This is a problem and I agree. Most of our portfolio companies are concerned that COVID is temporary and are seeking alternative business models in parallel. This is because institutional investors, who will ultimately end up funding the companies down the road due to Reg C funding limited to $1M/yr, continue to tell startups that need to have alternative business models in case a vaccine is approved. To some extent, trying to move away from the deeply entrenched institutional investment model is an ouroboros.
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.
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.
Hello! All the companies we selected have large growth opportunity given that their products are intended to assuage the harsh realities of COVID. All finances are published on the startup profiles and for most, this is their first money in. The XX mentor team is a founder community of 50 founders, each w/ several years of experience running our own companies, collectively valued over $4B. As with all early-stage startup investing, it can be risky, but our team's extensive operating experience gives us unique insight in to selecting the founders most likely to be successful. We often have more operating experience than most VCs. Additionally, companies across the world applied and the final cohort included a diverse contingent w/ 31% female and 47% PoC. These numbers are more diverse than you'll see in any venture portfolio and as it has been well established, diverse team outperform those that are homogeneous. Our global pipeline gives us substantial competitive edge. Finally, regarding competition, most companies have pitch decks that outline the market landscape and the founders are happy to answer Q&A on the Wefunder profile to help investors understand competition and other risks.