The Startup CPG Podcast

Daniel Scharff
Hello CPG ers. Welcome to the Startup CPG podcast. I'm your host, Daniel Scharff. Today we have a bonus episode featuring Jonny Price of Wefunder and James Reyna of Jiby Coffee. We just hosted a startup CPG webinar on community fundraising, which is raising money from family and friends and also your customers. And I thought it would be really beneficial for you all to hear it. So I'm sharing it now as a podcast. So we used a slide deck in the presentation, but I don't think you're going to have any trouble following along just the audio. But please excuse if we refer to some written material. I want you to know also startup CPG has a partnership with Wefunder, so if you raise with them, use our discount because it'll save you a lot on their fees.

00:57
Daniel Scharff
You can use the link in the show notes or email Johnny Jonn yfunder.com and mention the startup CPG fee discount. Enjoy. This is a super interesting topic for me, the idea of community rounds. The reason I wanted to do this webinar now is because early vc's have left the building. They are not cutting checks for early stage brands. And so I think, you know, everybody is looking to be scrappier now, whether that is looking for alternate sources like financing, you know, loans, I think that, you know, that can be one option. Or angel investors, there are a lot of different options and community rounds are one of them. And we've seen some companies do it successfully.

01:39
Daniel Scharff
And so we invited Johnny Price from Wefunder, as well as James Reyna, who has recently done a wefunder campaign, really just to give you guys the 101 on it. So a little bit behind the scenes, like what is it? What does it take for you to do it and just help you guys get educated about it and then probably make a better decision about whether this might be something that's right for you and your brand. So I am going to pass it to you, Johnny. And if you guys want to just say what's up and who your brand is or what you're thinking about or what you had for lunch, go for it. You can definitely put whatever you want in the chat.

02:12
Daniel Scharff
If you have questions you want to ask, it's best to put them in the Q and A and then I'll curate them as we're going through. And just make sure if you want to send your chat to everybody that you select. Everyone. The default is just hosts and panelists and then only we get to see your lovely comment. So. All right, Johnny, I'm going to pass it over to you if you want to maybe start with an intro.

02:31
Johnny Price
Yeah, sure. Thanks for having me here. Daniel James, thanks for joining as well. It's going to be awesome to hear your experience as a founder who's actually done one of these community runs on Wefunder. Great to be speaking with all of you guys. Just to quickly, personally introduce myself. English accent, from the UK, originally, grew up in London, moved to San Francisco, married an american girl. So that's why I'm now this side of the pond. Started my career in management consulting, as were talking about earlier, spent six years in a firm called Oliver Wyman, then went to start a team doing crowdfunded microloans at a nonprofit called Kiva.org in San Francisco. So I started the US team of Kiva, ran that for seven years, and then joined we funder in 2018. So I've been at we funded now for six years.

03:14
Johnny Price
And yeah, now last 13 years of my career really focused on trying to get more capital flowing to entrepreneurs, especially through the medium of crowdfunding. But yeah, folks today, talking about we funder, I wanted to kind of get through these things. So firstly, quick overview on what the hell is a community around. Secondly, wefunders mission. Thirdly, which of you guys listening is it a good fit for? What are the pros and cons? Some kind of boring technical details and then well, interview James and hear from the horse's mouth on his experiences on wefunder. So just to be kind of super high level, what is a community rounds? Normally when startups are raising capital, they are using what's called regulation D. The two kind of main things of that we funder and community rounds change. Regulation D is limited to accredited investors only.

03:58
Johnny Price
So if you're raising capital, normally you guys probably know, oh, you're limited to raising from accredited investors and then secondly, you're limited to privately soliciting investors. There is actually a version of Reg D where you can publicly promote the raise as well, five or six c, but generally speaking, private solicitation.

04:14
Daniel Scharff
Can you remind us what's an accredited investor?

04:17
Johnny Price
Yes, accredited investor is $200,000 of income, or $300,000 of household income, or a million dollars of wealth, excluding your primary residence, your house. So another way of thinking about it, basically the richest five 6% of the US population is accredited. And so, seamless segue. Wefunda uses regulation crowdfunding as opposed to regulation D. With regulation crowdfunding, it changes both of those things. Firstly, now unaccredited investors can invest as well as accredited investors. About 50% of investment volume on Wefunder is from accredited investors still. So a lot of accredited investors investing through the platform. But now the 95% of the population that is not accredited, that is the vast majority of your customers, can now actually invest in your company and the vast majority of your network, LinkedIn connections, friends and family, etcetera.

05:11
Johnny Price
And then secondly, with regulation crowdfunding, the SEC allow you to publicly promote the offering and run a marketing campaign around it. For me, this is a big part of why I'm excited about the future of what we're building at Wefunder. It's 2024. The idea that startups should a, only be able to raise capital from millionaires and b only be able to privately kind of pitch their investment, it's extremely anachronistic. Daniel James do you know where this show, what show this is pulled from?

05:46
James Reyna
Mandy Python no.

05:47
Johnny Price
Close. Good guess anyone in England would know this. This is a show called Blackadder. Incredible tv show. My entire sense of humor is based on Blackadder. That might be a pretty bad advert for the show, but you guys should still go and watch it. It's awesome. So for me, like the best we funded, community rounds are an awesome marketing campaign. Obviously it's a way to raise capital, but as well, maybe even more so. This is an incredible marketing campaign. Your most loyal customers, it's a chance to invite them to become owners and investors in the business can be alongside VC's and angel investors. It doesn't need to be an either or thing. I think that's a common misconception.

06:27
Johnny Price
Like we love it when there's like a VC leading around, pricing around, and then you're opening up an allocation to let your customers and community invest as well. But for us, it's a marketing campaign and community engagement campaign.

06:38
James Reyna
Go ahead.

06:39
Daniel Scharff
So I think, yeah, one thing that I noticed then, not knowing a lot about crowdfunding is it seems like this is not about raising money from your friends and family as much. Like it's more about your customers. Like we're gonna make this a marketing campaign to our customers and give them the chance to support the brand. Is that right?

06:56
Johnny Price
I would say both for me, I wrote a blog post with a picture of Britney Spears that maybe we can share as a follow up. And there was in Britney Spears, she has a song where it's like all eyes on me or something like that. And for me, when you're running a community around, like go big, like push on all fronts really like try to get the word out as much as possible so it goes as quickly as possible. You raise as much money as possible and there's this real, like whoa, these guys everywhere has real kind of momentum.

07:22
James Reyna
And also Johnny, you told me one really good tip when we started, which was to think about concentric circles when you start to blast out your campaign because momentum is really important for fundraising in general, but definitely for crowdfunding. And when you start to think about who's your tightest concentric circle, your closest, maybe your team and your advisors, and then your customers and then your friends and family, and then keep breaking out of that's really how we targeted and like sectioned off communications and it just started expanding. Like it created the snowball effect naturally when we thought about concentric circles, but it was like everyone beyond customers too.

07:59
Daniel Scharff
Kind of like Amazon reviews, like no one's going to buy it unless you got some good momentum there. So start people who can give that to you.

08:05
James Reyna
Yeah, makes sense.

08:06
Johnny Price
Yeah, love that. Thanks for chumming with that James. Yeah totally agree. And so yeah, raise money for everyone, friends and family, angel investors, you know like one of the nice things about Wefunder as well, it lowers the minimum check size. I dont know what your minimum, James, was, but you can set the minimum between $100 and $1,000 from Wefunder. So typically if youre doing a reg d round taking checks of ten k, 20k minimums, well on Wii funder we have the platform and the infrastructure to allow you to lower the minimum check size. Then you can hoover up a bunch of smaller checks. And Daniel, its not just early stage VC's in this climate versus 2021 with stimmy checks and public stock portfolios to the moon, it was a lot easier to raise larger checks from angels.

08:48
Johnny Price
Now there may be a little more reticent to write a 25k check into an early stage startup. Well then maybe you can hoover up a bunch of five k, ten k, even one or two k checks and turn a bunch of nos into smaller checks. Yeah but if you kind of compound a lot of those together, it can build momentum. We also have 2 million registered users on Wefunder. 300,000 people have made an investment through the platform, 30,000 of those are accredited. So theres a lot of people well put you in front of as well. One thing I try to set pretty conservative expectations around is like how much you expect to come from our investor base versus people that you bring. It really varies on the campaign.

09:24
Johnny Price
Y combinator companies historically have pulled in two thirds of the investment volume from Wefunder investors, then one third of people theyve actually driven. For your typical CPG company, I would expect that ratio to be flipped, maybe 70 30, something like that. So you guys are bringing 70%. So if you want to raise two hundred k and we fund there, you bring 140k from your friends and family, angels, customers, your marketing, and then 60k you might expect to come from we fund. It might come in above that, under that, but I think that's kind of a healthy kind of average expectation.

09:55
Daniel Scharff
And then one question we got from Susan is she has heard that VC's and larger institutions don't like to see crowdfunding on the cap table. Now, is that antiquated? Is that true? What do you think?

10:07
Johnny Price
I think it probably depends on the VC. I think there's one element of it which is antiquated. So it used to be that when I started at we fund in 2018, like if you'd raise like 200k from 200 people, average investment on we fund is $1,000. So if you raise 200k from 200 people, we put 200 people on your cap table, that was bad. But that changed in 2021. So in 2021, the SEC allowed for what's called SPV, special purpose vehicles to roll investors up to one line on your cap table. So in the last few years and anyone raising a Mi funder, it's now one line of cap table. But I think some VC's or lawyers are maybe still living in the past, but they're not familiar with that. That's now solved.

10:43
Johnny Price
I think there's another question around kind of perception and like negative signal. And like if you raise from the crowd, like did that mean you couldn't raise from real investors? That's a much more kind of nuanced conversation. Like, for me, that's to some extent it's like, well, beggars can't be choosers. And like, to your point earlier, Daniel, it's like hard to raise capital. You're looking for alternative options, that if you need to raise capital to grow your business, just like do that. If you are really worried about negative signal and you are on the venture path, which obviously is not a fit for the vast majority of companies that are starting every year in America, but if youre on the venture path and youre concerned about signal, then what I normally recommend is to just have a VC lead the round.

11:21
Johnny Price
We would hope that any consumer facing company every round, even if its a venture led round, maybe especially if its a venture led round open up an allocation to let your customers invest as part of it. Really great example of that Mercury bank. So they raised $120 million Series B in I think it was 2021. And then after they closed the Series B they opened up a $5 million extension to let their customers invest. They funded $5 million from two and a half thousand customers in less than 24 hours. On we funder relets. Another example, 80 million Series B, 5 million community allocation 24 hours. And so if you are concerned about negative signal then I would say we believe theres still value in letting your customers invest. Its going to supercharge their NP's, theyre going to be loyal customers, brand ambassadors, etcetera.

12:10
Johnny Price
So just have them kind of follow if you see whos leading and pricing around.

12:14
Daniel Scharff
I dont know. Honestly ive never raised money but it seems kind of wild that somebody would look down on us being able to raise money from our community. For me that would be a great.

12:23
Johnny Price
Sign PresTon well exactly.

12:25
James Reyna
I found that to be true. People were like excited that were able to raise money from our community. I haven't been now to the stage where we're like actually having serious VC conversations, but most of the ones that I stay friendly with are like extremely supportive or happy or impressed that were able to do this from bringing in actual customers and people who love the product or the brand or the story so much that they're willing to put their money behind it beyond buying product.

12:52
Daniel Scharff
I could see if you've knocked on every door in town and then that's your last resort. I could see them being like, well yeah, because you guys were desperate, but if I don't know brand and they're just coming to me with this cool story and they're like, and by the way, we're scrappy and that's the valuation we wanted and we got it done with our fans and now we're coming to you like that's an incredible story. So I feel like it's all about the context and the story that you're.

13:13
Johnny Price
Yeah, and the position and that's a really good point. The last point you made, Daniel. And the other thing I'll say here is that at least good VC's, once we've taken care of the cap table issue, which we have. Right, good VC's I think will invest in growth. If a company has a hockey stick growth chart and a huge tam and an unbelievable team that is by far going to Trump. Okay, well, we raised 200 grand from 200 passionate customers like a year and a half ago its one SPV on the cap table. So yeah, good vC's. Hopefully youre investing in growth. These are just a couple of examples. Was this you, James, do you remember?

13:47
James Reyna
Yeah, thats a friend of mine actually.

13:49
Johnny Price
Yeah, I thought I took it from your page. So Kyle, alumni venture for America, Andrew Yangs nonprofit. Andrew Yang actually was the lead investor, if you know him, presidential candidate. He was the lead investor in his company MLE, which is live on Wefunder right now the other day, which is pretty cool. He had him on their podcast.

14:05
James Reyna
I gave him a lot of advice he was asking about. That's so funny because I was also in venture for America which from Yang. So that's funny. That's why I know Kyle.

14:13
Johnny Price
I know Andrew from the Cuba days. He was running VFA. I was running Cuba. Us. Good deal. Yang gang baby. Okay, enough politics. But yeah. So the comment here that Kyle mentioned rooting for you both and believing you both keep killing it, my friends, right.

14:25
James Reyna
Or Ashley.

14:26
Johnny Price
The products are converging across several categories and they're crushing with their sales and customer growth. These investor notes, we have a slack channel that we fund it. Every time someone invests, we see the investment come through in the investor notes. And reading these investor notes is for me like what Wefounder is all about, what community rounds are all about. Just like hundreds of people, customers, connections, supporters coming together to invest in a founder they believe in, a company they believe in sometimes a cause they care about and hopefully add value and kind of be supportive along the way. And also hopefully if you build a big company, you exit in five, seven years time. Make a bunch of money for your investors. Also make money for some of your earliest customers and supporters as well as a bunch of millionaires and VC's.

15:10
Johnny Price
Yeah, you can raise up to $5 million per year through a community round. Average raise on we funder is 400k. Average investment is $1,000. So 400 people investing $1,000 each, like I mentioned earlier, can be part of a larger round, an allocation for your customers alongside VC's. And there are competitors as well. So by all means do the research. Obviously, wefunda, you think are the coolest and we're certainly the biggest. So yeah, this is just an example of what our website looks like. I was going to maybe share my screen and go to the website, but I think that might be a little risky. So I'll just show you some screenshots. This is our explore page so you can see the different companies. We have different categories. This category is VC and notable angel bags.

15:49
Johnny Price
We have a, you know, consumer products category or a biotech category or whatever. And then once you click on CalmX, then you come through here. They're raising right now. They've raised 1.1 million. This is actually the second raise with us. Beauty kind of hair care CPG company based in Chicago. And yeah, 1.1 million raised from 1264 investors. If you go to wefund.com Kelmix and then you click on the what people say tab, that's the tab where I pulled those investor quotes from previously. Again, you can see this is what it's all about. I can't scroll down on the screenshot, but down below you can see here, price drowns. It talks about what the valuation of the company is and then their minimum check size is $250 and yeah, very easy.

16:30
Johnny Price
Just plug in a number there, invest, create a Wi funder account, check out using a credit card, bank account, Apple Pay pretty quick and easy. And that kind of leads me onto we funders mission. So we fund is a public benefit corporation, not a C Corp. And so we're pretty mission driven. A big part of that mission is to get more capital flowing to founders like James and probably a lot of you guys. We just think more capital flowing to entrepreneurs to allow them to kind of chase their dreams and build their company is a good thing. And then secondly, especially more capital flowing to underrepresented founders as well. That's women or entrepreneurs of color or geography is the other lens that I look at.

17:08
Johnny Price
It's like 77% of venture capital I think right now goes to three states, California, New York and Massachusetts sets. So we hope if we have kind of a more democratic approach to angel investing, we can kind of get more capital flow into 50 states throughout the country. And then on the investor side of the equation, the mission is to allow everyone to invest in startups they love, not just rich people. It seems, again pretty anachronistic to me. Certainly very un american. I always think its slightly weird for the british guy to be lecturing Americans on whats un american, but the idea that only rich people can invest in cool startups they love seems to be about the least american thing in the world. And then also building stronger connections between investors and founders.

17:52
Johnny Price
Building community around startups is actually a question id love to ask James. Maybe we can just jump to it now. James. But a big part of the vision for us is, okay, if you have hundreds of people who are investing in your company here, all of them can in small ways help maybe we had one story of a company getting their products into Home Depot because the founder asked the wefunder investors to hit up Home Depot and try to get them on the shelves. And they made that happen. Or help with hiring or product feedback or as you mentioned earlier, Daniel, Google reviews, Amazon reviews. Any examples of that for you? James would jibby two things.

18:29
James Reyna
One of the perks that we gave at a certain threshold of investment was that we would add people to our R and D sort of taste testers. And so it was kind of like a win because people are excited to be taste testers. And it meant that we got a whole extra big batch of people who would be like not only willing, but like excited to share feedback to us as were developing new products. Definitely that and Amazon reviews. When we launched on Amazon, we just asked everybody, hey, can you grab our product, write us a five star review, and like, that's a great way to launch a new product by having the core audience love that.

19:03
Johnny Price
Yeah. And the idea is if they are an investor, if they are financially incentivized by GB success, they're going to be more likely to write that review.

19:10
James Reyna
DANiEL oh, I was going to wait.

19:12
Daniel Scharff
But I mean, I can see it too, of just like, it feels cool to say that you're an investor in something, right? Like this is true. You can't deny that. And I think, like just giving your customers, I think, a chance to be able to say that to people, they're just always going to be rooting for you and always thinking of reasons to tell people about you. And, like, they do actually have a stake in the game. So it makes a lot of sense to me from that standpoint. And then I have one question maybe going to the next slide, which is so one question that I have is about valuation. So these days I said, hey, early VC's mainly have left the building angels. I think, like you were saying, they're a little tougher and I bet they're much stricter on valuation now.

19:54
Daniel Scharff
So let's say going back, I don't know, three, five, seven years, whatever, food tech heyday, you know, you have an idea for a company, it's worth 5 million already, right? And you got like a little bit of traction, maybe an actual product. Whoa, we're at 10 million. Let's go. You know, you can give away 10% of the company and get a million bucks. Great. Like, that's not going to happen these days, right? And you know, you're seeing 2 million valuations, right? And so like, yeah, the amount that you have to give away to get some cash is going to be tough.

20:22
Daniel Scharff
So if you're raising money, what do you think you can defend for a valuation on a platform like this where youre really talking to consumers and theyre going to see all your data probably, and you got to really be out there defending it versus also these days going to angel investors or vcs and the valuation you can defend there?

20:41
Johnny Price
Yeah, thats a really good question. Its again a little nuanced. The answer is usually it depends on what situation youre in. So its nuanced. What I normally say is, I think one of the advantages for founders of raising capital through we fund a, there is going to be a little more leeway in valuation. A customer writing a $500 check is going to be less price sensitive on valuation than a VC writing a 500k check. I think that is like theres some element there to which that is true. I think you can easily get in trouble by pushing that logic too far. And if youre too far out of line with market, then sophisticated investors that know what theyre doing. Again, 50% of investment volume on we fund is from accredited investors.

21:23
Johnny Price
And if legit angels that know what theyre doing who are going to write you a 25K check are then not going to invest or are only going to reverse the $1,000 versus $10,000 because you push the valuation too high, then youre just going to raise less money and its going to be harder to raise money when you try to get in front of investors on wefunder as well. Again, well put you in 30,000 credits and investors. And so again, if youre competitive, youre going to put yourself with a better shot of like raising more money from our community. So what I normally recommend here is, again, you want to try to line up investors at the start, right, as a private phase and we fund it before you publicly launch.

22:00
Johnny Price
And so from those kind of angel investors that youre pitching or folks that hopefully are going to write some larger checks into, anchor the round at the start in those conversations, try to zero in on, okay, whats the valuation where theres going to be demand for investors and then kind of put those terms up on we funder. But I do think right now VC market is down. In 2021, VC valuations were too high. I would think its very fair to say in 20, 23, 24 VC valuations are too low. Theyre going to bounce back. And sometimes startups will use this as a bridge where, okay, I was talking to a founder earlier today where its like, okay, let me raise a bridge round for my community right now.

22:39
Johnny Price
And hopefully, and then in six months time, one, ill have slightly more kind of growth metrics to show. And then secondly, the VC market will have picked up again, nothing to do with my companies, just the market is inflated a little bit, so ill be able to command a higher valuation in six months time. So to some extent I think that can be a benefit to founders sometimes, but you should be careful about pushing it too far.

23:00
Daniel Scharff
Okay, makes sense. And then my second question is, whats the deal with like, you see everybody like, oh, their goal was only 50,000 and theyve raised 8 million% of that and theyre at 1 billion. You always see kind of a low goal and then an absurd amount raise where like, oh, theyre so successful I have to invest also. What is the strategy and thinking there? What do you tell company?

23:22
Johnny Price
I think that we have a company called Republic. I think that's maybe a little bit more in their kind of Ui. I didn't think you'll see that on Wi Fi. Although now I don't have it in front of me. And now I'm suddenly worried that actually maybe we do have that say on Wefunder. We have a minimum goal and a maximum goal. So let's say you want to raise 500k, but you might set a minimum of is the minimum we allow on the platform. Most companies, when Wefunda will go with a 50k minimum. So then the minimum is important for two reasons. One, as long as you pass your minimum, you can keep what you raise. So in that case, if you only raise 40k, campaigns of failure, 40k goes back to investors, you don't get anything.

23:58
Johnny Price
But as long as you pass 50k, if you want to, then you can close on the money and say, okay, well, we only raised 300k, but we passed the minimum, so we can keep what we raised. The other thing that's relevant with the minimum is as soon as you pass your minimum, we can send you a rolling close. So let's say a month into the campaign you've raised 200k. Well that's past the minimum, so we can send you then you keep raising, raise another three hundred k and then we send you the rest at the end of the campaign. So the minimum will be kind of a lower goal. But I think the way we do the UI and we fund there is in that particular instance, the goal will be like the, so it wouldn't be showing kind of 800% over goal.

24:37
Johnny Price
I agree, that looks a little bit.

24:38
James Reyna
Strange, but there's also sometimes tranches you'll have an early bird goal, right. And like an early bird goal might have a discounted Val cap and we did this and that's to help incentivize sort of like that first bucket of investors to like you know prime the pot and get the momentum rolling. So like we did that. So we had like first goal hit and then next goal at a higher valuation. And like this also gave moments for us to push urgency and fundraiser and that's really important in fundraising of any kind, like even when you're talking VC. So using goals as a strategic part of fundraise was really important for us.

25:16
Johnny Price
Yeah, I totally agree. That's a really good point. It actually makes me think of another kind of broader point as well, which is it ties back to the conversation on valuations earlier. I think a lot of this stuff, one thing we funder is trying to do, I think this actually quite differentiates us from our competitors. We're trying to say how does fundraising normally work? And let's basically replicate that just now. Everyone can invest and you can publicly promote. So for example like if you would raise on a YC safe, if you are raising from agents and VC's raise on a YC safe on we funder, if you would do a revenue share, if you are raising three regd then do a rev share on we fund it.

25:51
Johnny Price
If your pre money valuation will be 8 million in a Reg D, do something pretty close to that on we fund there. And then to your point James, on the like the psychology, right? Any fundraising round is like, you know, fomo scarcity, like you know, psychology and thats really important on wefunder as well. We have this mechanism where you launch in private and so everyones always like how quickly can you get me in front of the wefunder investors? How quickly? Its like thats actually the wrong way to think about it. You want to raise as much as you can. As James mentioned earlier, those inner concentric circles in private.

26:21
Johnny Price
So that then when you push the button with a public launch, you go live, you push it out on social media, email blast to your customers, you get in front of the wefunder investor base, the more money youve raised there the better. So if youre trying to raise $2 million and when you go public on Wefunder is a 50k, that is a horrible, awful signal, right. So the more youve raised in that private phase, the stronger the signal. And again, its like just a lot of these elements we want to try to replicate conventional fundraising just like anyone can invest.

26:49
James Reyna
Okay, I think this will take us.

26:50
Daniel Scharff
Into this slide but we got a few questions from people in the chat here around when should I raise and how will I know how much I should raise and you know, should I have a certain kind of revenue before I do it?

27:02
Johnny Price
Yeah. And yeah, this is probably relevant for this slide. I mean I am a little biased right away for refunders so you should definitely talk to other people on this question. For me like I don't really understand why you would do a friends and family round and not do refund that. There are some pros and cons actually I think on the next slide we get into that but for me this is like a great fit for a friends and family round because you know it's all in one place. It looks really neat. Its clear investment contracts, we take care of the payment processing, we roll it up to one spv on your cap stable if you want to, you can also push it out into a larger base, get in front of the wefunder investor base.

27:37
Johnny Price
So I think its a pretty efficient and kind of neat way to run a friends and family around with first money in and then substack are raising $5 million from 8000 substack users in 24 hours as an extension to their series b. And obviously if youre trying to raise $5 million in a day then really the only fit is going to be okay. If you have a huge audience of passionate customers that love you like Mercury, replace subsect levels, these guys will raise $5 million in a day. And we funder basically the bigger the audience, the more passionate the audience, the more explosive its going to be.

28:15
Johnny Price
For me a big part of it is how much are you trying to raise and even if youre an earlier stage company, if you can hustle and you know how to kind of close and sell your company, even if it's just like 100k like we fund, it can be a useful platform to do that. Like fathom video, they raised $3 million on Wefunder and this was obviously the case for James at Jiby. Fathom raised 3 million on Wefunder. It was like 2 million from VC's and then 1 million from their customers. So that's the other kind of, it doesn't need to be a standalone thing.

28:44
James Reyna
We did that also. I was going to talk about that. We took VC money and we also had in tandem a community around refunder and I think that was a really.

28:52
Johnny Price
Good way to do it for some.

28:53
James Reyna
Of the reasons you mentioned before of like if somebody doesn't want to hit our minimum check size but is still really interested, maybe angel investor who might want to put in like a few thousand dollars rather than a 15k minimum, they'll do it. But I also wanted to answer, I think one of the questions was like how do you know when is the right time to raise? Like Johnny, you answered it from like a very like a technical standpoint, you can do it when you're going to do a friends and family thing. But if we need a more like business perspective answer, I would definitely throw out that like when we first raised ever, we did it on the wrong perspective and were trying to raise to solve problems and it's a really bad time and reason to raise.

29:31
James Reyna
When we got a little bit older and smarter and did the refund around like were raising to start scaling solutions. And just from like a vehicle thing aside, you should always raise not to solve problems but to scale solutions. That's how you know it's time to raise. Love that.

29:46
Johnny Price
Totally agree. Raise from a position of strength. This is the slide I mentioned on the pros and cons. Id be curious about if James has other stuff to add into this. For me, main pro is this is an awesome marketing campaign. Ive had many founders tell me this is the best marketing campaign ive ever run. Turn like hundreds, maybe even thousands of your customers into investors and owners we believe will do good things for your growth and therefore actually make it easier for you to raise from vcs and follow on rounds. Because VC is like investing in growth can make it easier to raise capital because now you can raise from everyone unaccredited as well as accredited investors.

30:20
Johnny Price
You can get in front of wefunner investors, you can publicly promote the offering, you can hoover up a bunch of smaller checks and this is a little bit more airy fairy where its part of our public benefit corporation thing. Wouldnt it be cool if when you make a bunch of money IPO like your earliest customers and supporters are kind of making money with you? I tweeted the other day I think it would have been cool if 5000 Uber drivers have become millionaires at their IPO. I mean, you know, Jason Calacanis is cool but you know, this week at startups but you know he already had a bunch of money. Would have been cool if like some of that had gone to the 5000 drivers. And then on the downside it can be an expensive way to raise money.

30:59
Johnny Price
Say we fund a charge of 7.9% and they might erase startup CPG. Community members earn a discount to 6.9%. So you guys can buy Daniel Beer for that one. But still 6.9% is not the cheapest capital out there. I think you can do an spv on angel list for a fraction of that. So if you just want to raise from accredited investors, it's going to be cheaper. If you want to raise from minor credit investors as well. I think we funder is the cheapest platform, certainly of any large platform, but still it's not the cheapest way of raising money. Sometimes what I recommend is with what James did, if you have larger investors coming in writing 50k checks, definitely don't bring them in through refunder. We don't earn 6.9% of 50k check that you guys were going to bring in anyway.

31:45
Johnny Price
If it's an investor that we bring, which occasionally happens, then I think we earned the fee on that one. But you definitely can do what changes larger investors bring outside of we funded, don't pay the fee.

31:55
James Reyna
Okay.

31:56
Johnny Price
Hoovering up a bunch of smaller checks. I think the fee makes sense on those. The other thing we haven't touched on yet, and this is important, the SEC say that because retail investors are investing, we need more public financial disclosures. And so you need to get financials done, gap financials for two years, or if you're a startup, then going back to your incorporation date or incorporated more recently than two years, going back to the incorporation date and depending on how much you raise. So if you raise up to 124k, just self reported financials. If you raise between one hundred twenty four k and one point two million CPA reviewed financials and then more than 1.2 million up to 5 million, you need CPA audited financials. So firstly, that's a cost.

32:37
Johnny Price
If you're raising more than 124k, you've got to pay a CPA to do a review or an audit. Review might come out at between one and seven k. In my experience, depending on the complexity of the financials, audit might be twenty five k. The other thing there is these financials are publicly filed with the SEC, so anyone can go to the SEC Edgar website and it's also linked on the Wefunda page and see your financials. So if you are really sensitive about I do not want any retailers to see how much money I made in 2023. It's high level p and l. It's not like SKU level margins or anything like that. But if you're nervous about those financials being out in the public domain, that's usually a deal breaker.

33:16
Johnny Price
So you have to be kind of okay with at least like high level p and l cash flow balance sheet being kind of out there.

33:22
Daniel Scharff
I haven't heard any brands worried about retailers seeing it. I've heard them be like, well, it doesn't look great. Like, like my financials, its kind of a tough year. Thats one of the reasons I want to do this. Thats why I dont want the financials to be out there. But thats going to happen no matter who you try to raise money from. Right?

33:38
Johnny Price
Exactly. If youre going to raise money, then theyre going to be digging deep in the due diligence into your financials. But maybe theres a timing of when you want to show that. But yeah, certainly thats a good thing. And with Reg D, it's not a public financial disclosure. Sure your investors are going to dig through your data room, but it's not publicly shared. And then the other thing we talked.

33:59
Daniel Scharff
About touch on. So what I'm gathering from this is people are asking, hey, could I launch from this pre revenue right away? And I think the takeaway that I'm getting from what you're saying is this isn't just some bountiful stream of investors and you dip your fishing pole into and they're all going to come hopping like you need to work. This is a platform largely for you to raise from your customers, from your friends and family. Like you're going to have to go out there, you're going to have to campaigns. You might even promote it on social and like do paid ads and stuff. Now you might also get some stuff from the we funder universe. But like primarily you should be planning for how am I going to raise this money on this platform? Is that right?

34:39
Johnny Price
And I would say, like, you know, the earlier you are, probably the harder it's going to be to persuade a bunch of strangers on we fund all social media to invest in you. And so the more it's going to have to come from you pitching investors, you know, one by one, closing tricks one by one. But yeah, I totally agree with what you just said. And look, if you're substack, then you can send one email to millions of users and raise $5 million in a day. But that is the rare exception on wefunder for most folks. I think it can make fundraising a little bit easier. But yeah, it's fundraising. Usually it's hard work, it's a grind. And yeah, if you don't have that like hockey stick. It's going to be harder. So just quickly spin through this. Mentioned earlier, 5 million per year.

35:19
Johnny Price
Just talked about this, the financial requirements before closing on the money you need to file a form c with the SEC. Thats whats called form C. We do that for you as part of our fee and then 21 days after that you can get your hands on the money. Actually this is kind of an important point. So before you can close on the money you need to file this form C paperwork with the SEC. But you can actually start fundraising immediately. So if anyone wanted to go and start a wefunder page they could be live on wefunder like in an hour's time and starting to share it with people. And then we kind of hold the reservations in an escrow account. And before we send you the money you need to do the legal paperwork. Like I mentioned, minimum raise one hundred fifty k.

35:59
Johnny Price
And yeah with regulation crowdfunding you can promote it. And actually this is an important point. Kind of touched on this but just to be explicit, you can raise on equity or debt. Actually on we fund, the vast majority of what we do is equity but there are some debt raises as well. And then within equity you can do a safe convertible note price round on the loan side you can do a loan with a fixed interest rate or a rough share. So whatever the investment structure that makes sense, we can accommodate on we funder. So yeah, just before we get to.

36:26
Daniel Scharff
James example, so just to like summarize how you might suggest someone does this, they're gearing up. Susan chimed in like hey, let's say I have a 6 million valuation and I'm just going to try to do a raise and I want to do a crowdfunding raise. What I heard from you is like hey, if you're going to include in that some bigger angels that you already know, you know, over 50k type stuff like go and get the checks from them, don't do that through us because you don't need to pay the fee, 7% fee or whatever through us for checks that you already have. But then maybe to give the round some momentum if you have like angel investors that are 1020 that kind of range, like maybe good to get them lined up ahead of time.

37:04
Daniel Scharff
And then, so when you actually launch the campaign that's public that people are going to see not for those checks that you already got, but the remainder amount that you're trying to raise, theyre already in and theyre hopping in on day one and theyre giving you that good momentum, those smaller checks, and then you get to the point where youre going to then hit the next concentric circle, start raising with your customers, maybe. Does that sound right?

37:25
Johnny Price
Exactly right. And I think it would be great to turn over to James at this point because if you look at the website right now, it says 462k there on the WeFund campaign. And that was basically, I think, something like 360k from accredited investors. And it sounds like a vc as part of the round and then basically 100k from customers and the broader community. And so James is a perfect example of where you used Wefunder for like a component of the raise. But how did you structure it and kind of approach it, kind of from a process and timing perspective?

37:54
James Reyna
Daniel, one of the things that you can do on Wefunder, which is cool, is that because we raised on the same firms, like our safe note on Wefunder was the same safe note that were sending to private investors, we're able to sort of pull that goal together on Wefunder. And like, if you're on that screenshot, if you like, hover over the number, it'll say what the breakdown is. Right. And so even if you're raising off of Wefunder, it'll sort of go towards your we funder goal, because that's your fundraising goal in general. So that's good. I also wanted to talk about, because I know a lot of when I've had conversations with people who are asking me about my experience with Wefunder, most founders are really interested in literally, like how did you do it? Like how did you market? Was it hard?

38:34
James Reyna
Did it take a lot of time? So I would love to talk about that. Kosher.

38:38
Johnny Price
Yeah, and just, I'm going to drop a link in the chat as well with a fundraising guide we put together. But, yeah, that would be awesome.

38:45
James Reyna
James, go ahead. I was going to start with that link because that link is like literally just the handbook for how you should put. I think it's learn Wefunder.com, or did you change it?

38:56
Johnny Price
I don't know why learn takes us well.

38:58
James Reyna
I mean, it's one of those anyways, but it's basically like the handbook for how to successfully raise around. And it talks about breaking down your layers of communication all the way from thinking about pre launch to post launch to the first few weeks of your campaign. The middle, which kind of is like no man's land. And we got probably 80% to 90% of our entire round in the first two weeks. And the final week, and were live for about two months. I saw somebody ask, is there a time limit? I don't think there is actually a time limit. You can have a campaign open for quite a long time, but we got almost no investments in sort of that middle month period. We had a few conversations with VC or small angels and then directed them towards wefunder.

39:41
James Reyna
But most of our marketing communication happened before we launched. Right? When we launched, like, heavy, like one email a day, one text a day, one social media post a day, and then at the very end, like, really pushing funnels. So what we did was first break down audiences into concentric circles, like talking about, like, who's the most likely? And then who has never heard of jiby and breakdown communication and order of those. And then we broke down communication by channel. So you've got Instagram, you have your email list, you have SMS, you have TikTok, you have LinkedIn, you have slack channels. If you're in any group me channels just break down every single channel that you have to communicate to people. And then the third thing that we broke down was, what is sort of the message in each point?

40:23
James Reyna
And how does that paint an overall picture? For example, before we launched, we already knew were going to do we funder, but before we launched, we said to our audience, hey, we're thinking about doing a community round, right? Like, can we count you guys in? Basically a really short founder email like that, you know, not like thousands of people are responding and be like, yeah, you should do it, let's go. But a good amount of people said, yeah, that would be really cool. And then, you know, the next day or 48 hours later, the next email was like, we had so many people say, yes, we want to do a community round. And so that was our next bit of communication, people. So, like, really trying to build this story of momentum and groundswell even before launch was super important.

41:03
James Reyna
And then when we launched, we could say, like, it's go time, or even it's like 24 hours to go time, then it's go time. And we got a lot of money in the beginning just because of that and, like, thinking about how we can break down the communication.

41:13
Daniel Scharff
So, James, just a quick question on when you started getting those emails from people. Like, actually, yeah, I'm interested. Do you see any commonalities and who those kind of people are? Like, are they all people that, like, you kind of knew before they became fans of the brand or these are random people? Like, could you say, like, yeah, this. Like, anything demographic wise or location wise? Or income wise that you're like seeing. Oh yeah, it makes sense. They're from this group that's probably going to invest.

41:37
James Reyna
It was definitely a huge amount of subscribing customers. Like, it was people's names who I recognized who were like, whose orders I packed a million times when were self fulfilling. So, like, people who I had never spoken to, like, you know, a customer who had been like a ten month subscriber put in like a $10,000 check and I had never spoken to this person. Like, thats crazy. Thats really cool. There were a good amount of people who I knew, but I would say that was the minority of our overall investors. And I think Johnnys ratio is pretty accurate. I think we raised like 60% from our community and maybe 40 or a little under 40 from Wefunder. Like people who werent customers and I had never spoken to, et cetera.

42:17
Johnny Price
It was actually 65% from first time investors on Wefunder and 35% from existing we funder investors. So yeah, a little bit over the 70 30 split I mentioned before.

42:27
James Reyna
That's great. Another thing that I wanted to mention is like, you put this in the beginning of your slides, Johnny. Like, a lot of the Wefunder launch campaign is a marketing campaign just as much as it is a fundraising campaign. And if you follow a lot of the same principles as like a product launch, which are like, we're going to pre hype our audience, we're going to tease it, then boom, we're going to have a big splashy launch and then kind of follow up on educational things right after that. That was really what it was. And I think the context of like, we are marketing this campaign to our consumers and to our community is an important way to think about it. And like, here's a really good example of that, actually.

43:04
James Reyna
I had sent like, I think it was on like my 7th email. I sent my 7th email and I noticed that my mom invested. She put in like $1,000 and I was really excited, obviously. But I asked her, like, I'm just curious, like, why did you invest on email number seven and not like when we launched? And her answer was just generally because like, you meant to every single time. But she's getting emails, she's a busy person. And like, it just was always the wrong time and wrong place and then she clicked one of them and it was the right time in the right place. And I think a lot of founders are like afraid to annoy people, which is valid, but you gotta be a little bit annoying to pull something like this, like, to, like, really do it.

43:43
James Reyna
There is that rule of seven. Like, somebody has to hear something or see something seven times.

43:47
Johnny Price
I was just gonna say, your mom's answers to that question was like, well, I don't know if you heard games, but there's a rule. People don't do anything until the 7th touch point. Just to build on what you said on the marketing campaign. I don't know if you did this, but one specific tactic that I love is like a fireside chat where you invite a bunch of people to a webinar, can be digital, can be in person as well. You're the star of the show, you're the founder. Talking about the journey and your background, why you started the company, the pain point that you felt, then the vision you had, and then the journey so far. And it's kind of like it's marketing the we funder community around. And hopefully people that by the end of that hour, they're like, man, this guy's awesome.

44:29
Johnny Price
Where do I invest? But it's also just unbelievable kind of excuse or opportunity to really bring people into their brand narrative. And your personal narrative is found, obviously, like CPG companies. Like, the personal founder brand is very inspiring with the company brand. Did you do any of that at.

44:45
James Reyna
All despite being on this webinar? I really don't like being on camera and talking, so I was, like, embarrassed to do these Instagram lives. And I saw a lot of other people do those for successful campaigns. I never did that, but I did do certain emails that went out after customer second order or something that was like, hey, by the way, we're raising, if you want to chat, here's a link to my calendar for a 1015 minutes convo. I can't say that I had hundreds of fills, but we have a dozen or two dozen of just, like, random person decided to take that call because they were interested in learning more.

45:18
James Reyna
Another thing, this is, like, just more of a small tip that I remember being weirdly successful was an email that was kind of like a filler email that we sent out that wasn't really like asking or pushing anybody to raise. Like, because I see a comment in here, like, I feel icky asking people for money. I totally agree. It feels weird when you're like, give us money, we're raising, blah, blah. But one of the more successful emails was actually just like an FAQ about Wefunder. Like, what is Wefunder? Is it safe? How does it work? And it was just like a little FAQ that was built off of an FAQ from Wefunder. And the lesson learned from there was like, think about kind of all the reasons that somebody might not want to join or might not want to invest, but, like, they're interested.

45:58
James Reyna
And one of them might just be like, they know Jibby and they love our brand and are interested, but what the hell is Wefunder? Or I've never invested in anything before. And so also consider that in your communication, if you're raising, like, you already know a lot about wefunder because, like, you're on it, but make sure that your customers know what the hell it is too.

46:16
Johnny Price
One other super specific tip is text messages. I don't know if you did this, James, but, like, multiple founders have sworn that, like, sending SMS messages, wefunder is like very good on mobile. Like, beautiful. Like Apple Pay checkout, you know, Google login, Apple Pay check out, super easy. And folks have told me they've raised hundreds of thousands of dollars by sending a bunch of text messages. I remember when I liked your analogy to the product launch we funded, launched this kind of newsletter. We have found a secrets on product hunt last year, and for the last two or 3 hours of the race on product hunt, I was sitting in my bed texting. I texted 250 people on my phone. And it's like, if I was launching a refunder, I would do the same thing.

47:00
Johnny Price
Just replace, like we're launching our products on, but like, hey, it, check it out. We run a community around and I.

47:05
James Reyna
Think people can really tell when they're being, like, mass marketed to versus, like, something that is more vigilant. And I did the same thing. And I think what you're saying is not like, go to Klaviyo and do your SMS list. Like, I literally text 100%. As many people as I know individually.

47:19
Johnny Price
I'm not smart enough to do Klaviyo. So it had to be one one.

47:24
James Reyna
You kind of have, like, a bunch of different ways to talk to consumers. And, like, one way to talk to consumers is from Jivi, the brand. But another way to talk to consumers is from James, the founder. And so, like, I would send a lot of plain text emails that were like, 100%, hey, it's me, I'm the founder. And here's our story. And then I would send more, like flashy or branded emails that are from jiby. And this just gives you, like, more ways to connect and more ways to connect intimately with your consumer base. Oh, yeah.

47:50
Daniel Scharff
I just wanted to ask one question that was coming in through the chat from absinthia is around female or underrepresented groups representation. So do you have any data around like hey, we know this disgusting data point about how only 2% of funds raised through VC go to female entrepreneurs. I know you said this is a better platform for underrepresented groups. People don't have that same access, which I love. And honestly there's nothing that makes me more annoyed than when a VC requires their email address to connect with them. On LinkedIn I'm like, okay, you only want to connect with people who are like your network. I get it. So I assume this is already better. But do you have any anecdotes or data points around, you know, what percent of the people raising are female or underrepresented groups? And also what about the investors?

48:36
Daniel Scharff
Are you seeing more of the investors like female investors or what do you see?

48:40
Johnny Price
Yeah, some progress on both sides of the marketplace, the founder side and the investor side. Not like it's not like 50% of investors and we've been or women. But yeah, we don't have perfect data. We don't ask either investors or founders for ethnicity or gender data so we dont have great data. But from the kind of qualitative, kind of sample based approach on the founder side that we did a couple of years ago, 20% of capital was going to female founders. So way better than the 2% stat that you mentioned that I know. And I think if you were to cut it by ethnicity as well youd see kind of significant improvement in terms of like the amount of capital going to founders and then on the investor side, 70% of investors on Wefner and men 30% women, which obviously is not 50.

49:24
Johnny Price
But if you look at angel investors, I think it's like 80 515 men to women. So again, kind of positive movement in the right direction would still love it if we could get closer to parity. But I think on both the founder side and the investor side, some progress for sure. And again we found if you read our public benefit corporation charter, in that charter we talk about expanding assets to capital offer underrepresented founders.

49:47
James Reyna
Great.

49:47
Daniel Scharff
Okay cool. Well I think we're just about wrapping up here. I think we got through pretty much all the questions. Somebody asked for a reminder on the fees. So I think typically we funders model is that for all the amount of money that you raise through refunder you would typically be taking 7.9%. If you use the startup CPG link that I'll post again here now then it's 6.9%. So not free but at least that'll save you a little bit of money.

50:14
James Reyna
Also on fees I think it's important because I think people also wonder like how much does it cost to actually just set it up like do a campaign? And the answer is if you can do the deck and the story page yourself and you're comfortable doing the reach out and sending the emails, then it's free. There was nothing else other than your time and it was a lot of time. It takes work to put in these things and prep these things. But we also were able to do a lot of our emails and planning ahead of time so that weren't scrambling to do them live. And by following the guides thing that Johnny posted like we're able to get that all done right like a big chunk of it before we even launched.

50:53
Johnny Price
One other kind of question on the fees and again this is nuance but James, how much do you spend on like paid ads and paid marketing for the race?

51:00
James Reyna
We did none at one because were recommended kind of not to and two because were only selling CBD at the time and you just can't run anything that talks about CBD. So.

51:09
Johnny Price
So thats because Daniel, you mentioned paid ads before and thats again thats I think one thing that differentiates wefunder from our competitors. We dont really love paid ads as a way to raise money. I think its already the 6.9% fee. What you typically find in Roas return on ad spend is like four to one, something like that, five to one. So if youre spending $0.25 in ads to raise a dollar of capital plus the refunded fee on top of that just becomes a pretty expensive way to raise capital for me. If your customer LTV is really high and so you're spending ad dollars and you're raising capital and recruiting customers, then actually it can start to make economic sense. But just to say I think because with Kickstarter I think people are often spending time money on marketing.

51:50
Johnny Price
With Wefunder it can work and we'll talk to you. And that's another thing we haven't touched on our team. We want to be supporting and advising and guiding consulting with anyone working through our process. But one of those things will talk you through is like okay, does it make sense to spend any money on marketing paid ads here? And usually the answer is no.

52:10
James Reyna
Got it.

52:10
Daniel Scharff
Makes sense. And are there ways that you can get cool features as if you're doing well, as Wefund are going to throw it up front and center on the homepage, that maybe gives you a little bit of a boost or that percent that you get from the people who aren't really your people.

52:25
Johnny Price
We have a rule, the first 50k is on you. So we're not going to even list you publicly on the wefunder list of companies. Email you out to our guys until you get 50k. Once you hit 50k, then you can, at any point you can choose, okay, we want to go public again. Usually I recommend actually, don't just go public. As soon as you hit 50k, raise as much as you can first. Then you make a stronger first impression with our user base. But then there are various milestones. Like once you pass fifty k, one hundred k, two hundred fifty k, five hundred k. We do basically different marketing activities that will give you more real estate and more kind of eyeballs on the we funder investor base.

53:00
Johnny Price
And so that 70 30 ratio I mentioned earlier, again, that would varies company by company, but whether it's a 200k raise or a $2 million raise, the average remains pretty constant, 70 30, because basically, the more money you're raising, the more exposure you're getting to the we funder audience. And yeah, we follow those rules pretty rigidly. We're kind of regulated by FINRA, so we can't give kind of special treatment to this company over others.

53:23
Daniel Scharff
Makes sense. Okay, so just a reminder to everybody, I pasted the link that we have, which saves you on fees in the chat here. I also, without asking, gave Johnny's email address. I mean, if you email him, I would just mention startup CPG. So again, you can get coded in with that discount. It's Johnny, J O N yfunder.com. Probably his assistant. Respond. Her name is Joni, which is a little confusing, but it works.

53:51
Johnny Price
Yeah.

53:51
Daniel Scharff
Thank you guys, everybody, for listening in. This was really interesting for me. Obviously, I was learning alongside all of you. And thank you, James, for bringing the brand perspective and hit me up on.

54:00
James Reyna
Slack if you want to talk, even just like 15 minutes chat, I'm happy to share my experience a little bit more in depth.

54:05
Daniel Scharff
All right, any other closing words?

54:07
Johnny Price
Invest in companies on Wii funder. Don't just raise capital for your startup, but become angel investor. Invest in a cool company like Chibi. Take it. Two minutes. Be angel investor. Woo hoo.

54:18
James Reyna
All right.

54:19
Daniel Scharff
All right, thanks, everybody.

54:20
James Reyna
Thank you, guys.

54:21
Johnny Price
Cheers, guys.

54:22
James Reyna
Bye. Take care. Bye.

54:25
Daniel Scharff
All right, everybody, thank you so much for listening. If you enjoyed the podcast today. It would really help us out if you can leave a five star review on Apple Podcasts or Spotify. I am Daniel Scharff. I'm the host and founder of startup CPG. Please feel free to reach out or add me on LinkedIn. If you're a potential sponsor that would like to appear on the podcast, please email partnershipstartupcpg.com and reminder to all of you out there, we would love to have you join us the community. You can sign up at our website, startupcpg.com to learn about our webinars, events and slack channel. If you enjoyed today's music, you can check out my band it's the super fantastics on Spotify music. On behalf of the entire startup CPG team, thank you so much for listening and your support. See you next time.