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View this email in your browser                                                                                            March 18, 2021
Good morning and happy Tuesday. Crowdfunding's biggest regulatory changes to date went into effect on Monday. It's safe to say they didn't go unnoticed.

In a mere 12 hours, Gumroad became the first company to reach the newly raised $5 million offering limit. Putting its money (literally) where its mouth is, Wefunder took advantage of the regulation and opened up an offering allowing investors to invest in Wefunder itself. Backstage Capital reopened its previous offering, which it maxed out at $1.07 million back in February. And finally, Republic raised $36 million for itself as it prepares for a big crowdfunding future ahead.

All of this and we still have two days left this week. We've got all the details below. Let's get to it.
Gumroad - Powering the creator economy
Creators deserve to get paid for their work. Gumroad makes it easy. Founded in 2011, it was among the first platforms to address the emerging class of creators and their unmet needs. Gumroad has risen to an industry-leading position with more than 74,000 creators selling over $390 million of products via its platform.
  • Millions of creative people produce valuable digital products such as online courses, software applications, guides, research, etc. But selling products online and managing customers can be complex and time-consuming. Empowering the creator, Gumroad makes it simple for creators to sell their goods and services online.
  • With Gumroad, sellers can quickly and simply get their own online business running. Gumroad helps creators build product and checkout pages, handle payment processing, and manage customers.

A first-of-its-kind deal
Gumroad is unlike any other company that has previously raised via crowdfunding. Generating nearly $10 million in 2020 revenue and over $1 million in net profit, it's a notably more mature company than what platforms like Republic, Wefunder, and StartEngine are used to seeing. 
  • For months, I, alongside many others, have been speculating about the types of companies that would be drawn in by the higher $5 million offering limit. Increasing the previous limit by 5x, there was little to no doubt that more mature companies would look to crowdfunding.
  • Still, it was somewhat shocking to see a company of Gumroad's stature dive in on the very first day of eligibility. Gumroad has raised from some of the most prominent venture firms and investors in the world, and it likely would have had no problem doing so again. Instead, it elected to raise from an entirely new group of investors - its own audience.
Led by Founder and CEO, Sahil Lavingia, Gumroad raised $5 million from 7,434 investors. Investors include Gumroad creators, Twitter followers, entrepreneurs, unaffiliated retail investors, and even some venture partners that participated in the deal out of their own pocket.
  • The best part: the maximum investment amount was limited to $1,000 to ensure as many investors as possible could participate.
"The way it starts is not by a normal person doing it," Lavingia said. "It's by someone who is at the tip of the spear, someone who has an interesting angle, and then it gets sort of democratized over time."
  • With a sizable audience looking on as Gumroad elected to bypass the traditional venture capital route, Lavingia knew his decision to open an offering on Republic would push other entrepreneurs to rethink what's best for their own business and perhaps reconsider the role of crowdfunding.
Viewing equity crowdfunding as a way to reshape how startups raise capital and who they raise from, Lavingia used his platform to bring awareness to the alternative financing method. To say it was effective would be an understatement.
  • Investor demand for the deal crashed Republic's website twice on Monday. The 12 hours that it took to fill the full $5 million offering is staggering in comparison to Republic's previous record, which was set in February when Backstage Capital raised $1.07 million in 8 hours. 
The big picture: The March 15th Reg CF changes have been a long time coming. It took just minutes for Gumroad to breeze past the previous $1.07 million allowance en route to reaching the new $5 million limit. Setting the stage for many more to follow in its footsteps, Gumroad demonstrated the power of the crowd and the tremendous opportunity newly provided by equity crowdfunding.
Invest in Wefunder on Wefunder
You read that correctly. Wefunder has facilitated the successful funding of more than 400 companies to date and is currently offering over 200 live deals. But this week, the company gave investors the opportunity to invest directly in Wefunder itself.
  • Offering a priced round, shares of Wefunder's Series A Preferred Stock can be purchased at $2.19862 per share, yielding a pre-money valuation of $160,000,000.

Betting big on the future of crowdfunding
Founded in 2011, Wefunder was arguably the most influential advocate pushing for the introduction and expansion of equity crowdfunding back in 2012. Nearly a decade later, crowdfunding has undergone incredible growth and Wefunder believes it has only just begun to have scratched the surface of what's to come.
  • "We've been in the warmup for the past four years. May 16 is when the whistle blows and the game starts", said Wefunder. After achieving growth that would have seemed unlikely even 1 year ago, Wefunder is looking to capitalize on its successes as it prepares for what it believes will be a tremendous influx of capital into crowdfunding in the years to come.
During Q4 '20, Wefunder saw 5x year-over-year growth in investment volume, bringing the 2020 total to $87 million invested across all offerings.
  • With strong growth continuing into 2021, Wefunder generated $982,911 in revenue and $302,723 in net income during February.
In 2021, Wefunder expects to see over $350 million invested across its offerings. "Our goal is to at least 3x again by December '21", said Wefunder.
  • In December '20, $16.1 million was invested on Wefunder. In December '21, the company is expecting more than $50 million. In order to achieve this growth, Wefunder believes it will need to be launching 100 offerings each month. 
Relying heavily on new US and EU regulations, Wefunder believes it'll be able to achieve these lofty targets as investors and companies alike pour into the crowdfunding market during the months ahead.
  • The new EU equity crowdfunding laws that go live in November '21 are expected to be "as good as the newly reformed US laws."
  • In 2012, the UK rolled out the most entrepreneur and investor-friendly equity crowdfunding regulation. Made effective in 2021, the US and EU introduced equivalent laws. Wefunder anticipates the US and EU crowdfunding market to each be about 7x the size of the UK market.
  • Between the US and EU markets, Wefunder expects to be processing $5 billion per year in investment volume by 2024.
With this new round of financing, the company intends to prepare for its launch in the EU, grow its headcount by 2.5x, and launch an improved and redesigned Wefunder platform.

The big picture: Wefunder has seen firsthand just how powerful it is to allow your customers to become your investors. Attempting to reshape the early-stage fundraising ecosystem, it is giving its investors the opportunity to invest more broadly in the rise of crowdfunding and participate in the upside that Wefunder may one day achieve with sustained growth of this magnitude. 
 
Backstage Capital reopens its record offering 
Arlan Hamilton and Backstage Capital didn't wait long before following suit and taking advantage of the new Reg CF regulation. Reopening its recently maxed out offering on Monday, Backstage is closing in on its new $5 million target with over $4 million raised as of Thursday morning.
  • An investor favorite, Backstage Capital closed its previous Reg CF round in February when it incredibly raised $1.07 million in just 8 hours.   

A new way to raise a fund
Backstage Capital is a venture capital firm focused on empowering underestimated founders. Founded in 2015, the firm has very quickly received attention from the industry's most prominent investors as a leading voice advocating for the founders that have long been overlooked by early-stage investors.
  • Investing in more than 160 underrepresented teams since 2015, Backstage has paved the way for a new approach to venture capital investing.
With the launch of Backstage Crowd, Backstage Capital has again taken an unorthodox approach to venture capital by expanding its fundraising efforts to include both accredited and non-accredited investors. The firm has made it a focus to provide access, education, and resources to a much larger community of individual investors that have historically been shunned.

The big picture: just as it has led the venture industry toward a more diverse future, Backstage may again be at the forefront of change. Following this first-of-its-kind raise from a venture firm, Backstage received notable attention from fellow venture investors applauding the initiative.
  • Led by Tyler Tringas, Earnest Capital followed Backstage's move and gauged the interest of its social media following on Tuesday in participating in a Reg CF offering as a percentage of its next fund. Tringas's followers expressed interest in collectively investing over $2 million through a crowdfunding offering. Needless to say, Tringas indicated he would be moving forward with opening a crowdfund offering as part of his next fund.
Republic raises $36 million in its Series A
Just one day after Wefunder opened up its own Reg CF offering, Republic announced that it had raised a round of financing to similarly fuel the growth it expects ahead.
  • The round was led by Galaxy interactive, with participation from Tribe Capital, Motley Fool Ventures, and Broadhaven Ventures.

Advancing its retail revolution
Republic has strategically positioned itself with these firms to help advance its mission of empowering retail investors, as well as to help provide the Republic community with even greater access to high-quality deals.
  • "We are at the early stages of a multi-decade super-cycle of retail empowerment", said Galaxy Interactive's Richard Kim. Michael Sidgmore of Broadhaven Ventures stated that he believes Republic is the on-ramp for investors into private markets and the "Charles Schwaab for the next century".
Since 2016, Republic's parent company and its subsidiaries have raised over $70 million to fund its mission of democratizing access to sought-after investment opportunities.
  • In order to better provide opportunities in real estate, small business, and video game investment, Republic has acquired, respectively, Compound, NextSeed, and Fig. 
  • Looking ahead, Republic plans to build on its growing Reg CF position and expand its crypto offering capabilities through the hosting of digital asset sales.
The big picture: Republic's growth is grounded in one mission: opportunities should not be limited to small, closed networks of investors. Everyone should be able to invest in the future they believe in. Raising this round of financing helps them achieve that mission by providing investors with even better access to assets that have traditionally been off-limits. 
Want me to take a deep dive look into a particular offering, ask any questions, or just reach out and introduce yourself? Shoot me an email at drew@thecrwd.com. Otherwise, I'll see ya next week.
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