The most important thing we do is manage a fund that aggregates all of the smaller investors. These investors are actually Wefunder's investors. Wefunder then makes one investment into the startup.
So the startup doesn't have to deal with dozens of investors on their cap table.
Or, put in other words, all the logistical and legal hurdles are placed on Wefunder, not the startup.
For instance, if Wefunder goes broke, do the investments go down with the company or are they all in a separate entity?
We've fixed this with WeFunds - our LLC fund that bundles many small investors into a single item on a cap table, relieving the logistical and legal downsides.
We also believe in the crowd as a value-add investor. For example, Casetext (YC S13, SV Angel) is raising on Wefunder because they'd love to have lawyers who are outside the Silicon Valley bubble invest in them.
That may solve a few of the problems with having numerous small investors, but it doesn't solve them all. For instance, if I raise $25,000 each from 20 investors who are spraying and praying with a dozens or more other startups, I have to consider that potentially none of these investors will have the motivation or wherewithal to provide additional assistance (financially or otherwise) if and when I need it.
Companies with founders who have a fundamental problem with the VC/Entrepreneur relationship may see this as an opportunity to take their business to the people they really want to serve. The visionary customers who will be buying the first release of your product may also be interested in making a (small) early investment in your company.
There's certainly a great deal of risk for these more casual investors. They need to really understand the risk before they get involved, but investors are supposed to be evaluating their risk anyway. Hopefully companies like wefunder will do a good job of helping investors identify risk and opportunity. If they don't, other services will likely take their place.
But let me play devil's advocate for a moment.
From the standpoint of a founder, I know that raising small chunks of money from lots of investors is more likely to be problematic than it is likely to be beneficial. There are numerous logistical and legal downsides to this.
From the standpoint of an investor, I know that spray and pray investing rarely produces great wealth. And I would have to assume that general solicitation and the willingness to raise money from lots of investors are signals, and not necessarily good ones.
Taking both of these things into consideration, I would have to conclude that companies taking advantage of the JOBS Act to raise money are, in theory, probably going to be less attractive as investments than companies that don't have to. In other words, the JOBS Act might create more opportunities for me, but it would be foolish of me to assume that these are the same opportunities the rich and well-networked have access to.