By all accounts, 2021 was a record year for founders and venture capital, with $330 billion raised across the country. There's also a small but growing ecosystem of founders and entrepreneurs who seek investments outside of that traditional model, and Wefunder is supporting those efforts.
The San Francisco crowdfunding site, which was founded in 2012, saw investments more than quadruple from $55 million in 2020 to $236 million last year. Wefunder provides non-accredited individuals the opportunity to invest in small businesses and startups, and by extension, also opens up funding opportunities for founders who can't access more traditional sources of investments.
Over the past decade, 1.4 million individuals have invested nearly $400 million on the site and supported over 1,800 founders, according to the website. The median investment is $250, and founders who have raised money on the site have also raised more than $5 billion from venture capital, as well.
Wefunder says that 87% of founders on the platform are outside of Silicon Valley, 22% are female and 4.4% are Black.
I spoke with Jonny Price, Wefunder's vice president of fundraising, this week about what led to the platform's record-breaking year, how crowdfunding has changed and the potential impacts that broader economic events might have on small investors.
Tell me a little bit about your own background and how you came to be at Wefunder? So, I grew up in the UK, started my career in management consulting, then volunteered at Kiva and joined it full-time in 2011. I founded the U.S. team and led it for seven years. Then in early 2018, I moved on and came to Wefunder and have been growing the team here for the last four years. It's been a really exciting journey and feel like it's just getting started.
What is Wefunder for somebody who isn't familiar? It's a platform that allows startup founders to raise capital, not just from accredited investors, institutional investors, rich people, but also from their customers, their fans, the community. And on the investor side of the equation, we allow anyone, not just rich people, to invest in startups they love. So anyone can go and invest in Starbucks on the stock market. A few years ago, you were not able to invest in your friend's early stage coffee shop unless you were accredited. And so the SEC passed some laws as part of the 2012 Jobs Act that was then rolled out in 2016. This is called regulation crowdfunding. This is the legal exemption that we have, to allow unaccredited investors and accredited investors to invest in in startups they love.
Who is the typical investor on the platform and what draws them to Wefunder? When startups historically have raised capital, they're either raising from venture capital firms or they're raising from accredited investors, basically millionaires, right? So 5% of the population, roughly, is accredited. Now with Wefunder, 100% of the population can invest. Wefunder investors are younger, they're not as affluent and still tend to skew kind of middle income and more female. That's a big part of what we're doing. If you democratize angel investing, then we expect to have more women of color outside of the coasts empowered as investors, and that we expect will also mean that more dollars flow to women of color.
I imagine some of these projects could get really massive in terms of the amount of small investors that are going in. So how does the equity sharing work? The vast majority of what we do is equity, and either a priced round or a convertible note. We also allow for other instruments like debt. We had some companies do a loan with an interest rate of 8%, let's say, or even paying investors back a percentage of revenues, what we call a revenue share deal, but for sure, equity is the most common form of investment structure on Wefunder. Let's say you're taking a $5 million check from a VC on a $25 million post-valuation for 20% of the company, it works exactly the same on Wefunder. But rather than one VC having 20%, now your customers or your community between them have 20% and it's allocated pro rata. Crucially, for the founders, we roll up those investors into one line on the cap table using a special purpose vehicle (SPV).
So if there are 1,000 small investors going in on a project, the startup doesn't have to deal with 1,000 different agreements? In the SPV, we have one lead investor that the founder designates who is going to cast the vote for the individual investors in the SPV. So the founder just needs to collect one signature, and the investors can kind of trust that, OK, we can see who the lead investor is who's going to represent our interests, which is, I think, an elegant way that Wefunder has led the industry in building a structure for this investing.
I also wanted to talk to you about the record breaking year Wefunder just had. What sparked that growth and why now? The obvious answer is that in March of 2021 the SEC made some improvements to the laws around investment crowdfunding. Regulation crowdfunding was made legal by the SEC in 2016. And then there was some improvements to the rules that were rolled out in March of 2021. And the three most obvious ones to highlight are firstly, the companies previously could raise any $1.07 million per year, now they can raise $5 million per year.
And secondly, we can now use a special purpose vehicle to roll investors to one line on the on the cap table. Previously, we were still making them one line on the cap table was using what's called a custodian structure to do that. An SPV is just slightly more commonly used and familiar to lawyers and VCs.
And then the third thing was that you can use what's called testing the waters, which basically means you can launch a campaign a lot more quickly. So now on Wefunder, finally, you can launch your campaign within a few hours. Previously, you had to do some legal paperwork and get some financial standing. It might have taken you a month to launch a campaign in 2020. In 2021, you can literally do it in minutes.
Will the Fed's moves on interest rates impact your investors and your platform as much as the broader, more institutionalized investing ecosystem? Yeah, I think it will probably impact us. Investing in a startup with a 10-year exit kind of journey looks relatively less attractive when interest rates go up and bond yields go up. And so, you know, there's a kind of higher opportunity cost of capital. That being said, I think Wefunder is probably more resilient from the investor side. Because going back to what I said earlier, our tagline is invest in startups you love. So that more nuanced motivation maybe makes it a little bit more resilient there.
And the other piece is, I suspect that the business model of Wefunder is somewhat counter cyclical because if capital is awash in Silicon Valley, as it has been in the last few years, and it's very easy to raise a seed round, the relative value of Wefunder as a way to raise additional capital becomes less compelling. Whereas if we enter a cycle where it's harder for founders to raise capital, then I think the value proposition of Wefunder is like, hey, you can actually turn your customers into investors.
If you look at when the pandemic hit in the spring of 2020, we saw significant growth and investment volume. And we found over time, when the world was falling apart, and founders were are all of a sudden finding their rounds collapse and it was really, really difficult to raise from agents and VCs, they were able to raise on Wefunder. If we do enter more of a downturn, which obviously hoping we don't, but I would expect us to be pretty resilient to that.
