dicletian

Thanks -- this is one of the best essays on Bitcoin I've read.

SecondMarket is a different animal -- they structure liquidity tenders for late-stage private companies and collect portal fees per seller, and, in the past, ordinary secondaries transaction vigs. They also run a large, traditional financial services business that has historically paid for much of their involvement in the startup world.

Funders Club is also a somewhat different animal -- they offer investors access to venture funds where risk is pooled, and also do single-purpose funds that resemble your product.

You are exclusively offering investors access to one investment and one set of risk. Let's say you can get it down to $4k/yr:

* Accountant to prepare and send out K1s to 50 shareholders $1000

* Delaware agent & franchise tax $400

* Legal, regulatory filings, 4 hrs $1000

* Your or your lawyer's time to give legally binding answers to questions from 50 shareholders $?

* Valuation analyst hired by you or firm, 5 hrs $600

* Broker dealer / misc / insurance $1000

These numbers sound pretty low to me but let's say you have economies of scale.

Making money solely when investors make money still seems like a reach. If you make 100 investments per year and have a decent team you will be burning a lot of cash -- the only way to recoup that cash will be to charge a transaction fee or keep raising money until carried interest pays out (which it often doesn't). Either way, it's something you should address in your disclosures.

It's one thing not to have a fleshed-out revenue model if you are a consumer site: nothing will happen if you die except for some upset users, but you can't just suddenly unwind a group of 400 investment funds when the underlying capital is tied up in illiquid private stock.

"All the small investors (often < $25k) invest in the Crowd Fund, which then invests as one entity in the startup."

So your company must create and manage a new investment vehicle for each startup to raise money on Wefunder? I assume so, otherwise the investors in one holding will incur the liability of the fund being sued by the investors/investment of another.

According to your FAQ, you are not charging any fees yet and have raised about $500k to support your operations. On top of operating the parent business, for each entity you will have to prepare and send out K1s, make numerous compliance-related and SEC filings, and correctly disburse funds once liquidity arises. As a fund, you'll also possibly have to prepare annual or quarterly mark-to-market valuation reports for your holdings. All told, this could run into the tens of thousands of dollars per entity per year.

What happens if your company runs out of money to properly steward the funds you raise? Do you have a strategy to mitigate legal / compliance costs?