
Senate Passes Amended Crowdfunding Bill, Emulating Kickstarter Model - llambda
http://idealab.talkingpointsmemo.com/2012/03/senate-passes-amended-crowdfunding-bill-emulating-kickstarter-model.php
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jerrya
I went to a presentation about this Tuesday.

What became apparent is not just that crowdfunding will open up all sorts of
revenue to startups, but that it will also create opportunities for new
services dedicated to the crowdfunded startup industry.

Just as now we have startups whose market is startups and their needs, so too
crowdfunded companies will need specific guidance and services in terms of how
to structure offers, issue press releases and other information packets to
deal with hundreds or thousands of small investors, respond to questions from
these investors, and perform other duties different from those that are needed
by startups who fund from far fewer and more sophisticated investors.

I think if I knew a few financial lawyer friends and had some capital, it
might be a good place to be.

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milkshakes
This is what ProFounder wanted to be. Sadly they were ahead of their time.

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alain94040
I believe crowdfunding may become a very powerful trend for startups (even
though criticism such as this in the SJ Mercury News is valid
[http://www.mercurynews.com/chris-
obrien/ci_20217467/obrien-i...](http://www.mercurynews.com/chris-
obrien/ci_20217467/obrien-ipo-reform-spells-disaster-investors)).

That's the reason why there will be a panel dedicated to discussing
crowdfunding at the upcoming startup conference in mountain view
(<http://thestartupconference.com/>).

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param
Actually, there is very little criticism in the mercurynews article you cited
about the crowdfunding. Most of the criticism is focused on other portions of
the bill.

Literally, all content from the article about crowdfunding is: "The crowd
funding proposal has some merit. Companies could seek to raise up to $2
million through individual donations up to $10,000 each or 10 percent of a
person's income..<snip>.. But in its current form, even the crowd funding
piece is problematic because it provides little oversight of the process by
letting just about anyone into the fundraising game."

I can understand why it is 'instinctively' bad to not have any oversight into
the funding process, but how is letting just about anyone into the game bad?
It could even have positive impacts to startups like mine who don't have
valley/VC contacts but know individuals who could spare 10k.

Given that the costs of starting up have plummeted, it makes sense to allow
crowdfunding while removing the auditing/legal requirements because
crowdfunders would be taking lesser risk than investors of yore. Practically a
certified investor (1m+) has the capability to invest in 100 startups before
(s)he can invest in 1!

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jerrya
"but how is letting just about anyone into the game bad?"

Some params are good, some params are bad.

It's not that letting anyone into the game is bad per se, it's that some
params are bad and will try to defraud small unsophisticated investors and it
is probably easy to do so.

Congress and the SEC presumably would like to gain the advantages of
crowdsourcing but also want to protect the small time $10, $50, $100, $1000,
$10,000 investor.

~~~
param
not disagreeing with anything you said. I am merely pointing out that the
parent posted a link that wasn't adding anything worthwhile into the
crowdfunding part of the story

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mikeryan
Can someone explain to me does "crowd funding" a startup mean I give $400 and
get a piece of equity? And isnt that what I do on the stock market? Except in
this case it lacks the financial oversight and disclosures of a pilublic
company?

What's to prevent "pump and dumping" of startups?

I'm not being facetious. I've been wondering this for a few days now and feel
im missing something obvious.

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bilbo0s
I'm right there with you.

I mean KickStarter is akin to donation. There is no expectation of getting
your money back plus a return.

This seems ... I don't know ... kind of bush league. Who would do this? A team
might have, I don't know, thousands of potential 'investors' who they would
have to keep happy. What about follow on rounds? So many people are lawsuit
happy now a days as well. Just seems... I MUST be missing something.

~~~
eli_gottlieb
Kickstarter, properly done, is actually _not_ an investment but a product
purchase. You are promised a "reward" priced for how much you donated; this is
a tangible product in exchange for your money.

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Kliment
Except that is specifically against the kickstarter terms of service. There is
no legal obligation to the seller to give you anything, whether or not it was
promised as a reward. The Kickstarter FAQ tries to paste over this by talking
about reputation but legally, it's simply not there. Legally speaking, a
kickstarter contribution is a donation with no consideration included.

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T_S_
Great. The idea is to reduce transparency and let mom and pop play the game. A
missed opportunity to promote transparency.

For most of these little companies no advantage is lost by reporting cash
flow, transactions and other relevant metrics. All easy to calculate. The new
services around these little companies should be accounting support. Instead
all we are going to get is "social proof" followed by an info blackout.

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ataggart
So it's not that something previously illegal was legalized, nor that
something previously burdensome become less burdensome. Instead more
bureaucratic overhead was added, barriers to entry were raised, and all that
with a nice helping of nanny-ism in the form of meagre limits to how much one
shall be permitted to invest.

Perhaps this will help "create jobs", but not for those who want to
participate in any aspect of providing capital, borrowing capital, or
facilitating such an exchange. The only jobs created will be for those who
have the skills to navigate bureaucracy in order to lessen the increased
deadweight loss this bill will create.

Edit: apparently _something_ was illegal, but the article failed to mention
it. Still not sure what that _something_ is.

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InclinedPlane
Kickstarter is not crowdfunding, it's pre-orders and donations. No equity
changes hands.

The new thing here is that soon it will be legal to do just what Kickstarter
is doing today but also add the option for supporters to purchase equity in a
venture. Think: micro-IPOs. So instead of just pre-ordering the Double Fine
game or getting a sweet poster or lunch with the team you could also maybe
invest in, say, 2% of a company set up for the project which might net you a
fincancial return if they make a profit.

That sort of thing will now soon be legal. It's still limited due to the
weight of excess regulation but it's a step in the right direction.

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ataggart
"The new thing here is that soon it will be legal..."

The article fails to make any mention of what precisely is currently
_illegal_. I'm still not clear on that. What crime would I be committing today
that will soon not be a crime?

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wmf
Basically it's currently illegal for someone who's not a millionaire (an
"accredited investor") to invest in startups.

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joshu
It is illegal for the startup to take investments from non-accrdited investors
under many circumstances. It's not illegal for the investor per se.

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nikcub
So, who is working on a 'kickstarter for startups' company?

