In the burgeoning Midwest tech sector, a new crowdfunding platform is looking to accelerate growth within the community through equity-based crowdfunding for non-accredited investors.
Wunderfund, a Cincinnati-based crowdfunding company, is just weeks away from launching its equity-based crowdfunding platform to unite innovative entrepreneurs with local individuals interested in small equity investments from as little as $100.
Headed by CEO Marvin Abrinica, this effort ultimately bolsters the community in two fundamental ways: by bringing required funds to the community’s entrepreneurs and by giving local individuals the opportunity to participate in the success of their hometown startups and reap the accompanying benefits.
According to Abrinica, this platform promises to be the first in the region to be licensed by the Financial Industry Regulatory Authority (FINRA), which regulates brokers and dealers of securities. Moreover, Abrinica seems to be taking advantage of a golden opportunity to bridge the gap between investors and entrepreneurs in a state that was recently named by Forbes as the best state in America to launch a startup.
With such rapidly growing entrepreneurial spirit, startups in Ohio are surely in need of additional funding. Granted, venture capital has recently been flocking to the state, with $470 million invested in 2016 — a 46 percent increase from 2014 — but a need will always remain for early-stage startups to acquire additional capital.
Wunderfund will allow these startups to raise up to $1 million from public investors — that is, from individuals outside the traditional venture capital system. Moreover, it will give local citizens the opportunity to participate and take advantage of the growth within their own communities.
While crowdfunding has long existed as a way for entrepreneurs to secure the funds they need to develop their ideas, Wunderfund is unique in the sense that it allows non-accredited investors to invest their funds in exchange for equity.
What does this mean?
Non-accredited investors are defined by the SEC as individuals with a net worth of less than $1 million and who earn less than $200,000 annually. According to the SEC, this type of investor accounts for about 90 percent of the United States population.
Until September 2013 with the passage of Title II of the JOBS Act, public investors were limited to the option of rewards-based crowdfunding, whereby their investments were accepted in exchange for rewards, such as discounted product price, early product release, or company swag.
With the passage of Title II, accredited investors were finally able to invest in crowdfunded projects for a stake in the company instead of settling for the traditional rewards-based model. While Title II cracked open the door for equity-based crowdfunding, the remaining non-accredited investors remained marginalized without the ability to invest.
It was not until the passage of Title III of the JOBS Act in May 2016 that the floodgates opened and non-accredited investors were finally able to invest private funds for equity in startup companies. While this move marked great progress in the average American’s accessibility to investments, some restrictions were imposed that limited their investment freedom. Namely, investors with annual incomes below $100,000 would be allowed to invest the greater of $2,000 or 5% of their income; also, investors with annual incomes above $100,000 would be allowed to invest up to 10% of their income.
Additionally, restrictions were imposed on the companies themselves, which must adhere to increased regulatory compliance and a limit of $1 million to be raised. Some have argued that these restrictions pose harmful barriers for potential investors due to the low limit and the added cost of regulatory compliance, but other preliminary analysis suggests that platforms like Wunderfund would work well for certain ventures, particularly those with funding requirements under $300,000.
Companies like Wefunder currently lead the pack in terms of Title III equity-based crowdfunding, and have experienced impressive success with over 40 successful campaigns since May 2016 when Title III was passed. While Wunderfund may face hard competition from established companies like Wefunder, it holds the advantage of being located in one of the most innovative communities in the United States.
Though the platform has not yet been launched, it is likely to be coming soon. According to a Facebook post from August 4, Abrinica writes, “So proud of my team this week! Justin, Morgan, JM, and Jonathon were all on top of it. They rocked our product demo with regulators. Wunderfund is just weeks away.”