Kickstarter is a crowdfunding marketplace focused on providing resources, support, and funding to creative ideas and products. The company was started in with a mission to bring creative projects to life by using crowdfunding and crowdsourcing.
Back in , Perry Chan, founder of Kickstarter, wanted to bring two DJs to New Orleans to play at the local jazz fest, but the gig never happened because it cost too much. This led him to come with the idea of the customers being able to buy tickets for a show. Once a set target was reached the gig would happen, or the customers will never be charged. This was a great vision to support new ideas.
The mission , even today, is to help people with ideas to put present them and obtain funding from the internet as easily as possible.
Kickstarter just bought the concept to the next step, onto the internet, but with few tweaks of their own to prevent misuse of the platform. Kickstarted is a marketplace where people with creative ideas meet people who want to support creative ideas and buy innovative products. The creators launch their projects on the platform with a set funding goal.
They mention everything about their idea through text, images and videos, and even mention the rewards the backers will get if they support their idea.
That attitude suggests companies on track for a mega-exit may seem increasingly out of place on Kickstarter as competitors go after backers who want to make a buck. By contrast, companies getting acquired early on would be winners on equity crowdfunding sites. These sites say they democratize investing, letting the little guy in on the action. Slava Rubin, the CEO of Kickstarter rival Indiegogo, has said he wants to disrupt "the gatekeeper who decided who gets money.
Oculus raised money on Kickstarter because it wanted to see if people wanted and would buy the product, and whether developers wanted it and would build games for it. The wildly successful campaign validated that premise, and made it much easier for Oculus to raise money from venture capitalists, he says — but there was no incentive for them to offer equity at that time.
They got exactly what they bargained for. And if Oculus did another Kickstarter campaign for a new headset, it would have no trouble getting funded again, he says.
If Oculus did another Kickstarter today for a new headset, it would have no trouble getting funded again. We will also see companies with less tangible products crowdfund for equity in order to prove out their product before raising serious cash.
This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Articles. Alternative Investments How to Invest in Movies. Company Profiles How Twitch. Partner Links. Related Terms Crowdfunding Crowdfunding is the use of small amounts of capital from a large number of people to raise money or fund a business. Learn the pros and cons of crowdfunding.
Considering a New Venture? Consider a Feasibility Study A feasibility study analyzes all relevant factors of a project to determine the possibility and probability of completing it successfully.
What Is a Startup? A startup is a company in the first stage of its operations, often being financed by its entrepreneurial founders during the initial starting period. Student Loan Forgiveness Student loan forgiveness is a release from having to repay the borrowed sum, in full or in part. Here is how to get student loans forgiven. Full scoop on those here. Wefunder has an online tool that helps you create a draft Form C fast and easy.
We'll also help you fill it out and do a compliance review. You should carefully read the Founder Legal Primer. Broadly speaking here's what you can expect to include in your legal disclosures, which Wefunder will then use to generate your Form C:. You can, however, raise an unlimited amount under Regulation D from accredited investors. 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.
We also require that your minimum goal be enough to give your business at least 6 months of runway. You should include every risk that you can think of that is specific to your business. Investors respect transparency. Writing down the risks not only helps investors make a sound decision; it also protects you as a founder. 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. The law requires that you disclose certain financial information in order to raise under Reg CF.
The specific financial reporting requirements depend on two factors: incorporation date and raise size. These will have to be completed by a CPA who is qualified to complete audits. Foot notes are typically 2 -5 pages and usually include: accounting methodologies used, an explanation of your taxes, a summary of any debt, and a summary of outstanding equity.
Wefunder can introduce you to a CPA that can do this work for you quickly and cheaply, though feel free to use your own CPA if you prefer. 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. Our algorithms are not capable of making good investment decisions and our sorting of offerings does not constitute an investment recommendation.
We also highlight and advertise campaigns listed on Wefunder, including by building pages on our site based on distinct themes, sending emails to our users, and running social media campaigns.
We select campaigns to be highlighted based on objective criteria, which we apply consistently to all companies on the platform — giving every company who meets the criteria the same shot to be featured. We do not highlight or advertise campaigns based on the advisability of investing, and our highlighting or advertising of a campaign does not constitute an investment recommendation or solicitation.
Companies will be visible on the Explore page once they have either 1 filed their Form C, or 2 completed a profile compliance review while in testing the waters. Think about it from the investor's perspective: you're looking for investment opportunities and find a cool-looking company.
Would you invest? Or would you wait until a person who actually knows the founder invests first? Once you do, we will automatically complete a compliance review and you'll be on that Explore page in no time.
That would be unethical. It's also illegal. Every company that has ever asked us this question has looked super scammy. Be sure to abide by these rules. You'll now be able to start promoting your raise before your Form C is filed, as long as you abide by these rules. Avoid hyperbole and misleading info. Oh, and don't say the SEC has "approved" your offering. The SEC doesn't like that. 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.
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 pitch, 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. The key to a successful fundraise is managing momentum. The faster the investments come in, the more new investors will want to invest. 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. Head over to our fundraising playbook for more tips. Investments go up and unsubscribes go down. This is a major project that will take some time to fully roll-out but we are moving fast and releasing iterations each week.
Like most raises, you get out what you put in. The success of your raise will hugely depend on the quality of your pitch and the power of your following. Get the scoop on creating a kickass pitch here and building out your entire raise strategy here. Yes, you can pay someone to promote your campaign, as long as they make it clear each time they promote your campaign that they are being paid to do so. You are required to take reasonable steps to make sure promotion is properly disclosed.
Remember that any promotion done off the Wefunder platform also has to comply with the advertising rules. After your funding target has been met and at least 21 days have passed, you may initiate the close of your round at any time. Investors are given a 5 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. Unfortunately, if your raise fails, you won't be able to run a new one 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. We don't hand out your email addresses or phone numbers; all communications with investors are handled on your company feed. 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. 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.
The annual report is due no later than days after the end of your fiscal year. You can do that by following these steps:. You should fill out:. However, you may still raise funds from accredited investors only using Regulation D. Different companies have different reporting requirements:. Under Reg CF, companies are exempt from registering their offering with states. However, states still have the authority to require filings for Reg CF offerings under certain circumstances.
A state is allowed to request that a company file state notices if:. Someone who invests small amounts of money in startups. The term's origin is from the 's, to describe a new investor in a new Broadway play. A dream-maker. A world-changer. Example sentence: If Wefunder is jam-packed with angel investors , does that make this a little slice of heaven?
Example sentence: Legend has it that when the Lead Investor for SunSipz officially got his status as an accredited investor years ago, he bought 50 containers of sliced mango — just because he could Amount of yearly revenue driven by contracted work; metric for SaaS or subscription-based companies. Example sentence: The founder of SunSipz was bootstrapping it in the earliest days of the company — the dude could barely afford oat milk. Glad they got their act together in the next month.
A "cap table" is startup jargon for "capitalization table. On Wefunder, all investors are one line on the cap table, represented by a single SPV. Founders often use Carta or captable. Carried Interest is a share of the profits from an investment. It's how venture capitalists make money from their own investors called limited partners , typically when a startup is acquired or after an IPO.
A Custodian is an entity such as a broker-dealer, bank, or transfer agent that holds any securities you sell on behalf of investors who are the "beneficial owners" of the securities. This means 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 the investors. The custodian also votes these securities and signs any documents on their behalf, following the direction of the Lead Investor.
The Custodian is s the one entity on the 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". The percentage of sales a company make to a specific type of customer; a useful metric to determine if they're dependent on only a small number or one type of customer.
Example sentence: I was in the aisles of Costco, looking for the colada mix, when a founder emailed me with details on her company's customer mix — they had 20 small companies plus 4 huge ones already using their software! That's what made it a hell yes for me! The culminating event for accelerator programs during which startups pitch their companies to potential investors. A legal arrangement in which a third party holds a large sum of money until conditions are met— at which point the monies are disbursed to the intended party.
In startup investing land, this means that a third party holds the actual investment money until closing conditions such as meeting the minimum for a raise are met.
Before these conditions are met, an investor can withdraw their investment. Example sentence: After investing in SunSipz the very first startup I invested in , I panicked when I saw my investment was in escrow! But then I realized that was just the waiting room for my monies and that, once the raise ended successfully, the company would actually get the funds.
A company is bought by a bigger company or starts to sell stock publicly, a big shebang for all investors. The type of door you frantically search in the dark vortex of a movie theater when you need to pee.
Example sentence: There I was— scrambling to find the door to get out of the movie theater to pee and I get a notification that SunSipz has been bought by Disney!
Ha ha! Example sentence: SunSipz was absolutely killing the game — the team was growing, they were gaining hundreds of customers per month, they were forming partnerships out the wazoo!
I knew I had to make a follow-on investment when they raised their next round. Verbal commitment to an investment deal before papers are signed and such. Full lowdown on the YC site. Example sentence: Jonny, I exchanged a few clear, simple emails with the founders and BOOM — handshake protocol complete. Example sentence: I was talking to this certified jerk the other day who told me he was pulling strings to make sure one of his portfolio companies landed in the hands of this specific VC associate.
Example sentence: If a magazine publisher fundraises IRR stands for "internal rate of return". Unlike a simple exit multiple, IRR takes into account how long it took to earn a return. It's a harsher way of judging the success of your investments. IRR for angel investors is very long-term. It can take up to 10 years to be able to sell your investments.
So we often talk about realized and unrealized IRR. An realized return is when you sold the stock and have the cash. An unrealized return is the estimated amount the stock is worth, usually based on the last price other venture capitalists have recently paid for it. The Lead Investor is responsible for directing the vote of all investors on Wefunder, and the XX team helps the startup grow in value. The founder must only get the signature of XX Investments as directed by the Lead to authorize any corporate actions.
It works much like an AngelList Syndicate Lead, except the legal structure is not an investment fund. The outcome is the same: one entity on the cap table and a single Lead to direct the signing of any corporate documents and the voting of the securities. A preliminary commitment for 2 parties to complete a business deal.
In this case, a letter in which an investor formally expresses interest in an investment opportunity. These are non-binding agreements which include the basic terms of the prospective deal. Figure of speech used to describe the distinct advantages a company has which make it unbeatable in its market. Not trying to sound like King Arthur out here but that sounds like a moat to me! Example sentence: Word on the street was that the MVP for SunSipz was a plastic water bottle with a triple A battery taped to the side… and it sold like mad!
A company significantly changes its strategy to better fit the market, customer preferences, etc. How to react when your grandma brings up your absolutely desolate love life at Thanksgiving dinner.
They pivoted and now they make nuclear space rockets! The innovation. I was stocked. The right for an investor to buy more stock later on to maintain their same level of ownership in a company. Example sentence: Holy crapola, Jonny— this electric water bottle company I invested in is really taking off! If they launched their round without a lead investor or financials, we'll also need to first file a material amendment that formally adds those things to the raise.
We then give investors 5 business days to reconfirm their investment or opt out of the tranche. If you're a founder looking to to initiate a rolling close, reach out to us closing wefunder. Please note it may take a few weeks to set everything in motion and receive your wire. How long a company could survive given its current revenue and expenses usually expressed in months.
Startups usually have between 6 to 18 months of runway. Example sentence: When the SunSipz founder realized he'd hit a full 2 years of runway , he spent an hour dancing around his bedroom-office. Example sentence: The market for oversaturated sunset flicks is… saturated. A company's potential to grow — to secure more customers, break into more markets, and dominate the market it breaks into it.
Less of a concern for lifestyle or "cottage industry" businesses than tech startups. Example sentence: Nah, Jonny, scalability wasn't my main concern in evaluating with SunSipz since its a lifestyle biz. Example sentence: Jonny! Did you know that pro rata rights used to be right in the main text of SAFEs but recently got moved to their own little side letter? Securities abounding! A startup raises early funds from private investors often in exchange for equity stakes to form their company.
Founders collect magic beans and get to work planting them in hopes of growing a mega, giant beanstalk Example sentence: Did you know that SunSipz raised their seed round entirely from their Berkley dorm-mates?
It's been getting cheaper for startups to make more progress with their seed funding, increasing their price when venture capitalists finally invest. The equivalent of an actor landing their first role in a Broadway show — it's an ensemble role but still a big deal A legal entity usually an LLC created for a single purpose.
A document often with a bunch of terms that investors and a company agree upon before finalizing a deal. The most important terms are usually the percentage of ownership and voting rights an investor will get through the deal. They're able to launch a pitch, spread the word, 1 and have supporters reserve spots in their offering.
Founders must include this disclosure in all public communications emails, ads, posts, etc. They must also direct people to their Wefunder pitch page to see any offering terms. Reservations are non-binding — no money is sent to the company. Once a company finalizes its contract terms and finishes all other legal disclosures, investors will receive an email asking them to confirm their investments.
Startups must qualify under one of several federal exemptions from securities registration. Otherwise, they are violating securities law. This law was rolled out May 16th, Investors are also limited in the amount of capital they may invest in Regulation Crowdfunding startups per year. To calculate your investment limit, first choose either your net income or net worth - whichever is lower. To find out your annual investment limits, open an investor account.
Companies using the Rule b exemption can raise an unlimited amount of money from Accredited Investors and a maximum of 35 unaccredited investors. Almost all startup investing occured this way until late This is a new exemption released by the SEC on September 23rd, Like Rule c , startups using this exemption can raise an unlimited amount of capital from Accredited Investors.
But unlike b these startups can advertise their fundraising to the public. There's a downside. Startups using c must verify that all their investors actually are accredited. This may require the investor to provide a letter from their lawyer, or it can be as burdensome as requiring tax returns or bank statements.
Learn more about c. Learn more about convertible notes. First developed by Y Combinator in , a SAFE grants an investor the right to obtain equity at a future date if the startup sells shares in a future financing. SAFEs are used by early-stage startups because they delay the difficult task of figuring out how much a startup is worth.
It is also a much cheaper and simpler contract than priced equity rounds, which may require months of negotiation and upwards of 30 pages of legalese costing tens of thousands of dollars. Common stock is a security that represents ownership in a corporation.
Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure; in the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders and other debtholders are paid in full.
Similar to common stock, this security is piece of ownership in a company. Typically, this stock carries voting rights, as common stock does. Preferred stockholders also get priority over common stockholders when it comes to being paid dividends money paid out regularly to shareholders out of a company's profits or a liquidation event ie.
The Wefunder Promissory Note is good for debt fundraises that don't require much complexity. It can be powerful for crowdfunding when combined with the Investor Perk Agreement. It may also be paid back by the company at any time. To preview a sample, download the Wefunder Promissory Note. Note that discount rates usually are only applied when the valuation is below the Valuation Cap.
The interest rate is the amount charged by a lender, usually expressed as a percentage of principal annually. Convertible notes also carry an interest rate.
Unlike traditional loans, however, this interest is paid in additional shares upon conversion of the note instead of cash. While Convertible Notes have an interest rate, the interest and principal are rarely repaid in cash; rather, the accumulated interest entitles the investor to receive more stock if and when the note converts to equity.
The pre-money valuation is the valuation of the company before an investment has been made. It does not include the value of the cash a venture capital firm is about to invest. Pre-money valuations for early-stage startups are most often determined by supply and demand. The post-money valuation is the valuation of the company after the investment has been made. It is equal to the pre-money valuation plus the amount of the investment. It entitles investors to equity priced at the lower of the valuation cap or the pre-money valuation in the subsequent financing.
The valuation cap is a way to reward seed stage investors for taking on additional risk. The valuation cap sets the maximum price that your convertible security will convert into equity. To translate that into a share price, you divide the valuation cap by the series A valuation. That means that you will get twice as many shares as the series A investors for the same price.
It can be the end of any quarter, but it's most often December 31st. Like an option, warrants grant the right to buy stock at a certain price in the future. Unlike options, warrants and the shares they convert into are always issued by the company itself. The Board of Directors have a fiduciary responsibility to guard the interests of the shareholders of a company.
The board makes decisions on major strategic issues, and can often but not always fire the CEO. In an early stage startup that has just raised a Series A, it's most common to have thee board members: two appointed by the founders, and one by the venture capitalist.
Usually at each major subsequent round of funding, another board seat is created. This includes an income statement, balance sheet, cash flow statement, and notes to the financial statements. This article provides an in-depth synopsis of GAAP requirements. The degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price.
Also referred to as a certificate of incorporation, this is the legal document establishing the existence of a corporation. It's typically filed with the Secretary of State. Section 3 of the Investment Company Act defines an investment company as a company that:. For companies in certain industries, such as real estate and venture investing, this rule requires a careful analysis by experienced lawyers to determine whether the company is barred from raising.
For example, a manufacturer will have an account receivable when it delivers a truckload of goods to a customer on June 1 and the customer is allowed to pay in 30 days. A current asset account which includes currency, coins, checking accounts, and undeposited checks received from customers. The amounts must be unrestricted. The amount owed for a period exceeding 12 months from the date of the balance sheet.
It could be in the form of a bank loan, mortgage bonds, debenture, or other obligations not due for one year. A firm must disclose its long-term debt on its balance sheet with its interest rate and date of maturity.
In the accounting industry, assets are defined as anything that a business owns, has value, and can be converted to cash. Assets are broken down into two main categories. These two categories are current assets and noncurrent assets. Usually shown as the top item in an income profit and loss statement from which all charges, costs, and expenses are subtracted to arrive at net income.
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