
SEC approves 200+ million Americans as Angel Investors - RedditKon
http://www.lawgives.net/blog/equity-crowdfunding-what-does-regulation-a-mean-
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osirisr
This is huge! Imagine if this existed during the time when Facebook was
becoming a big deal and individuals could invest in it. Imagine, for example,
if instead of that $2.5B pre IPO cashout going to one single investor it got
distributed amongst 50,000 investors. That would $50K for each at a 1000 fold
ROI. $50K is most people's yearly income =)

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api
I'm imagining the hordes of frothing con artist sociopaths that are about to
create flashy demo videos and cutout companies with lots of fakey "social
proof" and cutout demos sold as real products.

Equity crowdfunding for the general public _should_ be a good idea, but
unfortunately I'm afraid it's not. The asshole to elbow ratio is just too low.
I'm deeply concerned that the entire seed stage market is about to get shat
upon rather copiously. The frauds will actually drown out the good deals,
since they'll almost by definition be better at flash and promotion.

A lot of people are really naive about this stuff. Organized crime will likely
get involved. It will not be pretty. But hey, those companies that make flashy
startup intro videos are about to do a lot of business.

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arfliw
It'll be just like Kickstarter. Yes there is fraud and yes there are well
meaning failures but you also get huge successes like Oculus (and many
others).

Just as there are sure to be well publicized stories about people getting
fleeced -- there will be stories about other people getting rich.

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api
The quantities of money are larger, which will attract a different class of
scammer.

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arfliw
That does not change what I said.

Yes, there will be scams. And there will be successes.

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gbelote
It's great that the SEC is moving forward with implementing the JOBS Act, but
sadly what the SEC voted on isn't a good fit for startups and small
businesses. It's more of an "IPO-lite" and for the most part only makes sense
for companies that are a year or two away from going IPO.

On the upside, the "good stuff" from the JOBS Act (Title III) should be
implemented by the end of the year.

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PabloOsinaga
I'd like to launch a campaign for my startup users to have the possibility to
participate in our seed round. Is there a website/service that can help with
that ( something that could work like kickstarter )? AngeList and others are
not really designed for this use case (at least there is nothing publicly
available NOW)

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gbelote
Reg A+ (what was just voted on) is probably not going to be a good fit for
you, since you're required to get approval from the SEC and need to
periodically file audited financial statements. But the other part of the JOBS
Act (commonly referred to as Title III) should be here by the end of the year.
You should check out Wefunder (disclaimer: my startup), we'll be supporting
the JOBS Act.

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PabloOsinaga
Don't mind getting approval (I am assuming it's a somewhat simple procedure)
and submitting periodic audited financial reports. We (Bandhub) think it is
very important for our users' community to have ownership in the company. And
feel this is a great first step towards equity grants in online communities (
ala Reddit Notes ). So we are happy to go through hassles to get it done ( it
it's useful for you guys we can be beta testers of your platform )

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gbelote
It's going to be closer to filing a Form S-1 (like with an IPO) than
submitting a url and such, unfortunately. And it's probably going to cost tens
of thousands of dollars in lawyer/accountant time before you can even start
with Reg A+.

Users having ownership in a company can be a powerful thing, and I think we're
going to see it more and more. Hopefully with the new SEC regulations
companies like Reddit will be able to legally do what should be easy (gift
people equity).

The upside is that the SEC reported to congress that they're going to get
Title III (the part of the JOBS Act meant for startups and small businesses)
implemented by October this year. I think that's going to be a much better fit
for what you're looking for.

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delecti
So, honest question, isn't public investment in shaky tech companies exactly
what led to the early dotcom bubble?

Except now that it's before they even IPO, isn't it even more risky?

Genuinely curious, I was only 13 in 2000, so I didn't exactly know what was
going on.

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gbelote
That certainly was part of the dotcom bubble, but not the cause of it. In
addition to a very frothy public market there was an obscene amount of private
money getting invested in companies with poor fundamentals. sama wrote a great
article recently about bubbles.

There are a few things from the JOBS Act that protects against terrible
things. People can't invest more than a certain amount in startups overall -
your quota is based on your income or net worth and is either 5% or 10%,
depending.

Additionally, these are long term investments - you can't easily flip
investments and I think that'll play a big part in people's psychology. You
can't buy a share of some hip photo startup (for example) and sell it to
someone else in 6 months at a higher price. In many cases you're going to be
holding your investments until the company exists. There are exceptions to
this, but I think practically we won't see secondary markets for a long time.

Another thing (this is more specific to Title III - the crowdfunding part of
the JOBS Act that we're still waiting on) is that companies have to publicly
set a goal and meet it through a registered platform. So a shaky startup can't
find 10 suckers to give them $1000, they have to set a real goal (e.g. $50k)
and convince a crowd of people to give them money. It still will happen, but I
think fraud will be much less common than well intentioned startup failure.

The best part (IMO) is that the economics of investing will be dramatically
different, so people can invest $100. Startups are super risky, but with
$5,000 you can invest in 50 businesses and spread the risk. Because they're
startups many will fail, but it's less likely to get conned by 50 founders.

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MCRed
I'm completely in favor of individuals being able to invest in startups,
especially since you can go to vegas and blow $30k in a weekend, to not be
able to put $30k into a startup is a crime.

But this is going to make a bubble. IT will take a couple years to shake out,
but I sure hope that as a result of this the change isn't reverted.

Yes, people will invest their money poorly, but nobody could do as bad as
Social Security which in my grandfathers case, returned less than %3 fair
value of his money (Eg: effectively a %97 loss[1]. Slot machines only produce
a %98 loss!) And nobody has the option to avoid "investing" in social
security.

[1] compared to putting the money in an index fund. At the time of
calculation, the indexes had just crashed with the market, so the actual
results %90 of the time would have been much more in favor of individuals.

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adventured
Both of my parents died before drawing social security, they suffered a
complete loss on all the money paid into it.

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sctb
[https://news.ycombinator.com/item?id=9274602](https://news.ycombinator.com/item?id=9274602)

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crowdfundimpact
Question: What about Title III?

I've seen mentions in this thread of it coming out by the end of the year.
What are other peoples thoughts?

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iamtrask
pure democracy via capitalism... interesting. Are the masses smarter than the
1% is generous?

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anigbrowl
I'm more interested in the Title III changes supposedly coming down the pipe,
where you can file regulation D and then raise up to $1m from non-accredited
investors, but _engaging in general solicitation._

This would be absolutely killer for independent films, which are badly in need
of a financial boost at the bottom end of the market, and which in many ways
resemble a specialized startup. On the negative side, they don't have a
recurring revenue model of the same sort as a traditional product or service.
On the positive side, the business process/manufacturing path of a film is
very well understood.

Right now, some films are successfully crowdfunded. It works very well for
documentariesthat address a topic which already has a dedicated interest
community, and some kinds of fictional projects eg _Super Troupers 2_ met its
$2m funding target in something ridiculous like 48 hours. But crowdfunding is
_very_ heavily geared towards projects that have a pre-existing audience,
sometimes through participation of a Famous Person. If you're trying to launch
a film from scratch it's way harder, and it's harder again if you're not
targeting a very specific demographic (which is why you see a disproportionate
number of LGBT films on crowdfunding sites - it's a demographic that is
underserved by Hollywood and one that's easy to connect with from a marketing
standpoint). Paradoxically, the less money you are looking for, the more
difficult it can be.

Small indie films already go down the regulation D route - pre-filing with the
SEC, and then raising production/marketing costs through a combination of
presales to distributors and by offering a limited number of equity blocks to
accredited investors. But this is very very time-consuming. There are things
like tax incentives to help, but they require a lot of administrative overhead
and are more targeted at mid-sized projects from established producers, eg
California tax incentives require a minimum budget of $1 million, presumably
so to make the state's administrative overhead worthwhile.

It would be a huge change for indie films to be able to do general
solicitation for sub-$1m budgets, and offset the lack of brand identity by
offering investment participation instead, notwithstanding the high risks
involved. Unfortunately, it looks like there won't be any movement on this
before October of this year, meaining the earliest that Title III crowdfunding
will take off is in 2016, nearly 3 years after the final implementation
deadline set out in the 2012 legislation. I don't know if this is the fault of
the SEC itself or if the agency is too underfunded to go any faster, but it's
quite frustrating for those of us who'd like to raise capital int he micro-
equity space.

[https://fundwisdom.com/article/brian-thopsey/title-iii-
equit...](https://fundwisdom.com/article/brian-thopsey/title-iii-equity-
crowdfunding-update-nonaccredited-investors)

