Assess their risks, liquidity, returns, and timeframes
The minimum investment on EquityZen is $10,000, though this may vary by offering.
The standard minimum investment on Wefunder for most Community Rounds is $100. However, the exact minimum can vary based on the specific offering and the investor's status as an accredited investor.
Investing in private companies via EquityZen involves risks such as limited liquidity, market volatility, company performance uncertainties, regulatory changes, less available information, and potential lack of diversification, which could impact investment returns.
Investing in startups on Wefunder is highly risky, and there's a real possibility of losing your entire investment.
EquityZen offers liquidity for vested shares only. It does not provide liquidity for unvested shares, unvested RSUs, or options directly.
Wefunder's investments are not highly liquid, as there is no public market for selling your stake. After one year, you can sell to any interested buyer.
Unlike public market investments, private investments carry higher risks and unpredictability. Consequently, it's challenging to define a standard return rate for EquityZen investments.
On Wefunder, investors can earn returns through different investment mechanisms: Debt, Convertibles Stock (No Dividends), Stock, Dividends. Investment returns on Wefunder vary by investment type, with dividends more typical in later-stage, non-tech businesses.
Typically, companies on EquityZen have received late-stage funding, suggesting an expected investment horizon of 2-5 years, but outcomes can vary widely.
Investments on Wefunder are long-term, with an average return period of around seven years, particularly for convertible notes or SAFEs.
Individuals 18 and older can invest on Wefunder, regardless of whether they are accredited or non-accredited investors. Additionally, Wefunder allows investments through entities.
Assets on EquityZen, which are shares in private companies, can be highly volatile due to limited public information, sensitivity to market conditions, low liquidity, and company-specific events, leading to significant price fluctuations.
The assets on Wefunder, primarily startups and small businesses, are highly volatile due to the uncertain success of these ventures and fluctuating market conditions.
EquityZen Securities is registered with the SEC and is a member of FINRA/SIPC, ensuring it adheres to regulatory standards and practices for investor protection and undergoes regular audits.
Wefunder is regulated by the SEC and FINRA under Regulation Crowdfunding (Reg CF), requiring it to adhere to strict rules about investment limits, company fundraising, and disclosures.
EquityZen is a FINRA/SIPC member firm, offering account protection up to $500,000 (including $250,000 for cash claims) through SIPC in case of brokerage failure, not covering market value losses.
Investors in private companies on EquityZen typically do not receive dividends, as these companies often reinvest profits to fuel growth.
Wefunder investments typically do not offer dividends, as they are often in early-stage startups focusing on growth.
EquityZen charges a 5% fee to sellers upon transaction closure. For investors, a one-time sales fee applies: 5% for investments up to $500,000, 4% for $500,000 to $1 million, and 3% for over $1 million.
Wefunder charges a one-time transaction fee of 2% for bank payments and 5.5% for credit card payments. For WeFunds, an administrative fee covers lifetime costs like filings and accounting, with no additional contributions required from investors.
EquityZen issues a Schedule K-1 for taxable events and provides vetted tax documentation to investors. Upon investment, individuals complete necessary tax forms (W-9 or W8-BEN) and receive annual tax updates.
Wefunder supports tax reporting for investors by providing Schedule K-1 forms for those invested through LLCs or SPVs, detailing taxable gains or losses. For investments receiving payments, such as revenue shares, Form 1099 may be issued to report income.