Some late night thoughts I have on the monumental Substack Wefunder launch, having already surpassed their $5M maximum from retail investors with $2.5M+ on the waitlist.
Really exciting moment in the young and growing equity crowdfunding market. Rooting for all parties involved and congrats to Wefunder on the launch.
Substack is a force in the decentralized creator economy. So much so that Elon Musk’s Twitter actually blocked them from being mentioned or linked to on Twitter when 3 days ago Substack announced a soon to be rolled out competitor product to Twitter - will this successfully pull in people trying to leave Twitter but not sold where to go?
Substack’s April 6th launch timing isn’t a coincidence. If your fiscal year ends 12/31, and if you raise with the Reg CF exemption like Substack, there are 2 filings to stay up past April 30th.
An annual report with last year’s (2022) financials
A material amendment, which requires all non-disbursed investors to reconfirm their investments by providing positive consent to stay invested.
However, since a reg CF company is not allowed to disburse the money before being live for 21+ days, their April 6th launch date is a buzzer beater to secure the funds before then. While a live campaign needs to give investors 5 business days' notice to be able to cancel their investment before their money gets wired to the company’s bank, a closed campaign does not have this additional requirement. I think this is worth highlighting because
Their most recent financials are from 2021, and they’re…. not great. While they have no obligations to release their financials before their raise ends, they could release them early. You could argue that maybe their auditor is backlogged - except that their auditor opinion for these 2021 financials is from March 31, 2023! If their financials from 2022 are even worse, they might have some of their most loyal customers locked in at frustrating terms based on the most dated financials possible.
A Substack comment on their Wefunder raise page Substack has something I’ve never seen in my life - negative revenue of $5M.
Screenshot from the form C I imagine there was a long zoom meeting with their auditors hoping they could classify partnership fees as an expense instead of being taken out of revenue, but to no avail… accounting can be weird.
Andreessen Horowitz is their biggest investor - while they recently tried to raise more from VC’s per the NYT, they abandoned those plans but are now raising with their 2021 valuation of $585M in 2023. Is this raise a true effort to tap their community as investors as stated, or is there more to it?
I am hyped about Substack after hearing about their launch and concluded Substack is an awesome, underrated product. I think we’re seeing the beginning of the next stage in equity crowdfunding where hot VC deals are now available to retail investors while they’re still private companies. Equity CF is incredible for brand recognition and advertising. I just created my own Substack newsletter and what better way to start than to cover the Substack round itself.
I hope you subscribe for more equity crowdfunding insights and retail startup investing thoughts like these.
NOT Investment advice :)