
Indiegogo to launch campaigns combining perks and equity investment - artsandsci
https://techcrunch.com/2017/01/06/indiegogo-stuff-and-shares/
======
koololdkool
This is the future of startup funding. Money isn't the big problem with VCs,
it's the lack of vision and old boys network mentality.

Real people with small amounts of money can easily fund all of the great ideas
in the world. Even big ones I think, like cancer research. If properly
controlled (diversified, limited) it really could be the best way for people
to invest maybe 10% of their savings.

We just need a lot more work done in this area until it's safe and _simple_
for people and companies. This will be one of the many things that cause
technology to accelerate even more in the future.

~~~
david927
I don't know why this isn't the top comment. I feel that Hacker News readers,
despite their demographic, are often surprisingly averse to new ideas that
challenge current tropes.

There are a number who are afraid of equity crowdfunding for the reason that
some consumers will get fleeced. While that is an admirable sentiment, if it
was frankly more genuine there would be more effort put into curbing the
thousands of "financial vehicles", payday loan companies and MLM's that
scourge the poor. This isn't that. Yes, we need limits and constraints, but
there's too much at stake to throw the baby out with the bath water.

I think that it needs to be paired with an elaborate vetting process that
still is missing in crowd funding projects. Why can't we have organizations
that provide Technical Due Diligence, etc.?

In other words, I completely agree with you. Currently VCs (and many Angels)
are like major label record companies: they are more risk-averse than they
realize, they operate in a strict handful of myopic categories, and they are
unashamed of the old boys network aspect of it. It's all ripe for disruption,
and while the effect of that might mean some consumers will be cheated, we can
mitigate that portion. And the upside is huge. You are right, it would
absolutely "cause technology to accelerate even more in the future." The
future could be much brighter if we can figure this out.

~~~
ericd
I think the concern is that before the laws limiting this went into action in
the 30s, some people got fleeced for a huge chunk of what they had. It's
extremely hard and time consuming to do proper due diligence on bleeding edge
companies, and many consumers don't have even the basic background for
evaluating technical ideas. See the massive Kickstarter success of the razor
that cuts with a laser, run off of a couple of AAs or some nonsense.

Your idea for technical vetting organizations is an interesting one that might
solve some of this, but unless it's mandatory for getting investment, I
imagine that most companies won't bother.

This is sort of the function that syndicate leads can provide, though.

~~~
david927
I get that concern, and make no mistake it's mine as well. The Kickstarter
laser razor can be matched, though, by venture-backed nonsense like uBeam. And
that will happen. VC's aren't better, they are just fewer. We can't stop
people from taking their paycheck to Vegas, but we can enable those who want
to invest responsibly to do so to a greater degree.

And my point is that I'm really driven by the upside here. We're on the cusp
of huge technological change and what's holding us back is the pedestrian way
we're approaching it. We're facing 21st century potential with 1960's Mad-Men-
styled cigars and handshakes.

This tide will lift all boats. (Yes, silly and fraudulent projects will get
funded, maybe even more so, but so also will the truly innovative projects we
didn't even know we've been waiting for.) This is the moment in history when
we need to liberate innovation from the current gatekeepers of sweaty bald men
in suits who are really just looking for Facebook and Snapchat clones, to the
public to better unleash the potential of what's possible.

~~~
ericd
I get what you're saying, and I want to be optimistic about this too. I agree
that it will likely spur a lot of innovation if we make it easier to invest in
interesting early-stage projects. And yeah, VCs definitely do get fleeced as
well, I like Theranos as an example. They're more disciplined than many
investors because their funds are structured, though, so they're not likely to
dump their entire life savings into the hands of a charlatan, unlike many
private investors.

Maybe there's a way to structure this to get the benefits while still
protecting the little guys. Maybe the new law's restrictions are enough, since
they'll ostensibly be enforced by the gatekeepers who facilitate the
investment. I certainly hope so.

------
JumpCrisscross
Before the Securities Act of 1933, a common scheme involved pitching a pie-in-
the-sky idea ( _e.g._ a magic CGI smartwatch [1]), paying your self and
cronies an absurd salary for a few years, and then calling it quits before
rolling again.

No doubt, this still happens. But grandma was quarantined.

[1] [http://observer.com/2014/08/indiegogos-scampaign-problem-
lat...](http://observer.com/2014/08/indiegogos-scampaign-problem-latest-
crowdfunded-smartwatch-is-total-garbage/)

~~~
bduerst
These vaporware ideas still happen with Kickstarter & Indie Go-Go projects,
except people aren't even buying equity, just a promise.

At least with owning equity there are some legal maneuvers for shareholders to
go after mismanaging executives.

~~~
will_pseudonym
My favorite example of this is "Solar Freaking Roadways!". It reminds me of
the "Monorail!" from The Simpsons. While there doesn't seem to be ill intent
in the former, that doesn't matter if the solution is untenable. A fool and
his money...

~~~
deepspace
See also Fontus ([https://www.indiegogo.com/projects/fontus-the-self-
filling-w...](https://www.indiegogo.com/projects/fontus-the-self-filling-
water-bottles-sport-camping#/)) and Egloo
([https://www.indiegogo.com/projects/egloo-candle-powered-
heat...](https://www.indiegogo.com/projects/egloo-candle-powered-heater#/)).
Fools and their money indeed...

------
tyre
Raising money from random people on the internet sounds like a nightmare.

Every investor you take on is there for life and has a unique set of goals.
The advice they give you is bent towards those goals, be it creating the best
product, exiting in six months, IPOing in 10 years, or making a large social
impact. I can only imagine the all-caps emails from first-time investors
demanding the company go in one direction.

Investor relations can be a time sink to manage for an early stage company,
especially if you have inexperienced investors who only read about the good
times on TechCrunch.

~~~
elastic_church
> Every investor you take on is there for life and has a unique set of goals.
> The advice they give you is bent towards those goals

You just made the assumption that they will have a say at all! Non-voting
shares are in vogue!

~~~
jonwachob91
Non-voting shares don't save you from the emails/phone calls of
naive/ignorant/stupid investors.

~~~
cmdrfred
No, your secretary/answering service does.

~~~
jonwachob91
While I understand the spirit of your posts, I've learned the hard way that
treating investors with less than the respect they deserve is a sure fire way
to shoot yourself in the foot. They are often times the first and fastest
method to raising additional capital when in a pinch. Naive investor or not.

~~~
cmdrfred
>treating investors with less than the respect they deserve

Is not having a direct line 24/7 less respect than a investor deserves?
Especially one who was invested only a few hundred dollars?

~~~
JumpCrisscross
From FINRA, Delaware law and the SEC's perpsrictive, no. If you are not
lawfully forthcoming the sanctions and fines will come on swiftly and heavily.

------
joeblau
It seems to me that in recent history; Every time the masses get easy access
into something that historically had a high barrier to entry -- You get a huge
boom and a huge crash.

Back in late 90's when everyone was starting a company with no product at all.
Back in the mid 2000's when people were buying houses with no income
verification.

If there is anything that is going to lead to the next bubble, this might be
it.

~~~
anigbrowl
Most likely, but at least I have the skills to cash in on this one (by
delivering a product that this makes easier to finance, not by ripping anyone
off). In any case, when the primary national objective becomes the
construction of a gigantic wall regular economic logic has already departed
via the window.

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EekSnakePond
Step 1.) Raise an IndieGoGo campaign to invent some impossible thing that
makes Silicon Valley middle class super excited to throw money at, offer a
return. (Some fundivist nonsense)

Step 2.) Raise another IndieGoGo campaign that just promises a lesser return.

Step 3.) Raise one more IndieGoGo campaign that just promises an ever lesser
returns than that.

Step 4.) Make perks payout schedules and trickle enough money out to the
original raise to the few top perks of the other raises.

Now have now hypothecated a $10,000 raise to a $10,000,000 position. Wrap up
the entire position in a derivate. Wrap that up in another derivative. Wrap
that in a derivative. Then allocate the rest of your raise to meta counter
positions that arise from those positions.

Slowly release cheap updates for the original raise and slowly lose community
confidence. Trigger the derivative condition cascade. Make stupid money.

You're welcome.

~~~
Mtinie
I guess you are getting downbotted because you've open-sourced someone's
proprietary business idea that they were going to kick off next week.

You may have better luck with the Wall Street crowd.

------
caleblloyd
> if Indiegogo will even be able to get this past the SEC

It is already legal, the SEC passed Regulation A+ in 2015. Companies must be
approved by the SEC for Regulation A+ and then they can sell their offering to
unaccredited investors. There is limitations in number of investors and the
dollar amount of investments.

I work for Issuer Direct and we help companies apply for Reg A+ and get
funded.

~~~
LoSboccacc
What about international unaccredited investors? Say, from Italy?

~~~
caleblloyd
I'm not exactly sure. Most of the recent "1-A" SEC Forms filed only have US
States listed under "Jurisdictions in Which Securities are to be Offered"
[https://www.sec.gov/cgi-bin/browse-
edgar?company=&CIK=&type=...](https://www.sec.gov/cgi-bin/browse-
edgar?company=&CIK=&type=1-A&action=getcurrent)

There may be some other section that addresses the international portion of
the offering. All of the companies going through Reg A+ have lawyers familiar
with it writing these filings and telling the company what they should and
shouldn't do. If you find one you want to invest in, your best bet is
contacting the Company's Investor Relations department and they'll let you
know.

------
mrleiter
Very interesting move. But companies deciding to take equity funding from a
variety of investors without proper knowledge of finance (and the market for
the product) can be dangerous for both companies and crowd-investors. On the
one hand companies must not forget that the investors own part of their
company, which entails lots of legal issues (think of shareholder meetings,
etc...). On the other hand this probably makes it unattractive for
institutional investors who know the difficulties of handling scattered
equity.

~~~
ecopoesis
Sounds like an opportunity for a startup: SEC compliance as a service.

------
Animats
Why would anyone "invest" in a startup without voting rights and antidilution
protection?

~~~
jayjay71
Because they don't know any better. The goal is to reach people that otherwise
don't have the means to invest in startups - they have money, but not
expertise.

While I love the idea of crowdsourced equity investing, I think a lot of
uneducated (and educated) people will lose money chasing after the hype.
Hopefully it will be a learning process and some form of it will continue
afterwards that is beneficial for everyone.

------
lordnacho
I was thinking this model must exist already:

\- Have your bog standard crowdfunding site: bunch of projects with pics,
descriptions, videos. Pretty much anything goes.

\- With enough interest, appoint a due diligence person. So say some guy
gathers enough money for his moonshot. Site appoints someone with real
credentials (worked in space industry, auditing, etc)

\- Due dilly guy gets paid for report.

\- Investors decide if they want to play.

\- Weakness: who does due dilly on the due dillies? I guess you need a
sizeable network.

------
shmerl
I guess they follow Fig?

~~~
shinymark
In case anyone here hasn't heard of Fig they are crowd funding equity
investment into videogames.

More info on their site here: [https://www.fig.co/](https://www.fig.co/)

~~~
makomk
Fig also has a really, errm, interesting corporate structure. Basically,
investors get non-voting shares in a Fig subsidiary whose upside is capped at
some fixed proportion of the income from the game, with Fig acting as the
publisher - except without any of the usual tools such as IP ownership that
publishers use to ensure games they invest money in pay up. Investors
themselves also don't appear to have any standing to sue if the game
developers simply refuse to pay up. There's also conflicts of interest all
over the place between Fig, its subsidiary, and the developers it's handing
over money to, with huge overlaps in board membership. The information for
investors made for very interesting reading, though I do wonder how many
investors actually read it.

~~~
cbr

        upside is capped at some fixed proportion of the income from the game
    

That's not usually what people mean by a capped upside. In a context like this
I would take a "cap" to mean something like "your shares can't be worth more
than 5x what you paid for them".

~~~
makomk
Ah. I think it got lost in editing, but the problem is that the same doesn't
apply to your potential losses - if _any_ of the games backed by Fig fails
badly enough, or if Fig itself fails, you can lose your entire investment as a
result, even though you won't see a penny of the returns from the other games
if they succeed.

------
anigbrowl
I'm really happy about this if it goes OK with the SEC etc. This would be
great for small film producers who would like to attract a realistic amount of
equity to realize and market a project properly, while still being able to get
the microfinancing rolling with more tangible things like high quality hard
copies of the film, swag etc.

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gravypod
This is going to open up a wonderful can of worms that will hopefully ask some
interesting questions about the future of trading and investment from the
average person.

This will be really cool to see. Now don't get me wrong, I'm nearly 100% sure
anything like this is going to end horribly but it's good to be optimistic,
right?

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Namrog84
I'm really excited about the potential prospects of this. There are a lot of
things that'd need to be worked out a nd a lot of decisions to be made but I
think this has a ton of potential for all people. Creators and micro investors
alike

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elastic_church
> and if Indiegogo will even be able to get this past the SEC

If the President gets his SEC Commissioner confirmations, everything should be
able to get past the SEC if it simply promotes transactions between people.

