

To Turn The Crowd Into Venture Capitalists, FundersClub Raises $6M Seed Round - quan
http://techcrunch.com/2012/10/19/fundersclub-seed-round/

======
stanfordkid
I don't think this will work well for investors. The best deals in Silicon
Valley go to the best angels who generally don't need a website to be able to
get in on the deal. There is no shortage of access to capital for proper
companies in SV. The investors who put in small amounts of capital generally
aren't going to see returns on investment because startups are just _too_
risky.

Look at CircleUp for what I believe is a better model -- crowd funded capital
for semi-established consumer brands.

------
phillmv
Crowdfunding startups has always sounded to me like the best way to hide risk
from retail investors seeking a quick buck since the invention of the mortgage
backed security credit default swap.

~~~
patio11
Retail investors did not buy those. The closest they got was either a) houses
backed by ARMs made economic by mortgage-backed securities or b) shares in the
publicly traded megabanks which held billions of mortgage-backed securities.

~~~
phillmv
Of course, you are correct. I'll have to modify my attempts at witticism in
the future.

~~~
freshhawk
Crowdfunding startups are the mortgage backed security credit default swap's
for the retail investor?

------
jivatmanx
Can someone explain to me why you need to make 200k/year or have 1 Million in
assets to participate in this when the minimum funding level is only 1k? I
want to participate in this, but can't.

~~~
greattypo
They've limited participation to so-called accredited investors (with minimum
income or assets as defined by the SEC). There are non-trivial regulatory
requirements that come with accepting money from unaccredited investors, so
many (most?) startups do the same.

~~~
jivatmanx
Basically, "Because it's an SEC regulation"

OK, then I understand why this company and other start ups follow this rule.

But not why the rule is in place in the first place. To me, it sounds
extremely discriminatory that any government regulation would have a fixed
income or asset level requirement.

~~~
aaronblohowiak
This regulation exists for consumer protection. Prior to this regulation,
people were conned out of their money by investing in companies that may have
been a sham. This does imply that rich people are less prone to hucksters than
the poor (or that it is more acceptable for them to lose their investments..)
Recent legislation changes this so that anyone can invest up to a percentage
of their annual income, while rich people are unbounded in the amount they can
invest. Editorializing, I think this is a good compromise.

~~~
001sky
A liberal paraphrase might boil down to the old adage:

 _Don't make a bet you can't afford to lose_

Back in the day, people presumably "bet the farm" on XYZ shady investment.
Since the farm was all they had, it was a bet they could not afford to lose.
But obviously 9/10 startups fail to be great investments. So, as public
policy, the Gov't didn't want 9/10 farmers to go bankrupt. a Rich guy will a
$$$ minimum assets can still lose a "farm" and have something left (ie,
diversification).

Becuase the rich guy can (in theory) have scope for more investments
(experience) and/or to pay advisors (expertise), they are seperated out. Note
that there are lot of unsophisticated rich people and/or investors in certain
areas that have varying levels of sophistication (empirically). But with the
privelege of wealth come the obligation to realize _caveat emptor_ , vis-a-vis
public policy.

------
interg12
I'm incredibly skeptical of the weak term sheets that would come out of this
process. It looks like the crowd gets dilutable stock with no option for next
round priority investing. Best of luck on their success - I hope my initial
take is wrong, because this would be exciting at scale.

------
adebelov
congrats to a great team and amazing execution! FundersClub isn't the first in
the space, but it's definitely the first to gain so much traction in such
little time. I hope they keep killing it!

------
001sky
_FundersClub firmly believes it’s legal because it never handles the money
directly, instead raising money for a venture fund that funnels into a
startup._

\-- Intersting. This sounds more like lead-gen.

------
billirvine
Massive, scary legal risk here. This won't last long.

~~~
brandnewlow
I'm sure you have your reasons for thinking this, but having read Hacker News
for 4-5 years now, whenever people start making claims of startup failure
based on legal risks, for me that's now a pretty sure sign of a winner-in-the-
making.

~~~
staunch
PayPal (banking laws), YouTube (copyright laws), Airbnb (hotel laws), Uber
(taxi laws), Facebook (FTC privacy laws).

~~~
billirvine
Those are nothing compared to SEC laws and IRS requirements. Run afoul of
them, and prison is in the cards.

And PayPal didn't break any banking laws, only ran into parochial issues in
some states.

And Uber is having trouble too, aren't they?

~~~
Evbn
AirBnB does pretty well on an IRS-flouting (and similar state-level
authorities) business model.

~~~
billirvine
AirBnB doesn't have any IRS issues (at least not that I've heard of). Their
problems stem from being an enabler within an industry that typically requires
licensing... and doing so to rent properties for fewer than 30 days without
permit (required in some areas). Yeah, the law seems preventative, but it's in
place as a zoning issue to prevent a bed and breakfast from popping up in your
mom's cul-de-sac.

AirBnB is a good idea, running up against zoning laws that are also
(generally) good ideas.

------
Evbn
So much for dogfooding...

