And we now earn 'carried interest.'
This post was originally published on May 20, 2013 by CEO Nick Tommarello
After funding four startups, we've learned a lot, and have decided to start charging for our services.
We don't believe charging startups any significant amount of money is a good idea. Good startups have plenty of options to raise capital. Only startups who have no other option would pay transaction fees . Are those the investments you really want to make?
There's a better way.
We've registered with the SEC to be an investment advisor, taking advantage of a new exemption in Dodd-Frank for online venture capital funds. Our friends at FundersClub had the same idea, and kindly paid their lawyers to get a No Action Letter from the SEC!.
From this point forward, following the guidelines provided by the SEC, we will charge 20 percent carried interest. This means we'll share 20 percent of the profits if your investment is successful. And if it's not successful? We make nothing.
We like this model because it aligns our incentives. We only make money if you do, and we're in it for the long haul. There's no incentive for us to put crappy deals on Wefunder to earn transaction revenue.
To cover the costs, there's also a small administration fee. This pays for things like setting up the WeFund LLC, franchise taxes, banking, accounting, legal, and custodial fees. We don't earn any revenue out of this fee.
We have a lot of startups in the pipeline, and we're excited to show them to you!