you have a major investor who can anchor a round (typically investing $250,000 or more) and negotiate the complex terms, doing priced equity might be a good option.  Your law firm should provide these documents.  However, if you'd like to save money, you can send them the CooleyGo Series Seed Generator.  

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Form C

  • What is a Form C?

    A Form C is the compliance document you must file with the SEC in order to raise money on Wefunder with Regulation Crowdfunding.

    Wefunder has an online tool that helps you create a draft Form C fast and easy.  Before you launch, we'll also help you fill it out and do a compliance review.  

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  • What legal issues do I need to be aware of?

    You should carefully read the Founder Legal Primer.

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  • What's the minimum amount I can raise?

    $50,000.

    In a few cases, for idea-stage founders raising from their friends and family, we may lower it to $20,000.  

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  • What's the maximum I can raise?

    With Regulation Crowdfunding, you can raise $1,070,000 per year. 

    You can, however, raise an unlimited amount under Regulation D from accredited investors. Wefunder will spin up a free Regulation D campaign for you if you cross $1,070,000, so you can raise more money.

    For those who raise $1 million with Regulation Crowdfunding on Wefunder, we will host a Regulation A+ campaign for free. With Regulation A+, you can raise up to $50 million per year.

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  • How should I set my fundraising target?

    You must hit your minimum funding goal for the campaign to be successful. 

    We recommend setting the funding goal to the lowest amount of money you can make use of, then specifying how you'd use any extra cash. For instance, if it costs $50,000 to purchase a new budget-widget-maker, but you could use $500,000 for a super-awesome-widget maker, set $50,000 as your funding target.  Then indicate what you'd do with the $500,000.

    We also require that your minimum goal be enough to give your business at least 6 months of runway. 

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  • How do I write Risks?

    You should include every risk that you can think of that is specific to your business.  

    Do not think in terms of “these risks are going to scare away investors!” because painting a rosy (but incomplete and inaccurate) picture for your investors is bad for every party involved, including yourself. 

    Investors respect transparency. Writing down the risks not only helps investors make a sound decision; it also protects you as a founder.

    1. Disclose All Risks. Disclose everything you can think of that is specific to your company and industry.
    2. Be SpecificThe law requires that these risks be specific to your business, not generic boilerplate. 
    3. Write At Least SixOur system requires a minimum of six risks along with a few sentences of description for each. But we strongly recommend erring on the side of caution — even if you’re not sure, add it. 

    It's hard to think up risks out of thin air. This is why we've drafted a huge document trying to capture all the risks that can be relevant. It's a beast of a document, but definitely useful to dig through.  

    You ready? Open if you dare.

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  • Financial Requirements: Regulation Crowdfunding

    The law requires that you disclose up to two years of financials in GAAP (generally accepted accounting principles) format. 

    If you are raising less than $107,000 you must provide GAAP financials as explained below, which include an explanation of your taxes in the notes section (note: full tax statements will not be required.) These do not have to be reviewed by an independent CPA.

    If you are raising more than $107,000, you will also need a CPA Review Statement.

    We can introduce you to CPAs that can do this work for you quickly and cheaply. 

    However, if you are using your own CPA, please provide them with this information:

    1. GAAP Financials must include:

    • Balance Sheet

    • Income Statement

    • Statement of Cash Flows

    • Statement of Stockholder's Equity

    • Foot Notes

    Notes are typically 2-5 pages and describe your major accounting policies. Here's an example of GAAP financials.

    Two years of financials are required.  

    • Incorporated within 120 days of the fundraise: Need balance sheet as of a date in that period, which may be the inception date

    • Incorporated 2019: Need GAAP compliant 2019 financials (from inception)

    • Incorporated 2018: Need GAAP compliant 2018 financials (from inception) 

    • Incorporated 2017: Need GAAP compliant 2017 and 2018 financials

    • Incorporated earlier: Need GAAP compliant 2017 and 2018 financials

    • If your fiscal year is not 12/31, please provide year end financials. Your financial statements cannot be more than 16 months old.

    Even if you are pre-revenue and have $0s all the way through- these statements are still required. 

    NOTE: PLEASE DO NOT JUST SUBMIT YOUR TAX STATEMENTS, OR QUICK BOOKS. THEY MUST BE IN THE CORRECT FORMAT TO BE ACCEPTED BY THE SEC. 

    Is this your second Regulation Crowdfunding campaign?

    If yes, and you are raising more than $535,000, you will need audited financials. These will have to be completed by a CPA who is qualified to complete audits. 

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Promotion

  • Does Wefunder curate the startups on its site?

    No. It's not our role to choose what is worthy of investment. We screen companies for signs of fraud, but we do not otherwise pass judgment.

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  • What is the default sorting of companies on Wefunder?

    Offerings are sorted by objective metrics including page views, press mentions, Twitter followers, Facebook likes, investment velocity, number of Wefunder followers, endorsements, ratings by users, and/or profile completeness. This algorithm CANNOT make good investment decisions. That's what some humans can do.

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  • Why isn't my live fundraise showing up on the Explore page?

    Companies are visible on the Explore page once they've raised $5,000. 

    Think about it from the investor's perspective: you're looking for investment opportunities and find a cool-looking company. But, there's a big fat $0 on the profile – they haven't raised any money yet. Would you invest? Or would you wait until a person who actually knows the founder invests first?

    So, hop on the phone, tap into your network, and raise $5,000. Once you do, you'll automatically show up on the Explore page with some traction to show potential investors. 

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  • Can I pay to be featured more highly?

    No. That would be unethical. It's also illegal. Every company that has ever asked us this question has looked super scammy.

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  • Am I allowed to promote or advertise my fundraise?

    You are allowed to promote if you use Regulation Crowdfunding, Regulation D Rule 506(c), or Regulation A+. 

    You are not allowed to advertise if you use Regulation D, Rule 506(b).

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  • What legal restrictions are there on advertising?

    For Regulation Crowdfunding, you are only allowed to promote after your Form C is filed with the SEC. Oh, and never say the SEC has "approved" your offering. The SEC doesn't like that.

    You are allowed to advertise any way you like - email, Facebook, shouting off the rooftops – whatever. However, all your advertisements must be limited to factual information (i.e. avoid saying you have the "best" cupcake shop in the world). Also, by law, all of your advertisements must include a link to your Wefunder profile. 

    If you haven't filed your Form C, you can ask people to "follow" your profile to show their support, but you cannot say something like: "We are going to fundraise on May 16th." Or: "As soon as we file with the SEC, we'll be raising at a $4 million valuation."

    Check out the Legal Primer for more info.

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  • What can I say (or not say) in "real life" to the public?

    For Regulation Crowdfunding, you are allowed to talk to the public about the facts of your business or products if you do not mention the terms of your fundraise.

    The SEC's final rules on Regulation Crowdfunding are clear on this point:

    In addition, the final rules do not restrict an issuer’s ability to communicate other information that might occur in the ordinary course of its operations and that does not refer to the terms of the offering.

    If a stranger walks into your store and chats you up about investing, feel free to answer their questions about your business. Don't say non-factual things like: "We're the best cupcake shop in the world and we're gonna be HUGE!"

    If they ask about terms of the offering, you must point them to your Wefunder profile, and they can only make an investment through Wefunder. You cannot accept money on their behalf. 

    For "Demo Days," you can mention you are on Wefunder during your presentation if you keep your presentation limited to facts and say nothing about the terms. Most credible demo days – such as those organized by Techstars or Y Combinator – already do not let their participants mention they are selling securities (or the terms of their offering) so as to not be deemed a "general solicitation" of securities that is forbidden for most Regulation D offerings.

    That same rule applies for conferences. You may mention you are on Wefunder if you limit your discussion about your business to facts and do not mention the terms.

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  • How should I set up my marketing strategy?

    The key to a successful fundraise is managing momentum.  The faster the investments come in, the more new investors will want to invest.  Well-managed campaigns raise 30% of their total funding in the first week and 30% in the last week.  

    The most important thing you can do is to plan a big first day.  That "pop" can spark the entire fundraise.  

    Prepare a list of all the people who are love what you are doing.  Do you have any friends?  Ask them to get ready.  Have a mailing list of customers?  Write an authentic personal email to them.  Is this press-worthy?  Don't hire a PR firm – instead write personal emails to reporters who cover similar topics. 

    It's also good to plan to start your fundraise when you know you'll have a bunch news-worthy updates coming out. Expect to sign up a key client soon? That'll be a great update to share with potential investors in week #2.

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  • How do I get mentioned in Wefunder's newsletter?

    Every Thursday morning, we send a newsletter to hundreds of thousands of investors. 

    The law requires that we have "objective standards" for which companies are included in the newsletter. This means we can't include you just because we like you.  Instead, we have a series of inflexible rules:

    1. New Startups.  Those who raised over $20K.

    2. Closing This Week. Those closing their campaigns within 7 days of the newsletter release.

    3. Approaching Goal.  Those 70%+ of the way towards their minimum goal.

    4. Special News.  Those who signed a 50k+ investment or contract.

    5. Top 5 Most Raised.  Those who raised the most in the past 7 days. 

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After You Raise

  • How do I close my campaign?

    After your funding target has been met and at least 21 days have passed, you may initiate the close of your campaign at any time.

    Investors are given a five-day warning prior to closing with one last chance to edit or cancel their investment; after that, their funds are locked in and you'll work closely with our closing team to receive your disbursement. 

    You can read more about closing specifics here

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  • What if my campaign fails?

    Unfortunately, if your campaign fails, you won't be able to run a new campaign on Wefunder unless you can demonstrate that you've reached a significant milestone. This could be customer growth, the addition of new distribution channels, the addition of new products, or more.

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  • Can I extend my funding deadline?

    Yes. We offer a one-time extension with a campaign cap at 6 months.  

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  • Will investors contact me directly?

    No. We don't hand out your email addresses or phone numbers; all communications with investors are handled on your company feed.

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  • What updates will investors expect?

    Unlike public companies, updates are not required by law, but it's nice to let your investors know about your growth, sales, new partnerships, hires, and the other things going on at the company.

    Not all of these updates need to be long or serious – even just posting a few photos or paragraphs detailing the new cool thing your company is doing will show investors that you're using their money to help move your company along.  The better they feel, the more likely they are to help when they can.

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  • Do I need to file an annual report?

    If you complete a successful Regulation Crowdfunding offering, the law requires that you file an annual report in a year to update the SEC and your investors. We made this easy for you to do. 

    The annual report is due no later than 120 days after the end of your fiscal year. When the time comes, we’ll send you a reminder email, and link to a tool that will help you submit the report fast and easy. 

    If you neglect to file an annual report, you won’t be able to raise future Regulation Crowdfunding rounds until you file the annual report. However, you may still raise funds from accredited investors only using Regulation D.

    Different companies have different reporting requirements: 

    • If your company was dissolved, if you’ve liquidated all your shares, or if you’ve repurchased all issued shares, you do not need to file an annual report.

    • If you have fewer than 300 shareholders, you only need to file one annual report. (As all Wefunder investors count as one shareholder, this likely means you only need to file one annual report, unless you have a lot of outside shareholders).

    • If you have more than 300 shareholders but less than $10 million in assets, you need to file three annual reports before you are exempt.

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  • Is it free to use Wefunder after my fundraise?

    Yes. It's free to continue to use our platform to communicate with your investors.

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