With a new $115 million check from well-known venture capitalists, Mercury bank, a fintech that offers software and banking services to small businesses and startups, didn’t need to crowdfund from so-called regular investors.

Even after regulators raised limits on the amount a company can raise via unaccredited investors from $1 million to $5 million in March, that figure remains paltry for a company that has now reached unicorn status.

But mirroring the rising number of startups such as Robinhood and Doximity adding their own clientele to their roster of investors in the initial public offering process, Mercury is seeing the benefits of doing so in the private markets.

On Thursday, the company said it is looking to raise $5 million from its own customers and other layman investors via the crowdfunding platform Wefunder. That comes after the company raised $115 million in funding led by Coatue, valuing it at over $1.6 billion, as first reported earlier this month by The Information. Andreessen Horowitz, CRV, and Sapphire Ventures also participated in the round.

While more traditional players like Silicon Valley Bank have cemented themselves as the go-tos for startups, Mercury has made inroads by selling customers on its more tech-friendly and fee-less user experience. And as the fortunes of venture-backed startups and e-commerce businesses swelled over the course of the pandemic, Mercury—like other tech businesses with heavy exposure to that group including Brex, Stripe, and Carta—too saw its sign-ups grow: The company declined to disclose revenue, but says its now 40,000 strong customer base grew more than fivefold in the past 12 months, and the company now holds about $4 billion in deposits. 

Banking, says Immad Akhund, CEO and founder of Mercury, is a service in which customers often select a brand based on whom their peers are using. So it makes sense that the startup is taking advantage of changes in investing regulations to give customers more incentive to stick with the company as investors. The crowdfunding campaign, which will bring the total to $120 million, opened Thursday morning.

“Because of the law changes it became a lot easier to do crowdfunding,” says Akhund. “The majority of our growth comes from people recommending Mercury to their friends, and a lot of people pinged me and said, ‘We want to invest.’ And we want them to be part of the journey and part of the upside.”

While crowdfunding proponents once predicted it could upend the traditional venture model by unleashing a wave of layman investors, those forecasts so far appear to have disappointed. Five years since rules allowing the practice first went into effect, it represented just 0.01% of the total raised by venture capital in 2020, based on data from Crowdwise and PitchBook. There were a number of reasons for the lack of excitement: At a limit of $1 million, the amount was not always meaty enough to get a company off the ground. And it was often assumed that companies only resorted to the layman investor when they couldn’t raise funds from a venture capitalist.

But Mercury’s raise, along with those of its peers, shows how the practice is emerging increasingly as a potential supplement to the traditional industry, following the rule changes.

Creator economy–focused Gumroad in March raised $5 million of a $6 million round from crowdfunding, followed by Lux Capital–backed note-taking app Roam Research. And now, according to KingsCrowd data, Mercury marks the largest startup by valuation to offer part of its equity up via crowdfunding. According to Crowdwise, about 75% of the $240 million raised so far this year under crowdfunding rules came after March—when the limit rose.

Lolita Taub, general partner at early-stage–focused the Community Fund, notes that, just as companies have more options like direct listing and SPACs in the going-public process, startups are also finding more options in the private realm.

“There are pros and cons to each. When you take money from venture capitalists, they are aligned from a recruiting and business development perspective. It is incredibly powerful,” Taub says. But so is crowdfunding, she adds. As investors become shareholders in a company via a crowdfunding campaign, they can become valuable marketers that are “incentivized to promote the company.”

Notably, as Mercury is reaching its customers through its funding round, more and more diverse founders, especially those who lack a strong venture capital network or have been traditionally overlooked by the space, are also taking off in the early stages of their business via crowdfunding, says Taub. Founders and even investors themselves are finding new ways of using the crowdfunding rules.

Still, concerns persist as to what exactly counts as a good investment and whether unaccredited investors will be risking too much to get a piece of a startup. It is after all why regulators have capped the amount companies can raise via crowdfunding at such a low level. And for many startups, raising some $5 million or less might simply not be worth the paperwork.

But for now at least, a practice that used to be seen as a marker of a “second-rate” company, per Crowdwise’s Brian Belley, is certainly getting a second look.

And as for Mercury bank? Its new $120 million war chest is expected to let the company grow magnitudes larger. With 150 employees now, Mercury plans to hire some 200 more over the course of the next year.

“We’re still a drop in the ocean,” says Akhund, noting that startups at large raised over $150 billion last year in the U.S. “There’s still a lot of growth to be had…I’d settle for half [of that].”