Forget VCs, this accelerator lets you invest directly in startups fighting Covid

I agree with this premise regarding equity crowdfunding as it currently stands in absence of any professional guidance. We at XX have tried to improve this and mitigate risk by:

1) having a screening committee with deep founder operational experience and industry insight to identify the companies most likely to be successful.

2) attracted exceptional startups to broaden our applicant pipeline by making it open to the global community and guaranteed a $50k pre-seed investment.

3) had three month mentoring period where startups were stress tested and cleared for launch on Wefunder.

It's similar to LPs investing in a VC fund and trusting that the VCs performed the proper diligence.

There are four concepts that we are testing to mitigate risk to the general public:

1) We have a screening committee with deep operational experience (we have 50 founders that ran companies collectively valued close to $4B) to identify the founders most likely to be successful. We have more operational experience and industry insight than your general partner at a venture fund.

2) We attracted exceptional startups to broaden our applicant pipeline by making it open to the global community and guaranteed a $50k pre-seed investment.

3) A three month period where startups were mentored, stress tested, and cleared for launch.

4) Finally, as with all investments on Wefunder, company risk and financials risks are made transparent for the public.

Successful companies often have the greatest value creation at their early stages. It is unfair to only limit this value creation to "accredited" millionaires and billionaires. In a world where payday loans and lottery system prey on the poor, we are trying to create a system of equitable wealth creation, for everyone.

One thing to note is that the SEC does limit the amount non-accredited investors could invest here to: $2,200 or 5 percent of the lesser of the investor’s annual income or net worth. So while yeah investing in startups is risky, they can't bet the house.

Took the words right out of my head. Personally, I'd like to see some initial signs of traction/growth before I make any investments in a startup so unless XX is able to provide me with that kind of assurance (which can be done through a very thorough and transparent DD process), I'm not sure if I'll have the confidence to make an investment, at least not for now.

Yes for sure - you can read the story of all the founders, see their product and even their financials. XX invests in early stage founders and that's inherently risky but our thesis is that when founders are mentored by more experienced founders and are around other motivated founders, they'll have more likelihood of success. We've seen mentors and cohort founders go above and beyond for each other's success.

From my understanding, the SEC requires all companies raising through Reg CF have to provide financials statements that are reviewed by an independent CPA before the investors finalize their investments. I do agree, though, that there should be more overall DD--I personally would be hesitant to invest in a company if there wasn't a reputable lead investor (which not all Reg CF companies have).

Hello! All the companies we selected have large growth opportunity given that their products are intended to assuage the harsh realities of COVID. All finances are published on the startup profiles and for most, this is their first money in. The XX mentor team is a founder community of 50 founders, each w/ several years of experience running our own companies, collectively valued over $4B. As with all early-stage startup investing, it can be risky, but our team's extensive operating experience gives us unique insight in to selecting the founders most likely to be successful. We often have more operating experience than most VCs. Additionally, companies across the world applied and the final cohort included a diverse contingent w/ 31% female and 47% PoC. These numbers are more diverse than you'll see in any venture portfolio and as it has been well established, diverse team outperform those that are homogeneous. Our global pipeline gives us substantial competitive edge. Finally, regarding competition, most companies have pitch decks that outline the market landscape and the founders are happy to answer Q&A on the Wefunder profile to help investors understand competition and other risks.

Yeah, that was one of my concerns as well - some of these startups seem to be targeting issues that are tangential at best to COVID, and that was a little confusing to me given the article's title.

This is a problem and I agree. Most of our portfolio companies are concerned that COVID is temporary and are seeking alternative business models in parallel. This is because institutional investors, who will ultimately end up funding the companies down the road due to Reg C funding limited to $1M/yr, continue to tell startups that need to have alternative business models in case a vaccine is approved. To some extent, trying to move away from the deeply entrenched institutional investment model is an ouroboros.

Stock market offers liquid financial products, while angel investing is definitely illiquid. Irrationality in VCs will always be involved because we are human-beings but for sure less than in the stock market.

Good point :) We didn't expect that many applications; we would've wanted to accept more if we had more in funds. That's why we created a Fellowship program a week after Fight the Virus batch started - there were so many qualified founders we still wanted to support. And half of the startups raising on Demo Day are from the fellowship! If you have ideas for how we can scale this to include more founders in the future, message me!

To raise on Wefunder, founders have to find a Lead Investor to represent their Wefunder round. The Lead is motivated to set a fair valuation this way.

Startups are risky so people should not be investing with their savings account, especially during times like these!

Actually we've had our strongest months ever - not sure why given the times. I think people want to support businesses and missions they care about.

I can see the logic behind this. But at this point, my main concern is that people who can afford to invest $100 are not investing. Do they know about Wefunder? Can they tell the difference between Wefunder and Kickstarter? Do they understand the jargon even as explained with the website's current definitions?

The Lead Investor represents the custodian that holds all the investors.

I think it depends on the investment vehicle the startup decides to receive funds through.

Yeah that's what I was thinking as well! Giving the mass public the ability to invest in early-stage starts is like opening up Pandora's Box, imo - it just feels too risky to me.