Crowdfunder Review

Pros

• Good for seed-stage companies
• Keep-whatever-you-raise funding
• Crowdfunder doesn’t take a percentage of what you raise

Cons

• High monthly cost
• Most firms aren’t right for Crowdfunder
• Limited customer support

Crowdfunder Overview

Compared to such rewards-based crowdfunding platforms as Kickstarter, Crowdfunder is a different sort of beast. Launched in Los Angeles in 2012, Crowdfunder offers itself as an equity crowdfunding solution for “high-impact ventures.” In fact, Crowdfunder co-founder and CEO, Chance Barnett, was one of those who helped craft the JOBS Act — legislation passed in 2012 that opened up equity crowdfunding laws in the US, thus permitting companies such as Crowdfunder to exist (prior to this, equity crowdfunding was not legal).

Crowdfunder’s investment platform allows for accredited investors only. Who qualifies as an accredited investor, you ask?

• Individuals with an annual income of $200,000 — or $300,000 for joint income — for the last two years with the expectation of earning the same or higher income
• Individuals whose net worth (not including the value of their primary residence) exceeds $1 million, either individually or jointly with a spouse
• An individual who is a general partner, executive officer, director, or a related combination thereof for the issuer of unregistered securities
• An entity that is is a private business development company or an organization with assets exceeding $5 million
• Registered brokers and investment advisors
• Any individual who can demonstrate sufficient education or job experience showing their professional knowledge of unregistered securities

Crowdfunder is not a fundraising platform for personal causes, charities, or nonprofits. It is explicitly targeted at entrepreneurs and startups with high growth potential. The cream of the crop, you could say. In its About page, Crowdfunder lists a number of figures relating to the company:

• $160,000,000 investment commitments on the platform
• 12,000 individual and institutional investors
• 36,000 companies
• Funded 100+ deals at an average deal size of $1.8M

Crowdfunder’s platform, however, comes at a price. While the company doesn’t charge a percentage fee of the amount you raise like most crowdfunding sites, you will have to pay at least $299/month to use Crowdfunder’s platform. It’s a barrier to entry that will likely scare off the less self-assured and the under-resourced. But in exchange for these monthly fees, Crowdfunder promises access to its network of elite accredited investors.

Let’s explore how Crowdfunder works.

Services Offered

Crowdfunder’s equity crowdfunding platform is aimed at a very specific portion of the market. As Crowdfunder explains on its website:

Crowdfunder is designed for early-stage startups and more mature businesses raising seed stage, Series-A & Series-B funding. Our offering does not cater to inception stage companies at this time.

Crowdfunder has funded both VC-backed and independent startups. Crowdfunder’s primary categories of businesses it accepts include tech startups, social enterprises, small businesses, and film and entertainment. It is not designed for nonprofit organizations.

With Crowdfunder, you can set up a “private deal room” ahead of your fundraiser for free. You can create your company profile, store your deal documents, and invite your team members. However, to take your campaign public and start crowdfunding, you’ll need to purchase one of the three monthly subscription packages available:

Starter

• $299/month
• Public profile
• Ability to fundraise
• Get deal alerts

Premium

• $499/month
• Deal analytics
• Public views
• Investor browsing
• Public profile
• Deal alerts
• One hour of monthly support

Premium Plus

• $999/three months
• The same package as Premium except you pay $999 for three months and effectively get a free month

All payments must be made through Visa, Mastercard, Discover, or American Express. You can get a refund on your purchase up to 24 hours after you’ve made it.

Crowdfunder isn’t shy about charging a significant monthly price for its services. The company’s target demographic is the subset of entrepreneurs confident enough in their eventual success that the notion that they might lose money to Crowdfunder while their deal fails isn’t a deterrent. After all, if you raise hundreds of thousands of dollars, the money you’ll save by not paying 7.9% of what you’ve raised to Crowdfunder (roughly the industry-standard rate) more than makes up for the monthly costs.

Crowdfunder doesn’t seem to be trying to appeal to doe-eyed innocents here. The service is for those conversant in the specifics of business and startup culture. Normies might be better served by another platform.

Business Qualifications

To use Crowdfunder’s platform, you must be at least 18 years of age, and your business must not be involved in the following:

• Guns/Firearms
• Tobacco/Cigarettes/Cannabis
• Pyramid Marketing
• Adult Products & Entertainment
• Gambling
• Contests and Raffles
• Illegal Substances/Drugs

Terms & Fees

Here are the terms and fees for Crowdfunder’s crowdfunding campaigns:

Crowdfunder operates under the keep-what-you-raise model of crowdfunding — you keep what you raise, regardless of whether or not you meet your funding goal. Crowdfunder explains it like this:

This is because investors invest with the contingency of your business being a success and not if you reach your fundraising goal.

In addition to the monthly fees charged for the use of its platform, Crowdfunder states: “We charge a one-time fee to make your Deal discoverable to our network of accredited investors.” This is a condition that Crowdfunder ought to disclose a little more prominently on its site.

One curious thing about Crowdfunder is that the company doesn’t handle any of the funds you raise; you have to collect your funds offline from the investors themselves. It’s an odd setup — particularly for a platform that charges as much as Crowdfunder!

Bear in mind that equity crowdfunding is a still-evolving field, with the full impact of the JOBS Act still being assessed. Equity crowdfunding is a more complicated proposition than rewards-based crowdfunding, as investing is much more substantially regulated. Consult an attorney if you have any legal questions regarding the process, SEC regulations, etc.

Application Process

Crowdfunder’s application process is a bit more substantial than that of other crowdfunding sites. You can get started for free while you set up your Personal and Deal profiles, but to launch your Deal on Crowdfunder, you need to complete three documents: the Term Sheet, the Executive Summary, and the Investor Pitch Deck. These documents, particularly the Term Sheet, are complex. In particular, Crowdfunder recommends that when putting together your Term Sheet, you “consult and work with an experienced attorney to create the right financial offering that makes sense both for your company and for investors.”

Other startup business funding options if Crowdfunder isn’t for you:

Sales & Advertising Transparency

Crowdfunder has a great deal of information about its services on its website, though the company doesn’t do the best job of making sure all the charges are clear upfront. You have to take a pretty deep dive into the literature to discover all the terms, conditions, and fees associated with running an equity fundraising campaign. Still, the information is all there if you take the time to read it all.

Customer Service & Technical Support

Crowdfunder has an extensive FAQ and numerous support articles covering every aspect of the equity crowdfunding process, but one thing I noticed when going through these articles is that some of them are out of date. As there are thorny legal issues involved in equity crowdfunding, it’s important that this information be current!

In terms of direct support, Crowdfunder offers an email address but no phone support or live chat.

User Reviews

Overall, Crowdfunder reviews are rather mixed. However, there aren’t a ton of reviews available. Bear in mind that Crowdfunder is not accredited by the BBB.

Negative Reviews & Complaints

• High Monthly Fees: Reviewers and users alike have critiqued the comparatively high monthly fees charged by Crowdfunder, especially since Crowdfunder doesn’t transmit funds to you online like nearly every other crowdfunding platform.
• Misleading “Funds Raised” Calculation: Other users have taken issue with how Crowdfunder measures the “funds raised” by businesses on the site; the “funds raised” metric is not, in fact, the money raised on Crowdfunder but the total amount of money the company has raised from all sources.

Positive Reviews & Testimonials

• Flexible Deadlines: Crowdfunder’s flexible deadlines have been praised in user reviews.
• Keep What You Raise: Users like that you can keep whatever you raise on the site, regardless of whether or not you’ve met your funding goal.
• Good Customer Service: Some users have praised the quality of the customer service and the efforts the company makes to connect you to investors.

Final Verdict

Crowdfunder isn’t a crowdfunding platform for the mom-and-pop pizza shop down the street looking to raise funds to buy a new oven. Crowdfunder’s flavor of equity crowdfunding is best suited to the sort of unique startup that has exponential growth potential. For them, Crowdfunder may be a funding option worth looking into. But for most startups and businesses that might benefit from crowdfunding, there are cheaper, more straightforward platforms available.

Crowdfunder’s CEO has talked of wanting to democratize access to capital, which is a commendable goal. For now, though, Crowdfunder’s appeal is limited by the expense of the platform and the complex nature of equity crowdfunding. Equity crowdfunding is a field that looks to continue its rapid growth, however, and regulations are likely to be further streamlined in the future. Crowdfunder is well-positioned to take advantage of these trends.

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