
Invest in Startups - npt4279
https://wefunder.com/?titleii
======
vu0tran
The website looks very well put together!

In case you guys missed it, the SEC in Title II of the JOBS Act rolled out
TODAY. That means startups can now raise funds from accredited investors on
Wefunder site itself. This is HUGE but that's not all.

Next summer SEC will roll out Title III which means EVERY SINGLE AMERICAN can
now invest in startups for as little as $100. This will be a massive boost for
all startups everywhere, especially for non-traditional startups that couldn't
get funding before. I'm very excited to see all the new startups coming out of
this.

Great job Wefunder! The website looks amazing!

~~~
3pt14159
This is the beginning of Bubble 2.0. I'm a libertarian, but this decision is
fucking scary.

I invest a lot of money for people in my life (for free), so I fairly
regularly get emails effectively saying: "Oh look at this stock my friend
forwarded to me (pump and dump scam)" which I then have to explain why it
isn't going anywhere. So it is already pretty bad (especially on venture
exchanges), BUT when thirty thousand startups start taking investments from
mom and pop investors the consequences are going to be massive. We're talking
tens or hundreds of thousands of dollars from MILLIONS of people. Right into
the lap of startups that don't even have a merchant account.

So the lesson here is get in on this early, profit harvest, and get the fuck
out before it crashes due to irrational exuberance.

~~~
npt4279
I can understand your viewpoint, and I'm usually pessimistic about human
nature... But in this one thing, I'm an optimist.

I think it's a problem that the rich and well-networked effectively had a
government-protected oligarchy to investing in the best private companies.
Much of the capital appreciation in this country over the last couple decades
went to private companies before they IPO, of which mom and pop investors had
no access too... because the government 'protected' them by not allowing them
to invest their money where they see fit.

The JOBS Act has a good balance. No one making $90k will be able to invest
more than 5% of their income in startups. That makes sense.

~~~
7Figures2Commas
I don't have strong feelings one way or the other about the JOBS Act although
I do think it will be interesting to see how everything develops.

But let me play devil's advocate for a moment.

From the standpoint of a founder, I know that raising small chunks of money
from lots of investors is more likely to be problematic than it is likely to
be beneficial. There are numerous logistical and legal downsides to this.

From the standpoint of an investor, I know that spray and pray investing
rarely produces great wealth. And I would have to assume that general
solicitation and the willingness to raise money from lots of investors are
signals, and not necessarily good ones.

Taking both of these things into consideration, I would have to conclude that
companies taking advantage of the JOBS Act to raise money are, in theory,
probably going to be less attractive as investments than companies that don't
have to. In other words, the JOBS Act might create more opportunities for me,
but it would be foolish of me to assume that these are the same opportunities
the rich and well-networked have access to.

~~~
npt4279
In order to attract the type of high-quality companies currently fundraising
on Wefunder, we've were forced to figure out how to take away all of the
downsides.

The most important thing we do is manage a fund that aggregates all of the
smaller investors. These investors are actually Wefunder's investors. Wefunder
then makes one investment into the startup.

So the startup doesn't have to deal with dozens of investors on their cap
table.

Or, put in other words, all the logistical and legal hurdles are placed on
Wefunder, not the startup.

~~~
spydertennis
So wefunder is actually a new type of fund? Maybe an "on-demand fund?"

------
vladimirralev
A quick warning for everyone. Investing without having a complete access to
the books of the company you invest in is extremely stupid. No serious
investor would do that. Don't be stupid.

You must make sure the valuation is fair, this means - check the valuation
report, check the reputation of the company who did the valuation report,
sanity check it, look for signs of bullshit.

Keep in mind, even if the founders have solid reputation there may be some
unethical MBA behind the scenes who can act without founders understanding
exactly what he is doing.

~~~
irollboozers
Most early stage deals, like the ones you'll find on WeFunder or AngelList,
typically do not have valuations or financials to share simply because it's
too early on for a company to seriously offer that. Why waste time putting
together financial and valuation models, when you could be working on the
product and trying to grow?

~~~
vladimirralev
These guys are asking for very specific prices on their website. They must
have some kind of valuation behind it. I just need to know how they came up
with this number. Also, both IRS and SEC have rules and guidelines on how to
do valuation on startups - they use things like committed potential customers,
founder reputation, CVs and things like this. Every startup has to do
valuation before issuing stock options for example.

~~~
Major_Grooves
When I did the "valuation" on my startup for crowd-funding (Seedrs), when it
was nothing more than a wire-frame and an idea in my head (and an MBA research
project, but you almost make me feel like I should be ashamed to admit that or
something), I just did it based approximately on the valuations that various
accelerator-type programmes (including YC) were giving. I came up with 14% for
£30k, giving a valuation of £214k. Low enough to get investment fairly quickly
- nobody complained. How on earth are you meant to do a books-based valuation
of an early-stage pre-revenue company? You have to give a specific valuation
so people know what they are getting.

~~~
vladimirralev
Just google it. There are many methods to do valuation of startups. And again,
you can not issue stock options without IRS-supervised valuation. Most
startups on the website are post-seed with more than 3 people on the team
already BTW. So it's pointless to discuss pre-seed valuation at all.

Whatever numbers you have in your valuation I need to know how you got them to
decide if it makes sense.

(Edit: You may be from the UK, so it's a little different than US. I was
speaking for the US case here.)

~~~
irollboozers
You're mistaken, almost all of them are seed-stage, minus one. You can issue
stock whenever you want.

But I realize that your point is that you'd prefer due diligence and
transparency on terms before using a site like WeFunder. The thing is, most
investments at that stage don't have that much due diligence beyond market
size, team, and traction. I think this is where you're misunderstanding.

~~~
vladimirralev
You're mistaken. Most of these companies are raising >500K, this is not seed
money. Seed is typically less than 100K. There are at least 10 companies that
come from YC, which means they already got their seed round. You can't do seed
twice by definition.

~~~
irollboozers
There is no definition of 'seed', so I'm not sure where you're getting these
ideas. Seed is just pre-Series A.

I am a YC W13 founder and I just raised a 'seed' round. Our investors signed
the paperwork as a 'seed' round. We raised >$500k.

~~~
vladimirralev
That would be highly unusual. But it doesn't matter that much to me if it's
true. We were simply talking about different thing when saying "seed". No harm
done.

[http://www.investopedia.com/terms/s/seedcapital.asp](http://www.investopedia.com/terms/s/seedcapital.asp)

------
pesenti
Reading on YC about investing through a YC company into YC companies.

~~~
aegiso
...sell?

I kid, but the flavor is indeed a bit bubbly.

~~~
ChuckMcM
It worries me too, although an acquaintance of mine has a bumper sticker that
reads "just one more bubble, this time I'll sell."

My concern is that non-qualified investors will once again be participating in
a complex equities market with technology companies that are pushing the edge
of the envelope. That will fund companies that should not be funded, lose
money for people who cannot afford to lose it, and create another period of
ill will for "tech" investment.

------
hpvic03
This looks great. I'm just curious, what is the difference between wefunder
and FundersClub.com?

~~~
npt4279
The main similarity, besides both being YC alumni: FundersClub and Wefunder
both form single-purpose LLC's that aggregate small investors, and then make
one investment into the startup. So the startup only has one investor on their
cap table.

The main difference is one of long-term vision. FundersClub is invite-only and
exclusive. Wefunder is designed for everyone to be able to invest in startups.
We're most excited by Title III JOBS Act, which will let unaccredited
investors invest as little as $100.

We believe that the true value of crowdfunding comes from having your most
passionate users and customers invest, not just C-level execs in an invite-
only club who you've never met. The people who love your product can invest
small amounts on the same terms as professional investors.

~~~
hpvic03
Thanks for the reply. That's interesting, I wonder what Fundersclub aims to
gain from excluding smaller investors.

I have another question for you. What prevents your investment from getting
squished in future rounds?

I've been wanting to use a platform like this for a while, and that's one of
my main concerns.

~~~
npt4279
Investors on Wefunder are investing on the same terms as the professional
investors. It's possible that investments could get squished, but that would
lead to a lot of pissed off people, not just the smaller investors in the
fund.

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6thSigma
I'm curious - does anyone know if someone who doesn't qualify to be an
accredited investor can use power of attorney for someone who does qualify to
be an accredited investor to make 50/50 investments?

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paultannenbaum
The ASCII art in the javascript console is a very nice touch:
[http://cl.ly/image/3B1d1k1H1902](http://cl.ly/image/3B1d1k1H1902)

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greenyoda
I don't think I'd invest in a privately owned company unless they opened their
books up to me in a completely transparent manner (I'd expect the same
information that I'd have access to when buying stock in a company traded on a
stock exchange). My guess is that this level of information will not be
provided, which means that any "investment" in a company like this would be
more like betting at a casino.

------
marincounty
1\. Why does this website feel slimy? 2\. Maybe, I just I got used to the
status quo? 3\. I do think this website is a disaster waiting to happen? I
hope not, but I see nothing but lawsuits down the line. 4\. Taking money from
people who understand the risks involved in start ups is fine, but taking the
money from the average dude who was inspired by Steve Job's movie is Wrong.
5\. To anyone who's rushing over to this site expecting to make money one your
investment; Guy's like Steve Jobs and Mark Zuckerburg had a lot of luck on
their sides too. Mark would have probably never started Facebook, without
stealing the idea from the rich twins. And the god Steve; he got fired from
his own company. 6\. I wish start ups well, but be honest. Or, at least take
money from the people who can afford to lose it. It's not cool to lose money
from the middle class and poor. There might not be a God, but personal
integrity is the one thing that money can't buy.

------
ismail
I noticed a number of startups are listed (and publicly raising) both on
wefunder and angellist. How does it work if they raise >50% on each platform?

Also showing the % raised the way it is now is a bit misleading, it gives off
the impression that that was the amount that went through the wefunder.

Try maybe different colours so we can see easily what has been raised via the
platform.

------
kfk
So, I put the money, they tell me that:

1\. I am gambling

2\. They decide when to cash in. Usually it takes up to 10 years...

3\. I would be a "bother" for the founders (true, but no nicer way of saying
this?)

To me, and I am happy to waste HN points on this comment, this feels snarky
and offending. They seem to say "we are the cool guys", come join us, maybe
you ll be cool too, just gives us the money.

------
ilamont
I received a promo email from WeFunder this morning. To mark the occasion of
the change in the law, this was the messaging:

 _To celebrate, we are featuring great 25 startups from Y Combinator,
Techstars, and MIT!_

Clicking through to the "Raise Funding" page, which includes the pricing, this
message appears at the bottom:

 _We offer a 100% discount to select high-tech startups that recieved funding
from Y Combinator, SV Angel, or Andreessen Horowitz._

Not to dump on the accomplishments of the featured startups and those who have
received funding from SV Angel or Andreessen Horowitz, but the message to
everyone else seems to be: It doesn't matter how great your team is or how
well you execute, if you are not part of the incubator/angel A-list, don't
expect any breaks from us when it comes to promotions or pricing.

~~~
SwellJoe
They needed a seed pool of already vetted companies. This is extremely
rational on their part, and probably helps their early funders make reasonable
decisions.

The biggest concern I think one should have about this is that dumb companies
will be paired up with dumb money at a much greater rate than great companies
being paired up with lucky (or smart) money, making the whole concept look
bad.

------
Major_Grooves
It still doesn't really strike me as crowd-funding so much when the minimum
investment is still $1000. Is that some legal limitation in the US?

In the UK we can do equity-crowd investments as small as £10 - as I did when I
raised money on Seedrs:
[http://www.seedrs.com/startups/satago?promo_code=V5EKZUV4](http://www.seedrs.com/startups/satago?promo_code=V5EKZUV4)

Disclosure: That is a referral link - Seedrs give me 5% to invest myself if
anyone invests an amount through that link, which I think is astonishing in
itself and worthy of comment.

~~~
tlrobinson
You still need to be an accredited investor until next year anyway. I'm not
sure where the $1000 minimum comes from but it sounds like they intend on
lowering it to $100 eventually.

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coryfklein
What is the reasoning behind limiting non-accredited investing anyway? Why is
it a crime for me to give somebody else money if I am happy with the terms of
the contract?

~~~
npt4279
Thankfully, this will be legal in mid-2014, when the SEC finishes implementing
the JOBS Act.

In the 1930's - pre-Internet - people were more easily scammed by traveling
salesmen selling oil wells and such.

We have a lot more information at our fingertips these days.

~~~
jbooth
We have a lot more information at our fingertips these days, and 25% of the
country is convinced that Barack Obama was born in Kenya.

I feel like we're just running the cycle on this one, someone should put up a
countdown to the next Enron and these investments being made illegal again.

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tristan_juricek
I love this idea. I think this is a fantastic opportunity for us plebs to
start speculating.

It would be very nice to see if the crowd has a different kind of investment
trend from the accredited investors.

Edit: Mostly, I'm curious if there will be enough numbers to see a "wisdom of
the crowd" effect or if it will actually just amplify whatever the big money
tends to be attracted to.

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huhtenberg
Do non-US investors need certification?

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ringdabell
Website looks great. I'm sure the crowdfunding niche will explode even more in
the next couple of years.

That said, does anyone else think this will just feed into existing/new
bubble?

Title III in particularly will bring in a flood of dumb money. What a beacon
for #startupbros everywhere.

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paultannenbaum
If you guys are using heroku, you might want to scale up your dynos right now.
I am getting the application error page when I try to sign up.

~~~
npt4279
Thanks! We're on Heroku, and we're cranking those babies up right now.

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neonkiwi
Your progress bar active areas have two percent signs in the width property,
which breaks them (at least for me) to all show 50%.

~~~
npt4279
I'll get this fixed. Thank you.

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basicallydan
Can anybody tell me anything about the possibility of non-Americans investing
in startups in the US any time soon?

