
Forget VCs, this accelerator lets you invest directly in startups fighting Covid - johnwaldie
https://wefunder.com/updates/135922
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noneckbeard
As a founder I've raised through crowdfunding multiple times. The experience
is great on both the startup and the investor side, and I love that
crowdfunding lets more startups get off the ground, especially ones that don't
have access to SV money.

But this should really be thought of as "gambling" instead of "investing."
There's very little ability to do due diligence and the companies are usually
so early that it's impossible to know if it's going to work or not. However,
if you have money you're willing to lose it's a lot more rewarding than
spending it at the blackjack table.

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johnwaldie
I agree with this premise regarding equity crowdfunding as it currently stands
in absence of any professional guidance. We at XX have tried to improve this
and mitigate risk by:

1) having a screening committee with deep founder operational experience and
industry insight to identify the companies most likely to be successful.

2) attracted exceptional startups to broaden our applicant pipeline by making
it open to the global community and guaranteed a $50k pre-seed investment.

3) had three month mentoring period where startups were stress tested and
cleared for launch on Wefunder.

It's similar to LPs investing in a VC fund and trusting that the VCs performed
the proper diligence.

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amilner42
It's very high-risk. I guess it's a philosophical question of whether you
think the public deserves the right to take super high risks and invest in
startups (1000x more risky than the public market given there is no secondary
market).

On one hand you'd think the people with the least amount of money are the ones
that need the options to take risks the MOST. To get out of their situation.

On the other hand, will this help them? Will the companies be good enough?
Will they provide returns. Is helping 1% of people escape their situation
worth it for the other 99% that will invest in startups that fail.

Interesting

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johnwaldie
There are four concepts that we are testing to mitigate risk to the general
public:

1) We have a screening committee with deep operational experience (we have 50
founders that ran companies collectively valued close to $4B) to identify the
founders most likely to be successful. We have more operational experience and
industry insight than your general partner at a venture fund.

2) We attracted exceptional startups to broaden our applicant pipeline by
making it open to the global community and guaranteed a $50k pre-seed
investment.

3) A three month period where startups were mentored, stress tested, and
cleared for launch.

4) Finally, as with all investments on Wefunder, company risk and financials
risks are made transparent for the public.

Successful companies often have the greatest value creation at their early
stages. It is unfair to only limit this value creation to "accredited"
millionaires and billionaires. In a world where payday loans and lottery
system prey on the poor, we are trying to create a system of equitable wealth
creation, for everyone.

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anzhelika18
The idea sounds cool, but I want to have more transparency on how you chose
those startups. Do they show a huge potential for future growth? How do their
finances look like? Investing in startups is risky in general, but COVID-19
made it even more harsh. + some of those startups have many competitors in the
industry and I would like to see more what competitive edge your startup
selection has.

~~~
steventey
Took the words right out of my head. Personally, I'd like to see some initial
signs of traction/growth before I make any investments in a startup so unless
XX is able to provide me with that kind of assurance (which can be done
through a very thorough and transparent DD process), I'm not sure if I'll have
the confidence to make an investment, at least not for now.

~~~
nicolasbistolfi
A $100 investment doesn't seem much and it's more like a kudos, but it is an
investment. I agree that more information can help anyone determine better how
to choose between startup A or B.

~~~
steventey
That's a good point, and it reminds me of the saying - don't invest more than
you're willing to lose. I'm definitely open to making $100 investments, but I
guess my question was more directed towards higher risk/volume investments
that might beg for a more structured DD process.

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pjudice
I think the concept of turning to entrepreneurs to solve unseen negative
consequences of COVID is awesome. I wonder how to ensure founders actually
focus on COVID-related issues rather than taking advantage of the visibility
and funding to focus on other issues.

~~~
steventey
Yeah, that was one of my concerns as well - some of these startups seem to be
targeting issues that are tangential at best to COVID, and that was a little
confusing to me given the article's title.

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alexanderwu
Very cool - I think democratizing VC will help spurn a lot more innovation.
But do you think letting retail investors enter VC will produce the same
irrationality as what we see in Robinhood and the Stock Market?

~~~
anzhelika18
Stock market offers liquid financial products, while angel investing is
definitely illiquid. Irrationality in VCs will always be involved because we
are human-beings but for sure less than in the stock market.

~~~
steventey
Totally agree with this! There's also the notion of sunk cost when it comes to
angel investing, which often arise when a startup goes through a slow steady
decline in profitability and eventually, to their ultimate demise. You don't
(usually) see this happening in the stock market.

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pabwarno
I'm happy to see founders raising large amounts of money. But for some
founders, the mean investment seems to be around $1000. I was wondering if
there was a way to see the different portions that make up the total money
raised. Also, is there a set amount people typically invest? I find this might
be important to understand if the platform is truly building “a network of
everyday folks” or just have some experienced investors experimenting with a
new platform.

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manuel99
I think this is a great idea and improvement, because now I have the
opportunity to invest in very interesting startups that where previously
hardly analyzed by people that really know about these type of companies,
without needing a great amount of money and from any part of the world.

Also, it is a great opportunity for those startups that are working really
hard to create new ideas and products to ease the problems that the world is
going through due to the Covid-19 pandemic.

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slumberSam
Saying these companies "fight COVID" seems kinda untrue? Don't get me wrong,
the majority look impactful and useful, but the headline I'm seeing for this
everywhere is disingenuous if someone is looking for impact. However, it does
look like these companies are COVID-resilient, and will grow with trends the
pandemic is forcing. Potentially solid investments, and democratizing access
to that is cool. :)

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oliverfeuerhahn
If we're trying to get people to move away from VCs, why are there such few
startups accepted. It's almost as if we're bragging about leaving startup
founders with the craziness that is venture capital. Other than that, I work
at a YC and Wefunder company who doesn't like giving idea of liquidating
investors to spend on marketing/investory. I'd love if XX takes off.

~~~
jiwonharu
Good point :) We didn't expect that many applications; we would've wanted to
accept more if we had more in funds. That's why we created a Fellowship
program a week after Fight the Virus batch started - there were so many
qualified founders we still wanted to support. And half of the startups
raising on Demo Day are from the fellowship! If you have ideas for how we can
scale this to include more founders in the future, message me!

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akuppapplez
The idea of democratizing funding is always interesting. On one hand giving
power to individuals and communities who may otherwise never have the
opportunity to invest in companies in their Aha! moment is what we should
strive for.

On the other hand this could lead to outrageous valuations made by founders
who have the backing of devoted communities and taking advantage of their
social capital. Thoughts?

~~~
jiwonharu
To raise on Wefunder, founders have to find a Lead Investor to represent their
Wefunder round. The Lead is motivated to set a fair valuation this way.

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steventey
Interesting take on equity crowdfunding! But I wonder if the heightened risk
of equity crowdfunding compare to other asset classes, say stocks/real estate,
would dissuade people from investing in these startups, especially during
trouble times like this? Have you been seeing a lot of investment activity
since the start of Demo Day?

~~~
jiwonharu
Startups are risky so people should not be investing with their savings
account, especially during times like these!

Actually we've had our strongest months ever - not sure why given the times. I
think people want to support businesses and missions they care about.

~~~
steventey
That's a very interesting phenomenon - I can definitely see parallels between
that and the stock market, with there being record number of new traders
getting into the stock market in the recent months due to COVID
([https://www.wsj.com/articles/coronavirus-turmoil-free-
trades...](https://www.wsj.com/articles/coronavirus-turmoil-free-trades-draw-
newbies-into-stock-market-11588158001)). Not sure if the mindset between those
new stock traders and the new investors on XX are the same though.

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jose_vilaseca
As for the pandemic we are currently undergoing, I believe we should use all
means possible to put an end to it. This is why i consider XX should lower
minimum investment sum to 50 USD, so college students who are on a tight
budget can also invest in these startups.

~~~
pabwarno
I can see the logic behind this. But at this point, my main concern is that
people who can afford to invest $100 are not investing. Do they know about
Wefunder? Can they tell the difference between Wefunder and Kickstarter? Do
they understand the jargon even as explained with the website's current
definitions?

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julio_resende
That's a cool idea, but I wonder how you're controlling how much a person is
allowed to invest. Given that the SEC limits the amount for regulation
crowdfunding on annual basis, how are you gonna keep track of that?

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gavinluke
Super cool idea! Especially considering investing in startups is traditionally
reserved for accredited investors. Love the concept & how it opens up
investing in startups to non-accredited investors like me :)

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Kungpaokenny
This is an awesome idea. If I invest, does Wefunder represent me? How's this
different from other platforms?

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jiwonharu
The Lead Investor represents the custodian that holds all the investors.

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ryzalyusoff
how do you protect against startups that go bankrupt? are you FDIC insured?

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steventey
Yeah that's what I was thinking as well! Giving the mass public the ability to
invest in early-stage starts is like opening up Pandora's Box, imo - it just
feels too risky to me.

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stefan8r
It's a regulated crowdfunding - so there is a fair amount of reporting
startups need to do before they can raise and they're limited with how much
they can raise from unaccredited.

~~~
steventey
Thanks for clarifying! However, when I was looking at the startups
participating in Demo Day, say this one for example
([https://xx.team/stark.therapeutics](https://xx.team/stark.therapeutics)),
there wasn't much of a financial history - which does make sense, given that
they're an early-stage startup. So I guess my question is - what are the
metrics that are reported during the DD phase in order for these startups to
be approved for crowdfunding?

