WeFund SPV for Investors
- What is a WeFund?
- Why do startups use WeFunds?
- Who manages the WeFund?
- Do I have voting or information rights?
- How do you decide who gets to invest?
- What are the fees for a WeFund?
- How does Wefunder make money on a WeFund?
- When do we decide to sell securities?
- How do I earn a return on a Wefund?
- Subscription Agreement
A few startups on Wefunder can raise funds from accredited investors with a WeFund under Regulation D. If this is the case, it will be clearly indicated on the invest page; otherwise, you are making a direct investment. A WeFund SPV is a series of an LLC that exists for the sole purpose of investing in one specific startup. All the investors pool their capital in the WeFund, which then invests as one entity in the startup. The startup only has one direct investor -- the WeFund. If you invest through a WeFund, you will hold an interest in the fund instead of holding the company's securities directly.
Startups use a WeFund SPV to ensure their follow-on financing won't be at risk. Venture capitalists are uncomfortable when startups have many small investors (they don't like collecting thousands of signatures). With a WeFund, all those smaller investors are represented by one large entity.
WeFunds are managed by our fully-owned affiliate: Wefunder Advisors, an investment advisor.
No. All voting and information rights are proxied to the Moderator of the WeFund, Wefunder Advisors, which will act on your behalf.
Wefunder determines, at our sole discretion, which investors to accept. For instance, we may decline an investor who works for a competitor to the startup. Sometimes "hot deals" are oversubscribed; in that event, Wefunder will give priority to investors who we feel can most help the company. Due to the 99 investor limit in a WeFund, we may also give priority to higher investment amounts.
Wefunder is not compensated with any management fees or transaction-based revenue. There is a small administrative fee charged to investors that covers all the costs of operating the WeFund over the entire life of the entity, including regulatory filings, accounting, and K1 distribution. These fees are held within the WeFund to operate the fund to maturity without any further contributions from investors.
We charge Carried Interest, which earns us a share of the profits upon a successful investment exit. Depending on the company, we earn 5% to 20% of the profits of the WeFund. This is always clearly disclosed.
The Moderator of the WeFund, Wefunder Advisors, determines at its sole discretion when to sell the securities and distribute returns to investors. Usually, we will hold the investment until the startup is acquired or has an IPO. In some circumstances, we may decide to sell the securities sooner if we believe that will maximize returns. We will always act in the interests of the investors in the WeFund. Our compensation is directly tied to maximizing the value of the fund.
If you invest through a WeFund, you will hold an interest in the WeFund instead of holding the company's securities directly. We will manage and sell the company's securities on your behalf, and distribute any proceeds to you upon such a sale. Of course, when investing in something as risky as a startup, there may be no return at all.
On Wefunder, a subscription agreement is a contract between you and a WeFund SPV managed by Wefunder Advisors.
Most startups on Wefunder using Regulation D do not allow you to directly invest small amounts in their company. Instead, you are able to invest in a WeFund, which aggregates all the small-dollar investments and invests in the startup as one shareholder. The WeFund holds the underlying security (such as a convertible note, stock, or loan).
When you invest in a Wefund via a subscription agreement, you only have an economic interest - you have no voting or information rights in the startup the fund invests in. You also can't sell any shares in the startup. Wefunder Advisors manage the fund on your behalf and decides when to sell the securities (typically, when the startup is acquired or goes IPO). Only then do you earn a return. This is a very long-term investment. For instance, if you had invested in Facebook in 2004 with a WeFund, you would have had to wait 8 years later until they went public in 2012 to receive a return.
Read the WeFund SPV FAQ.