

FundersClub Ditches Dumb Money By Going Invite-Only - mittal
http://techcrunch.com/2013/08/16/fundersclub-invite-only/

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makomk
This is hilarious because it's right out of the ponzi playbook - financial
scammers love to make their schemes invite-only since it gives clients the
feeling that they're part of an exclusive club and makes them less likely to
question the investment.

I doubt that FundersClub is a ponzi or even a scam in the legal sense, but
it's entirely possible you'd have to be a sucker to invest and there there
will be shadier imitators that are outright scams looking to pick up the
people who can't get into FundersClub, especially if the JOBS Act is
implemented and they can seek money from the general public.

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argumentum
So you "doubt" that FundersClub is a ponzi scheme or scam (a very very serious
accusation), yet you accuse them of employing the same tactics?

By definition, a scam intends to mislead .. it pretends to be what it is not.
So if FC does not intend to mislead, it's an honest business and you have no
reason to tar it's reputation with the words you've used.

Regardless of what you think of the JOBS Act (which in many reasonable
interpretations is a boon to those who would not otherwise be exposed to the
opportunities now exclusive to the so called "1%"), it is wrong to tarnish
FundersClub with the labels you've used, sans some sort of evidence .. which
you don't have because FC is not a scam.

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GregorStocks
What makes you so sure that FC is not a scam?

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argumentum
It's a YC company, I know the founders, who are my batchmates, and _they are
not a scam_. The model they've used to pick startups (I do not know the
details) is excellent .. out of our batch they picked many of the most
successful companies.

I have no financial interest in FC, btw. I have not invested in any FC co's,
though I certainly would if I were in a position to.

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ChuckMcM
Heh, a lot of snark in the comments tonight :-)

I think this is a pretty smart move, mostly because I think there will be an
interesting correction when folks realize that most startups return $0, its
the outliers that return outsized returns. And the first sob story we get
about how someone took their 401k they spent the last 15 years building and
losing it all in start-up investing is going to be paraded about for the rage
views and that is going to just be annoying.

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mindcrime
I'm still not convinced that you aren't better off taking "dumb money", as
long as they "dumb money" investor doesn't try to act like a "smart money"
investor. Maybe I'm just arrogant (OK, I _know_ I'm arrogant, sue me) but the
way I see it is: I'm the domain expert in my space, and investors are domain
experts in, well, investing. So why do I want somebody who probably doesn't
know anything about what we're doing in terms of customers, market, product,
etc., trying to throw their weight around and shape the direction of the
company?

I find myself wondering if it wouldn't be better to look for somebody who's as
dumb as a brick, but hands-off. Essentially, somebody who says "here's X
thousand dollars of my money, go make me more money with it".

As opposed to "Here's X thousand dollars of my money, and why don't you pivot
to market 'Y', and maybe you should make this little change to the product
roadmap, and BTW, I have this old buddy of mine who would make a great CTO..."

Honestly, the only real reasonable sounding argument I've heard yet for
wanting involved, hands-on investors is so they can make introductions / open
doors for you. But if you're relying on your investors to get you in the door
of your customers, well, that sounds like a "red flag" to me.

 _shrug_

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tlrobinson
That's not how it works, at least with angels. The expectation is usually you
put the money in, and if the company needs advice or help with something
they'll ask you. Feel free to give unsolicited advice but don't expect the
company to bend to your will.

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caseyf7
Because you really need a bunch of people who think they're smart and want to
bother you with every idea they have. Especially at the bottom of your cap
table.

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hayksaakian
Because it's so hard to prune all those millionaires.

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nraynaud
Invite-only always feels a bit strange to me, in a community where we
celebrate the guy who made it alone against the crowd, it seem to foster self-
replication. You might end-up with car parks filled with Tesla cars owned by
people who all do kite-surf together on the week-end. You've lost the crazy
outsider who will shuffle the industry (or make it harder for him).

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joosters
What about all the 'dumb money' that's already there, i.e. the existing
amateur angels? Oh, they'll be the ones vetting the 'smart money' applicants.
Good luck with that!

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beachstartup
when popularity doesn't work, go for exclusivity.

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waratuman
My guess is that this was just an easier story to sell because they can just
approve accredited investors and not have to deal with those who are not due
to regulations. They may have planned to make it open to everyone but had to
step the plan back a bit.

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nivertech
Why not to let start-up founders decide from whom they want to accept money or
not?

