
U.S. Startups Fail to Attract Expected Crowd of Small Investors - vanderfluge
https://www.bloomberg.com/news/articles/2017-05-19/u-s-startups-fail-to-attract-expected-crowd-of-small-investors
======
tptacek
Crowdfunding appears to be a _terrible_ deal for retail investors:

* VCs survive by maintaining portfolios of companies in which 1-2 in 10 survive (most VCs fail to generate returns that beat the public markets). This means more than that you need 10 companies --- it also governs the kinds of companies you can invest in. Despite being a message board in part dedicated to startups, it feels like very few of the relatively specialized people here understand why VCs don't back quietly, steadily profitable companies.

* VCs compete for access to dealflow. The very best startups don't need to crowdfund and will usually get better terms from VCs. Moreover, there are logistical hassles with adding retail investors (in any form) to your cap table. All this is compounded by a signaling problem, where taking crowdfunding taints your company in the eyes of future VCs. So there's a huge adverse selection problem.

* Retail investors are given a deceptive view of the outcomes for startups. We all know most startups fail and zero out their investors (any S&P 500 component that did that would generate nationwide headline news for weeks). But more startups fail than we think, because many (maybe most) startup acquisitions are really managed failures.

There are probably more reasons than this.

I think equity crowdfunding is structurally broken, and more likely to hurt
people than to do anything for our technology market.

~~~
skdotdan
Why not to create a massive crowd-funded or publicly traded VC fund? (as
opposed to crowd-funding for a single startup)

Thus more people could expose themselves to VC but in a diversified manner.
Also, more capital would be available for startups.

~~~
tptacek
Someone has to get paid to do that, so now the premise of equity crowdfunding
has been reduced to: in the best case, you can crowdfund another venture
capital firm, and pay a tax out of your returns that wealthy investors don't
have to pay.

And, again: most VCs fail! A lot of money is invested in VCs not in the
expectation of those investments being lucrative, but instead in the hopes
that VC returns are uncorrelated with the public markets. But _no_ retail
investor does that.

~~~
kbenson
> And, again: most VCs fail! A lot of money is invested in VCs not in the
> expectation of those investments being lucrative, but instead in the hopes
> that VC returns are uncorrelated with the public markets.

Are there meta-VC's that treat VC funds like startups and invest in multiple
VC funds with the understanding that most will fail? That is, can you confirm
my suspicion that it really is turtles all the way down (or up)?

~~~
hkmurakami
Fund of funds exist. They typically become LPs in PE funds and Hedge funds.
Their value add is that they provide fund selection for sovereign funds /
pensions / endowments that feel that they do not have the expertise to become
LPs directly in the right funds (I find this value add to be bs, but I guess
I'm unfamiliar with how clueless someone directing a random sovereign fund
could be).

Larger VCs will become LP in smaller upstart ones to have better visibility
into earlier stage companies [1].

[1] Bessemer, Emergence, Social, and Sapphire are LPs in Saastr Fund
[http://www.saastrfund.com/strategic-
partners-1/](http://www.saastrfund.com/strategic-partners-1/)

------
seibelj
This is anecdotal, but I chatted with a VC for a while at an event and he said
their firm will not invest in anyone who did equity crowd funding, on the
theory that it signals a weaker company. If they were stronger, they would
have raised proper VC.

I think the existing VC investment structures hate the idea of crowdfunded VC
as it threatens their model, which is personal connections and an old boys
(and girls) network which allows more favorable terms for investors,
especially for first-time founders.

I hope that crowdfunding becomes more normal. Not every idea has to have
billion dollar potential, which is what most VC's are looking for.

~~~
FailMore
I was a VC. I think it is mainly that it is a very weak signal. A good VC or a
select group of high quality angels does help a company get itself in order,
so raising money from a large collection of distant angels tends to be a
signal that the quality of the company must be low - as they _should_ have
tried to raise from high quality individuals first.

A company with crowdfunding will have to display stronger metrics than a
company with strong angels / VCs.

Imagine two companies come to pitch, both are identical in every way. One has
crowdfunded a $1M seed, the other got a check from Andreessen Horowitz and the
CTO of LinkedIn. Which one do you put your money in? Even the potential deal
flow from those individuals helps hedge your bet.

As a side note I think that this relationship of quality and crowdfunding is
true (though not always by any means). I have seen fraudulent behaviour by
companies misrepresenting their data to a group who are, by a VC's standard,
very unsavvy investors. This company was certainly not able to raise money
from a VC, but raised two $M+ rounds on a crowd funding site. However, I have
also seen good companies who don't have an 'in' to the VC world raise money in
this way.

~~~
ericb
I think this bias is mistaken--because VC's use their network as a filter, it
falsely equivocates strong business/strong founder with individuals who landed
on a social graph that happened to have VC connections.

Biases like this are market inefficiencies that can provide outsize returns
for those who learn to look past it.

~~~
hkmurakami
It's basically a filter that tolerates false negatives.

Figuring out a way to create that VC/Angel connection implies abilities and
characteristics that they pattern match to past success. There may be high
potential teams that cannot pass this filter but will still succeed, but the
industry's deal flow is large enough that they are fine with a small number of
false negatives since false positives in their portfolio hurt more, especially
when you consider VC math needing 100x-1000x return potential from each of
their companies.

It's just like the FaceGooAmaSoft hiring filter we're familiar with that is
designed to prioritize low false positives at the cost of having a higher
false negative. (skilled programmers who aren't interested in the contrived
coding quizzes or can't do them well will be a false negative in the hiring
process)

~~~
xiaoma
> _" the industry's deal flow is large enough that they are fine with a small
> number of false negatives since false positives in their portfolio hurt
> more"_

This is backwards. Funding a company that goes nowhere is _far_ smaller an
error than turning down the next SpaceX.

~~~
hkmurakami
A fund only has 10~20 bets it can make though. That likely influences the
human decision making (could still be suboptimal).

Afterall didn't A16Z catch some criticism for not investing a large enough sum
into Instagram (which iirc had 500x returns or something) to make a large
enough difference to the fund?

~~~
ryandamm
A16Z didn't invest more in Instagram because of a portfolio conflict; they had
already invested in Picplz, and decided they couldn't continue to back
Instagram (which was Brbn, a social check-in app, when they invested).

A costly adherence to their own ethical rules, but it reinforces how seriously
Andreessen Horowitz takes portfolio conflict.

source: [https://bits.blogs.nytimes.com/2012/04/20/how-andreessen-
hor...](https://bits.blogs.nytimes.com/2012/04/20/how-andreessen-horowitz-
fumbled-an-instagram-investment/)

------
grellas
I wish the crowdfunding platforms well but, in the end, there is an inherent
tension between the core idea of crowdfunding and the idea of investor
protections under the securities laws.

U.S. securities law give two broad choices to issuers trying to raise money:
take your company public or do a private placement. With the former, you can
deal freely with all sorts of investors, in any number and with whatever
background. With the latter, you deal with sharp restrictions on the number of
investors you can deal with (if unaccredited) and on the qualifications of
investors for investment in such offerings (accredited, unaccredited, etc.).

Conceptually, crowdfunding tries to straddle these two worlds when it offers
true equity (as opposed to promotional giveaways only) in the ventures. It
seeks to broaden the number and type of investors who can invest in a startup
venture while simultaneously trying to protect prospective investors from
dishonest or otherwise improper offerings.

Problem is: the larger the number of investors and the more latitudinarian the
standards for who qualifies, the more it looks like an unregulated public
offering and the more it becomes susceptible to all the problems that brought
public offerings under strict regulation in the first place.

So today we have a hybrid that theoretically tries to open up startup
investment to all sorts of small investors but that practically attempts to
keep a whole variety of restrictions in place to ensure investor protection.
This hybrid is what is failing to gain popular appeal. There are too many
restrictions needed to ensure investor protection to make it a fluid vehicle
for small investors to invest and to make it attractive for startups to use it
as a means of doing their funding.

Thus, the _technology_ is there today to facilitate a robust crowdfunding
marketplace but the _law_ is not there for traditional reasons of investor
protection. And so the current efforts sputter along akin to how an otherwise
intriguing startup might seem to have almost unlimited potential but never
quite seems to gain traction.

It took five years to get the regs in place to support the statute that put
this funding mechanism in place. That is slow because the issues (in my view)
are intractable. Will another five years make a substantial difference. In my
view, no.

But who knows? My free market side says do away with the investor protections
and let it rip. But the lawyer in me says, no way - such a free-for-all will
likely cause many to be duped and few to prosper. It is not an easy choice and
that is why I think this will ultimately remain sputtering along with highly
uncertain prospects of effecting true change in the investment landscape.

~~~
caoxuwen
Genuinely curious, been looking into it recently - what're the problem with
unregulated public offering? Things i can think of are insider trading,
misleading information, ponzi scheme, etc.

~~~
vkou
Add "Our business model consists of paying salaries to ourselves, using
investor funds."

The regulations that public firms are burdened with are intended to make it
possible for investors to figure out if these kinds of shenanigans are
happening at your company. Private firms are exempt, because only
sophisticated investors can invest in them, and they can do their own due
dilligence/can afford to lose their investment.

If your crowdfunded startup is willing to provide enough information for your
investors to be able to figure this out, you may as well take it public.

------
mindcrime
_Swat said the practice is still in its infancy. Wefunder, StartEngine and
SeedInvest are the primary crowdfunding platforms, and many founders aren’t
aware that equity fundraising is an option._

This, and some people (like me) probably just got tired of waiting for the SEC
to do their part, and quit paying attention to the whole thing. When the JOBS
Act first passed, I was pretty excited. Then something like 3 years went by
and you _still_ couldn't do crowd-fund equity fund-raising. By then, the whole
thing had pretty much dropped off my radar.

I think as information about this percolates through the ecosystem, it will
become more commmon place. But right now there's a lot of uncertainty and
doubt surrounding the whole thing, and I expect that's hurting adoption.

~~~
dave_sullivan
> some people (like me) probably just got tired of waiting for the SEC to do
> their part

Yeah, same. Last I checked, the rules they _did_ come out with were pretty
restrictive. This article almost makes it sound easy, but if you read the full
text, it basically comes down to "If you can raise money from any other
source, like VC, private equity, institutional investors, or angels--do that
instead because it's easier."

You can read them here:
[https://www.sec.gov/info/smallbus/secg/rccomplianceguide-051...](https://www.sec.gov/info/smallbus/secg/rccomplianceguide-051316.htm)

The SEC pretty much said to congress, "Nope, we know better" and they've
effectively killed the bill by dragging their feet for 5 years and then coming
out with guidance that kills the intent.

Maybe there can be a new bill that takes "crowdfunding" out of the hands of
the SEC? Not sure how you would word that exactly, but some kind of exception
that removes their jurisdiction? Maybe even not classifying them as public
companies? (SEC has no jurisdiction over private companies).

~~~
Retric
Sadly, the SEC is fairly correct on this one. At least in terms of the history
of finance.

If you let companies raise either a lot of total money or a lot of money from
one person the incentives to make a company are less than simply get good at
raising money and then skim as much as possible. Then run for the hills or
repeat.

~~~
dave_sullivan
I agree with you historically.

> the incentives to make a company are less than simply get good at raising
> money and then skim as much as possible

I worry that, with the rules the way they are, the only people who will use
them _are_ people that are trying to do this. For instance, the company the OP
is about. If you make it _actually easier to raise money_ , more legitimate
companies (that want to spend less time on raising money and more time on the
company) will use that system.

The internet and reputation effects are enough, I think, to mitigate the valid
downsides of past experiments with "very free markets".

~~~
darwhy
I don't think internet reputation effects are enough at this stage. The SEC's
fear of everyman investors getting taken advantage of appear well-founded.
Just yesterday Kickstarter started a program aimed at addressing the
provenance of high profile flops that were funded and then skimmed:
[https://techcrunch.com/2017/05/18/kickstarter-launches-
tools...](https://techcrunch.com/2017/05/18/kickstarter-launches-tools-for-
creators-because-hardware-is-hard/)

------
Lagged2Death
I thought the whole deal with startup investing was: Invest in a few dozen
companies and hope you get one hit so big it makes up for all the others,
which you expect to all go down in flames.

That can work if you have millions to spend and the time, connections, and
access to pal around with dozens of founders, looking for the good eggs. For a
"small investor" who has a small fraction of a middle-class paycheck to spend
and access only to the web, it would just be the most boring form of gambling
ever invented.

Who "expected" a crowd of small investors for this, exactly?

~~~
erikpukinskis
My hope for crowdfunding would be that it would be exactly like you describe:
spend the time, connections, and pal around with people doing projects, but
the only difference would be the dollar amounts. $1,000 here, $10,000 there,
on things like performances, food carts, etc. Stuff a VC would never touch
because the max payout is like $50k.

But for a small investor to make 10 ~$5k investments, and get back principal
plus $50k over the course of a few years that's pretty good. And they can do
it in their own community on projects that don't make sense for someone in New
York or SV to even know about.

------
tuna-piano
Not only that, the ones that are can be quite scammy.

Highlights from this startup raising money:

-Advertised with TV commercials by former Seinfeld actor

-$160k in assets, raising $50million at >$200million valuation

-CEO was formerly barred from leading companies by the SEC due to security fraud

-The management team has a few more planned IPOs in the biomed and aeronautical industries, and has a graveyard of past businesses that got investor money and went bankrupt.

[http://www.businessinsider.com/yayyo-ipo-ads-tv-ramy-el-
batr...](http://www.businessinsider.com/yayyo-ipo-ads-tv-ramy-el-batrawi-sec-
rule-jobs-act-2017-5)

------
OliverJones
Hmmm. I'm an accredited investor. I'd have to be crazy -- or altruistic -- to
invest in a typical SaaS / software / Sili Valley startup via crowdfunding.

Why?

* Waste: Absurdly high cost of living in places with startup culture means labor costs must be excessive or you can't get the people you want.

* Focus: Not every software-style startup has Joel Spolsky or another leader with his kind of focus.

* Unicorns. For investors they bring to mind the mid-20th century play by existentialist Jean-Paul Sartre. "No Exit."

If I'm going to be altruistic I'll put my money into paying off student loans
for young friends, to give them the freedom to make altruistic choices
themselves.

~~~
david927
None of those reasons are exclusive to crowdfunding, though. I get that there
are few good investment opportunities and a lot of cruft, but I wouldn't list
the same reasons. For me the biggest issue is vision: All startups hope are
chasing money, but some are chasing it to the exclusion of everything else.
They don't see a different future, a better future; they simply see themselves
richer. Funding such startups isn't even altruistic. The opposite, it's
enabling a broken culture.

------
pilingual
I've been following the equity crowdfunding sites, and here are a few
observations on why it seems disenchanting.

1\. A lot of companies seem to be lifestyle and not startups; they don't plan
to grow 7% a week.

2\. Many companies aren't raising for the first time and are looking for a
bridge or 2nd or 3rd seed round.

3\. The cap on the notes is way too high.

4\. Many sites incentivize by offering T-shirts and other crap. The purpose is
investment so the sites should optimize around investment education and not
what reward you can get for just a few hundred dollars more.

In the end it is going to be hard to even 2x overall investment. I suspect
most people will just lose their money.

------
badloginagain
I would be willing to buy into a crowdsourced VC fund- I give money to the
fund for a slice of it, which in turn vets and invests in early stage
startups. They hit a big payout, my slice becomes more valuable.

The thing is, I don't want to do any work. I want someone else to do the
vetting and the paperwork to invest. Obviously, they get a bigger piece of
pie.

Basically, I want an index fund for early stage startups. It would be high-
risk, but it's the same risk (in principle) as VC firms have.

~~~
hkmurakami
Iirc VC as an industry loses money (or has poor returns), with the top 10
firms dominating the returns and some small number of startup firms posting
great returns (iirc this is from a Jason lwmkin's post)

So i think your index fund performs quite poorly.

~~~
petra
Are there any viable ways to open the top-10 for investment by bug funders ?

~~~
jerf
I suspect that what you're seeing is basically than the large firms are
successful enough and funded enough so they don't need more money that they
"negotiate" themselves 100% of the value. What can you bring one of the top-10
investors that they don't already have, such that they'd be willing to share
the benefits with you?

------
inputcoffee
As an investor, consider the following:

1\. They give you very little information. Sometimes just sales numbers or
some "traction" metric and a para on future plans. They talk about their
unique angle but not about their challenges.

2\. You put money in and you get very infrequent updates. Sometimes something
along the lines of "sales are ok" or "sales fell" without much detail. It is
treated as a favor to you, not an absolute right as an investor.

3\. If they need to raise funds again, suddenly they become more chatty.

4\. As an investor, my alternative is: public stocks! A lot more information,
a lot more liquidity. For the large stocks you're competing with geniuses at
hedge funds but the smaller stocks usually have less competition.

------
muninn_
Yup. And this is because if you're a startup and you take investment from
these "small investors" I can't recall the actual classification (class 3
maybe or something like that?) VC and accelerators simply won't touch you. So
there's no point. And then, if you're a "small investor" and you had, say,
$5,000 to kick toward a startup for speculative investing, the VCs simply say
that it's not enough money and they're just not interested in your small
change.

~~~
mindcrime
_And this is because if you 're a startup and you take investment from these
"small investors" I can't recall the actual classification (class 3 maybe or
something like that?) VC and accelerators simply won't touch you. So there's
no point._

Sure there is, if you never planned to seek VC funding anyway. I'm sure there
are plenty of companies that just need a little money to get over the initial
hump or two, and then plan to rely on organic growth. If you're not worried
about being a "moonshot" and don't have huge capital expenses (eg,
manufacturing a physical product, drug trials, etc.) then this could quite
possibly work for you.

------
dharma1
I was chatting with a startup that recently raised £1m crowdfunding as their
second round. They were really happy with their choice and not having VC
strings attached. I think an undervalued aspect of this is how powerful
crowdfunding can be in creating a few thousand early product evangelists (who
have vested interest in the company).

And I think TheDAO - though it was too early /fragile, had a half-baked voting
model and got too big too fast - was onto something. I think cryptocurrency
based equity/ dividends and decentralised, crowdfunded companies will
definitely happen at some point in the future.

------
austenallred
I'm not seeing AngelList syndicates listed here, which is probably the most
obvious way for a small investor to invest in a startup; you still need
_someone_ to do the diligence and find the companies to invest in, but I could
put my money into an "Index Fund" led by dozens of smaller investors, which
seems to be the most logical way to do something like this.

As for direct crowdfunding, I would be comfortable angel investing if I knew
someone was doing the due diligence, but no way am I putting my money into a
startup blind, or spending the time to do that due diligence myself.

After that, the signaling risk and additional regulatory complexity behind
this type of crowdfunding is likely a bad thing for a company, and likely
mostly filled with companies that can't raise by traditional means, so you
have an adverse selection problem and you're making it worse.

I think Naval and AngelList could change that, but there's quite a long ways
to go.

------
theprop
This isn't an accurate assessment or headline.

The accurate headline or assessment is "Equity Crowdfunding sites fail to
attract legitimate, investment-worthy startups"!

I've seen the startups posted at the crowdfunding sites and they look terrible
/ borderline scammy e.g. a site that's not growing and doesn't have much going
for it raising at a $25 million valuation.

Part of the reason is that there's a big gorilla in the room and it's
Kickstarter! If you have a great product, it's better to take it there than to
an equity crowdfunding site -- at Kickstarter, you get pre-orders, gauge
demand, get actual buyers/users, and don't lose any equity or have those legal
complications. It's much better than equity crowdfunding.

I also think AngelList should be evaluated as I bet it's enabled a lot of
brand new folks to get into angel investing.

------
david927
I don't know why investors would be interested. There's really no innovation
happening at the startup level anymore.

There was a time when you would hear of some interesting startup that had a
huge, grand vision of the future. But the last ten years have brought us
startups like Facebook and Snapchat -- and that's just not very inspiring.

I, for one, am looking forward to the next economic correction and Sili Valley
implosion, so that the froth will clear away and all that will be left are
those fighting for a vision instead of scheming for a profit.

------
zby
The main problem for investors is the principal-agent problem - simply that
the managers of the company will use the funds invested into it for their own
advantage instead of advancing the company. There are degrees of this - from
blatant fraud to slightly overpaying themselves or making deals with their
friends instead of best offerers. It is impossible to entirely stop this - but
there are ways to diminish the impact.

1\. Become involved in the company - this can work only if you have a big
stake in the company (with dispersed ownership you get collective action
problems) and the company is a big stake of your activities (you cannot get
involved much in many companies).

2\. Lend not buy equity (and require collateral etc).

3\. The laws for public offerings - with all that red tape involved: the
strict accounting, governance rules, information disclosure rules, etc.

4\. Investing in startups. This is a small special case where investing can be
something between becoming fully involved in the company operations and being
a small shareholder of a public company. This relies on the theory that
startups goal is to grow a 100 times or die - so small continues extractions
by the executives are ruled out.

The crowdfunding initiatives, try to reduce the red tape involved in a public
offering of equity - but they don't even try to address the problem that the
bureaucracy addresses in the first place.

------
rdlecler1
The problem is supply side. Crowdfunded companies are giving the platform
5-10% of the capital raised. Why crowdfund and have a whole bunch of investors
on your captable and give up some of that money AND deal with the compliance
cost of you're strong enough to get it from angels/seed VCs. Current
regulations force a broken model.

------
crispytx
The problem with equity crowdfunding right now is that most of the tech
startups aren't raising money through the portals. What percentage of the YC
Summer 2017 batch do you think will go on to raise money through the equity
crowdfunding portals? My guess is that few, if any, of the YC Summer 2017
companies will raise money through equity crowdfunding. And this is a huge
problem for potential equity crowdfunding investors. Equity crowdfunding
investors simply do not have the opportunity to invest in large number of the
best startups. Go check out the types of companies raising money on the
funding portals, most aren't tech startups. You'll find all sorts of bullshit
companies, everything from board games to restaurants!

------
wehadfun
I went to a workshop and asked a the guy what benefit does the investor have
to buy shares of Tom's Tire Shop. The guy said it is just like buying Apple or
Microsoft, and blah, blah, blah. No it is not like buying Microsoft. There is
no way to liquidate your shares.

------
zitterbewegung
I think that if they actualy want a crowd to do this that they have to improve
discovery of not only the ability to do this and the companies that want to be
crowdfunded. Up until know I vaguely knew that the JOBS act contained this
wording (and I presumed that something changed about the JOBS act) which was
false. The other part is discovery which could be helped by either partnering
with Kickstarter or making an independant website that would do this.

On the other hand it could be that Kickstarter is performing crowdfunding to
the point that the technique of using the Jobs act is not needed. Adding up 2
or 3 large kickstarter projects and you get the total amount raised. Currently
Kickstarter has funded around $3 billion dollars.

------
nowarninglabel
Small dollar amounts, but not necessarily "few" in numbers of people. Granted,
I'm not particularly interested in crowd-funded equity, but crowd-funded
interest-free charitable loans that Kiva has been doing in the U.S. have been
steadily growing. [https://www.kiva.org/lend/kiva-
u-s](https://www.kiva.org/lend/kiva-u-s)

Growing at the bottom may not produce eye-popping changes right now, but could
have some great long-term effects for re-invigorating small business growth
(which has been on the decline in the U.S. as I've posted elsewhere).

------
Alex3917
What would the numbers look like if the authors hadn't excluded ICOs? Given
that this is where the majority of the small-dollar equity crowdfunding is
going, it seems weird not to include them.

------
kevmo
Another slice of the explanation for this can be found in the ceiling there is
on crowdfunding: Your investors aren't people with deep pockets; it's those
who generally don't have even one full extra paycheck in the bank. When they
give you $20, that may mean they don't see a movie with their S.O. that
weekend, etc. The money pool is much shallower.

Raising the minimum wage would be good for crowdfunding.

------
imoldfella
Another reason for Small Investors to stay away is the senseless tax hassle. I
didn't invest because I had any ambition to get wealthy, I just wanted to
"give back" and help some ambitious young entrepreneurs get started. Now I'm
filing complicated tax forms for money I'll never see because those young
companies made 10$ in interest from the money sitting in a bank.

------
arikrak
I looked into investing a small amount in crowdfunding, but there are very few
platforms offering it and the companies seemed to be raising money at
overpriced valuations. It would be nice if crowdfunding could grow, since
ordinary people could get a share of large growth and they could also offer
certain unique benefits for a company the raising money (e.g. help with
marketing).

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danvoell
My problem has been that I haven't seen a single deal that I felt had
moderately favorable investor terms.

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goshx
I wonder how they are letting people know about this. I wasn't aware this was
possible and I still had in mind that you had to be "credited" investor, even
as a Hacker News reader, somehow this was flying under my radar. I don't
expect a lot of people to know about it.

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mempko
Turns out only the rich have enough money to invest. Everyone else is living
paycheck to paycheck.

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nathan_f77
I've had a look at a few of these startups that were trying to raise money
this way, and none of them seemed very promising. I'm not going to give money
to something just because it's there, it has to be something I truly believe
in.

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bluetwo
Honestly I thought there would be some marginally ethical VCs that would team
up with similar salespeople to scale up this type of investing.

I'm a little surprised this void hasn't been filled.

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pnathan
Startups have an enormously high risk profile. I'm simply unable to come up
with enough money to spread around enough startups that my expected ROI will
beat an indexed fund.

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blazespin
I think the huge win here will be things like Kickstarter. Just takes one
oculus to inspire folks. I could have potentially made 40K off my $400
investment.

Oh, and a free rift!

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boxcardavin
Small investors lack the biggest benefit of a good VC – good connections.
$120k from 12 non-F&F investors = 12 people to bother you without much
benefit.

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mceoin
ICOs are wildly popular (granted, not all from U.S., but crowdfunding seed
capital is proving successful for the right "idea spaces")

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skdotdan
Why not to create a massive crowd-funded or publicly traded VC fund? (as
opposed to crowd-funding for a single startup)

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prostoalex
Fidelity does this (FBGRX, FDGRX) and GSVC has been around (top investments
are Palantir, Spotify and Dropbox)
[http://gsvcap.com/portfolio/](http://gsvcap.com/portfolio/)

So I'd guess that demand for high-risk investment of the kind is well-served
by existing instruments, and even if Schwab or Vanguard have evaluated a
possibility of launching such fund, they have not pulled the trigger yet.

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SirLJ
VCs will always do much much better, they have the connections to do the
exits...

