Wefunder launches campaign to help coronavirus-impacted small businesses crowdfund loans
With the COVID-19 crisis, startups across Silicon Valley are looking for opportunities where they can both increase the visibility of their services and be helpful to people and businesses deeply affected by the pandemic.
Wefunder, an investment crowdfunding platform, announced an initiative Tuesday to help small businesses impacted by the coronavirus secure loans through its platform on friendlier terms.
The goal of the Coronavirus Crisis Loan program is to “provide critical cash flow during this economic crisis at a reduced interest rate,” a release from the company detailed. Loans can be structured in amounts ranging from $20,000 to $1 million with payments deferred until 2021 (and flexible, depending on revenue). The startup has a pretty simple calculator on its site to help businesses estimate what their payment structure would look like.
For Wefunder’s part, it’s not charity — they’re still taking a slice of the total volume raised, though they are halving their usual percentage from 7.5% to 3.75%. Wefunder also charges individuals a 2% cut from their contribution.
Wefunder was founded in 2011 and has raised just over $9 million in funding from investors, including Visary Capital and Y Combinator. In recent years, legislation passed that has made it possible for companies to raise smaller amounts of money — about $1 million or less in total — from non-accredited investors. The company says that businesses have raised $130 million to date through the platform.
Back in 2016 when the legislation was first introduced, equity crowdfunding was a pretty hot topic of discussion, but for the most part, equity crowdfunding hasn’t become commonplace. Part of this is the result of prevalent seed capital, something that has likely increased the riskiness of the startups that seek funding through platforms like these. This is obviously less of an issue when a good deal of the motivation to invest in a small business is because of the social good component, as might be the case with investors backing businesses taking advantage of this new program.
Alongside its loan program, Wefunder has also announced a three-month startup accelerator program focused on startups that can help tackle problems that will result from the crisis. They’ve notably cast a pretty wide net for the startups they are looking for, everything from remote collaboration to telemedicine to homeschooling, but they will invest $50,000 in each company and then help them raise more money through their platform on demo day.