

YC self-venture fund - electromagnetic

Given the recent post (http://news.ycombinator.com/item?id=1714377) about possible collusion and price fixing between Angel Investors, I was wondering if YC startups could begin providing their own alternatives.<p>P2P Loans are getting much more popular, which makes me wonder if we even need Angel Investors anymore. Are they still helping the process? I know that almost every YC start up, I would have been willing to invest in. I have like $10,000 sitting in my bank account, because I have no clue what to do with it. I'm sure I'm not the only one on HN with money who could invest in one of these great companies that comes through YC.<p>I'm suggesting a P2P Investment fund specifically for YC start ups. Sort of a DIY invest-in-us for the YC start ups as an alternate means of funding. I'm sure it could make a great YC project itself.
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10ren
It's a great idea - grass-roots investment is very appealing - but
unfortunately I think the main thing that angels bring is not money but
contacts and experience.

This might work with YC-alumni, though they probably they probably don't have
enough contacts/experience yet... but they definitely have quite a bit
already, and it's growing, and will only continue to grow.

In fact, far from being a result of this meeting, this growing power is one of
the causes of it (as noted in the article.)

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electromagnetic
YC is an experience mill as of itself. It's only going to be so long before it
hits a sort of critical mass that the angels won't be bringing in more
contacts or experience than YC is already self-networking to its start ups
through the virtue of being YC.

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vyrotek
Its an interesting idea. I'm curious how the legal side of things would
actually work. If I find a company I want to invest in and only want to do
$1k, do I get stock? Does everything pool together under a single person and
some legal agreements split any profit made in the future or something?

If no stock/ownership is involved then isnt it more of a donation? There are
plenty of sites for that.

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electromagnetic
One way to do it would be as a straight loan service to startups. I know here
in Canada you have to register as an accredited investor to loan money legally
(as far as I've always been told at least), which has quite ludicrous
requirements for small P2P loans.

Another way would probably be for the start up to offer to sell X-percent of
their company to the investment fund for a certain price. This is then broken
down into shares, and individuals can buy these shares for an equivalent
fraction of the offered price.

There is a third way, but I'm unsure if the start up would want it. A
continual investment (IE I could put in $1,000 every month into the company
for 3 years and end up with $36,000 invested) option, where people invest
however much they want when they want. However, I'm unsure what this would
mean for ownership of the company. I know many judges would view this as "the
founders invested $50,000 into the company, but the investors put in $100,000,
so the investors own 2/3 of the company", because this is how ownership is
decided in most small businesses. I don't know enough about how stock options
work in small business for the investments this way; I'd love to hear from
someone much more knowledgeable than myself on all this, which is why I posted
the suggestion.

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cperciva
_I know here in Canada you have to register as an accredited investor to loan
money legally (as far as I've always been told at least), which has quite
ludicrous requirements for small P2P loans._

You only need to be an accredited investor if you don't qualify under other
rules. Lending money to a relative? No problem. Lending money to a friend
you've known since high school? No problem. Lending money to a company you're
working for? No problem. Lending money to a company which provides you with a
detailed prospectus? Go right ahead.

Lending money to a complete stranger who hasn't provided you with full
disclosure of his financial status and you don't have enough money to qualify
as an accredited investor? That's when the rules stop you... and that's
exactly the sort of situation which should be disallowed, because there's no
way for you to not be the victim of a scam.

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lachyg
I've always been interested in the thought of a Kickstarter, but for
commercial projects. In exchange for $, you get back %. Always thought the
legals would be much too difficult though, as it's basically a stock market.

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chrisduesing
You are correct.

As soon as you offer equity (in any form, disguised or otherwise), on a
website, you have just made a public offering. The SEC has some strong
opinions on how this should and should not be done, it tends to involve large
legal and accounting fees.

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jacquesm
I don't think the money is the bigger issue here, that could be found. The
components that you'd need on top of that would be a screening process that
would bring out the kind of companies that YC does invest in and people like
Paul and others to help the start-ups go from 0 to 100.

The latter will be your real bottle-neck, likely there are plenty of people
that would be willing to pony up a similar amount of dough, but hardly any of
them could dedicate the time (and might not have the expertise) required to
really make a go of it.

