The main similarity, besides both being YC alumni: FundersClub and Wefunder both form single-purpose LLC's that aggregate small investors, and then make one investment into the startup. So the startup only has one investor on their cap table.

The main difference is one of long-term vision. FundersClub is invite-only and exclusive. Wefunder is designed for everyone to be able to invest in startups. We're most excited by Title III JOBS Act, which will let unaccredited investors invest as little as $100.

We believe that the true value of crowdfunding comes from having your most passionate users and customers invest, not just C-level execs in an invite-only club who you've never met. The people who love your product can invest small amounts on the same terms as professional investors.

Thanks for the reply. That's interesting, I wonder what Fundersclub aims to gain from excluding smaller investors.

I have another question for you. What prevents your investment from getting squished in future rounds?

I've been wanting to use a platform like this for a while, and that's one of my main concerns.

Investors on Wefunder are investing on the same terms as the professional investors. It's possible that investments could get squished, but that would lead to a lot of pissed off people, not just the smaller investors in the fund.

One would hope that, in the future, a $100 investment doesn't cost the startup $25. ;)

We'll be under a different regulatory regime by then. :) We also will decrease our costs as we scale.

Can anyone link to/explain what the 10% carry means?

To make it simple: Let's say you invest $1000 in a startup. The startup gets acquired and your stake is worth $10,000. You get your $1000 back, and then get 90% of the rest. So you get $9100, and Wefunder gets $900.

So x% carry means that the other party gets x% of your profit from a particular investment? Got it, thanks.

And AngelList, if I might add?

AngelList is optimized for professional investors in Silicon Valley. It's a little like inside baseball - "Oh, Dave McClure invested - now I gotta get in!"

We're optimized for people who love a particular startup because they use the product, but may not be as well networked in Silicon Valley or as familiar with startup financing. Ultimately, we're all about everyday Americans investing as little as $100.

We also have fully-integrated self-service fundraising software, since we're not relying on SecondMarket like AngelList does. This gives us a little more flexibility. Startup founders can use our software to do digital signatures, escrow, investor accredited verification, contract generation, etc, for as little as $100.

How do you address the quality problem? It seems that most startups don't need just capital, they need capital and connections to help with introductions and hiring.

So it seems that the modus operandi for an early stage startup would be

* join a well-known incubator, get investments attached to that program, if that fails

* reach out to well-known angels and super-angels, rely on them to syndicate, if that fails

* reach out to not-so-well-known angels and superangels, if that fails

* crowdfunding

It seems that the startups that are attracted to crowdfunding are either those that only need capital and not connections (a rare thing), those that have been spurned by incubators and angels, and those that need more capital than incubators or angels could provide but had been spurned by VCs.

If you look at the portfolio of 25+ companies currently fundraising on Wefunder, I think the results speak for themselves. All except one went to an incubator AND used us.

Most of the YC companies do not need capital. Most have raised significant amounts from very well-known investors.

We don't replace the current system of fundraising. We're just another tool founders can use.

We solve the quality problem by making it a no brainer for the startup - quick and fast money from a crowd of passionate users and customers of your product. But only having one shareholder on your cap table.