After two years of seeking regulatory approval, Wefund has officially received the green light to carry out its crowdfunding services for investments within the European Union. According to CEO and founder, this is the first time Wefunder has expanded outside the United States Nick Tommarellothe company is the first US investment platform to receive operational approval.
“It would be complacency not to do this,” Tommarello said, noting that expansion was linked to major policy changes that eased some of the thorny funding rules that plagued the region.
Previously, Tommarello explained, crowdfunding platforms had to get approval from every country in the EU to operate there, as each followed a different set of regulations. Thanks to a passed law 2021 the European Union and the EEA allow Wefunder to follow one set of laws that unites the 30 countries in the same framework.
Kate PowersWefunder’s head of EU operations, said that before the laws were passed, there was “no law that harmonized all countries – [crowdfunding platforms] can only operate country-specifically.” Now, she says, all platforms must be licensed by November 2023.
Powers said her team traveled to Lisbon, Madrid, Barcelona, Copenhagen, Amsterdam, Berlin, Tallinn and Munich from May to September to meet founders and other partners.
Much of that time on the ground was needed to help Wefunder get his name out there, Powers says. But she also notes that regulatory approval was an expensive, tedious process that took more than two years and required a lot of help from lawyers.
Wefunder is now positioned to launch strongly, it suggests – it already has 12 EU startups launching crowdfunding campaigns on the platform. Still, the changing laws are causing a race between US and UK platforms, all wanting to enter the region in one fell swoop, notes the co-founder.
Furthermore, 10-year-old Wefunder has much less capital than some of its rivals. While it has raised more than $9 million in known funding from investors including Y Combinator and Visary Capital, its capital pales in comparison to one of WeFunder’s closest competitors, Republic, which has raised more than $200 million in known funding since its launch in 2016. has brought in.
Tommarello suggests that Wefunder enjoys doing more with less. For example, in 2021, changing Reg CF regulations helped Wefunder grow to now more than 50% of the community round fundraising market share in the United States, according to the company.
The co-founder also says Wefunder takes a different, more modest approach to entering new markets compared to Republic’s $100 million acquisition of Seedrs, a UK equity crowdfunding firm that saw its merger with a rival blocked by competition regulators. Seedrs can only operate in the UK and its multiple jurisdictions; according to a spokesperson, the company is “currently in the process of obtaining an EU crowdfunding license”.
crowdcubeanother UK-based competitor has secured a crowdfunding license, Tommarello confirms.
More players in the market is good news for both American and European startups.
For starters, notes Tommarello, U.S. startups can now attract equity crowdfunding rounds in both the United States and the EU, essentially doubling the total capital they’re allowed to raise annually with the vehicle. The added competition also means companies have more choice on terms and conditions – and perhaps crowdfunding will reach a new echelon that will finally quiet down criticisms of the quality assurance of companies taking this funding route.
In addition, in the UK, finances are audited but not made public – which can save companies tens of thousands of euros. By comparison, for companies in the United States, audited financials are released publicly as they pursue a crowdfunding round for stocks, Tommarello said.
