
SEC loosens crowdfunding regulations for small businesses financing in pandemic - MLEnthusiast
https://techcrunch.com/2020/05/04/sec-loosens-crowdfunding-regs-so-small-businesses-can-raise-alternative-financing-in-pandemic/
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cjlars
I work in private equity so I've been keeping an eye on the crowdfunding space
and the quality of the equity on offer is -- to put it lightly -- unbelievably
low. I saw one company offering a SAFE note that only paid out if they went
public... for a single location brewpub (not even a chain concept!). I'm not
sure if that's legally the same as theft, but I'm quite certain it is
statistically the same as theft.

I'd advise everyone to steer clear of the space until we have a government
interested in minimizing the level of fraud and abuse. This current
development is likely to make things worse, not better.

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wmf
It's a logical conclusion that many people pointed out. Why would you sell
equity to random people instead of VCs? Because you're doing something that
VCs won't touch. We should expect all Reg Crowdfunding/A+ deals to be either
scams, low quality, or small opportunities.

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RockIslandLine
The question is why won't they touch it. Unrealistic expectations of high
returns kill deals too.

I'd be more than happy to start funding deals with high probabilities of low-
to-medium returns. And I know for a fact that those deals exist at the small
scale.

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tptacek
People say this a lot but it's worth questioning, because the "unrealistic
expectations" also make the portfolio math work, and if the math doesn't work,
not liking the expectations doesn't turn a broken investment into a viable
one. You can do a really superficial analysis in 5 minutes of Google Sheets to
work this out for yourself, and at least crystallize your implicit
expectations about the number of companies in your portfolio you expect to be
profitable in N years as opposed to dead and gone.

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renewiltord
I vaguely remember in the Startup podcast that Gimlet Media went to non-VCs
before VCs would get in on their thing. And they did eventually do a $200k
crowdfunding campaign. So clearly the argument "No VC = Scam" doesn't work. I
do buy that the scam rate may be higher. But I think allowing yourself to be
scammed some amount is probably okay.

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BobbyJo
Didn't they have a poor outcome? I feel like the only reason VCs got involved
eventually was FOMO, not a solid thesis.

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renewiltord
SPOILERS! Just kidding, I haven't reached the end (stopped when they started
doing other startups) so I don't know how they ended up. Looking it up, looks
like they sold to Spotify. I wonder if the deal was good.

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anticsapp
Now that Facebook CPMs are dropping (because major brand advertisers are
pausing spend), the snake oil salesman are back.

There's a hilarious Facebook ad where you can invest in a COVID-19
telemedicine startup. The doctor in her office is tending to a sick patient.
Through a laptop. And they both are wearing heavy masks for the laptop
session.

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catalogia
Haven't you ever heard of computer viruses?

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sieabahlpark
Achoo, tag you're it

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helen___keller
I've noticed multiple advertisements to invest in golf or food production
robotics on Instagram, of all places, in the past week. I always wonder what
kind of sucker invests into an Instagram advertisement.

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ashtonkem
Often fraudulent offers include a large number of typos or red flags
specifically to drive away high information buyers; sealing the deal usually
requires some labor, and they want to exclude anyone who might figure it and
not buy in the end. Better to exclude a few marks in order to guarantee that
everyone who clicks is credulous enough to sell to without significant effort.

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brenden2
I wonder if this is merely because they don't have the resources to properly
investigate small-scale fraud.

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lquist
Would investors be purchasing equity?

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Oblouk
Crowdfunding should be loosened. Sure some people will get scammed but it is
the same people who the government allows to sink their weekly paycheck into
scratchers. These regulations are only in place to give PE a monopoly on
certain investments.

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nickff
The critical difference being that government makes a lot of money off
gambling taxes; it may be a negative-sum game, but it's their negative-sum
game.

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Oblouk
Fair point

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generalpass
Deep down, I want to believe that someone, somewhere in the government
apparatus is working feverishly to help the other apparatchiks to understand
the Golden Goose's carotid arteries have been severed, and if something isn't
done immediately the entire income stream of all governments is going to fade
away into nothing.

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walterbell
Hopefully they win their debates against lobbyists for entities circling to
cheaply acquire/privatize municipal and other gov assets that can no longer be
sustained due to budget shortfalls.

