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Why are my securities held by the XX Custodian?
Using a Custodian increases the quality of startups that use Wefunder while also giving more voting power to investors on Wefunder.
Access to higher-quality investments. With a Custodian, higher-quality startups with other fundraising options are more willing to use Wefunder. Startups use a Custodian to ensure their follow-on financing won't be at risk. Venture capitalists are uncomfortable when startups have many small investors directly on the cap table (they don't like collecting thousands of signatures). With a Custodian, all those smaller investors are represented by one entity on the cap table: XX Investments LLC.
- Concentrate investor voting power into one Lead Investor. Before Custodians, almost no companies that crowdfunded offered voting rights to their investors. Now, all voting rights are held by the Custodian, which must vote as directed by the Lead Investor. The Lead Investor is financially incentivized to fight for the rights of all investors on Wefunder.