
YC wants to let people invest in its startups through the blockchain - rmason
https://techcrunch.com/2017/09/20/yc-wants-to-let-people-invest-in-its-startups-through-the-blockchain/
======
pfraze
> “Do I think ICOs are silly, bordering on scams? Yes, they are,” he
> continued. “But, there are a few that are important, and the blockchain is
> more important than not… ICOs need to be regulated.”

> At the same time, it could mean working, for the first time, with investors
> who are not “accredited,” meaning high-net-worth investors — an idea that
> appeals to Altman.

I guess he sees blockchains as a vehicle to getting the regulatory framework
he wants for securities, and (I assume) doesn't feel he can get for
traditional stock.

> Added Altman of the appeal of ICOs in particular, “People are watching their
> friends get really rich and it’s making them [frustrated and wanting to get
> rich, too].”

> “One of the trends that bothers me about Silicon Valley,” he continued, is
> that “more and more of the wealth creation here is not available to most
> people, and I think that’s very bad in a society with already so much wealth
> inequality. If there’s a way that new technology can make it practical and
> possible to democratize this, I think that’d be great.”

I mean, he _just_ said he recognizes it's a bubble. Doesn't a bubble usually
suggest wealth transfer instead of creation? Of course it's frustrating to not
get in on that money. It's even _more_ frustrating when you see the situation
as ethically gray, and here's Sam signaling that YC should jump on board.

~~~
pfraze
I guess I'd ask this question:

Is it ethical to want to bring in unaccredited investors to a market that's
known for being scammy and overhyped?

~~~
relyio
It doesn't bother the government when the middle class spend its hard earned
money in gambling, sport events or entertainment. Somehow, there's suddenly a
moral imperative to protect those poor sheep from doing as they please with
their property. But, wait, only if their capital inflow will dilute the
returns of established investors.

It's to protect the middle class of course, though one can only wonder why the
blatant double standard. I have no idea!

The "accredited investor" regulations are a sham, an unfair and artificial
barrier to entry that ought to be removed. Yes, some people will get abused.
This might even create local instability. But, that is clearly the long-term
optima. Those who lose money to scams can leave it to law enforcement to do
their job. Others who invest more they can afford to lose into bad apples will
learn that you should always hedge risk. As a whole, society gets smarter when
it is allowed to make mistakes, even costly ones. Smarter and less fragile.

~~~
lazyasciiart
> It doesn't bother the government when the middle class spend its hard earned
> money in gambling

Isn't gambling heavily regulated in the US to the point of being barely legal
in many states? Isn't that basically how many Indian tribes make money - by
being outside this regulation?

~~~
brandnewlow
Running a casino is heavily regulated. Gambling at a casino is open to anyone
over 21 where its legal. That was the OP's point.

~~~
dragandj
Yes, and everyone entering casino is _aware that it is gambling_.

ICOs, on the other hand, is like entering a street shell game. Something non-
regulated, where you are sure to get skinned.

------
tommynicholas
Every headline from Techcrunch disrupt that I have seen has been directly
contradicted in some way in the video. For example, Vitalik Buterin spends
about 10% of his talk explaining why not everything will be or should be
decentralized. The title of his video? "Decentralize Everything with Vitalik
Buterin"

~~~
zachlatta
This is called clickbait and is why Techcrunch is a trash website.

~~~
rayalez
I understand the aversion to clickbait, but using clickbait doesn't make
writers trash. Some of my favorite creators use the most shameless over the
top clickbait you can imagine.

That is what smart people do - they do things that work.

Why on earth would you decrease your success by 20-30%(I'm guessing) by using
less appealing headlines?

Clickbait doesn't devalue the articles. It only presents problems for websites
like HN, but here it is already moderated.

~~~
Gracana
> Why on earth would you decrease your success by 20-30%(I'm guessing) by
> using less appealing headlines?

Because you respect yourself and your audience enough to be honest, even when
dishonesty could attract more eyeballs to advertisements?

~~~
rayalez
In my opinion, honesty and artistic integrity comes down to article/video
delivering the promised value/entertainment.

The purpose of a headline is to get more people to click so that they receive
the value you've created. If your headline is a little less compelling - fewer
people will receive the value, the world will be a little worse off. So if you
believe in your ideas, and care about expressing them - you do whatever it
takes to convey them successfully. Utilitarian ethics.

You know you are competing with a huge amount of clickbaity entertainment, so
if the things you create are high quality, it makes sense to do things that
won't predictably cause you to lose.

I understand your point of view and why you'd find this distasteful, and,
personally, I don't use as much clickbait as I probably should. But my opinion
on this stuff has shifted over time, so I just want to express it.

------
soVeryTired
It feels like there are two different moving parts here. First, should YC open
up to a new class of investors? That's just a business decision for YC: either
it suits their plans or it doesn't.

The second question is _how_ they open up their business to new investors.
It's a little tricky to raise money from retail investors, so I wonder whether
this talk of an ICO is designed to skirt regulation. I know I sound very un-
hip when I say this, but that regulation is there for a reason. The vast
majority of investors don't have the background or knowledge to assess the
risk of alternative investments.

It's not impossible for YC to market to retail investors, just more difficult.
They should either raise money in the conventional way or not at all.

------
dalbasal
I can see why startups raising money benefit from an increase in the numberof
potential investors and capital. But apart from this, is there a good reason
to want to _" democratize access to investing,”_ and open the field to non-
accredited investors?

I share the instinctive response to a rule where " _only rich people can X_ "
but (1) Are startups such a great investment that unaccredited shlubs are
substantially disadvantaged by excluion? (2) Do they have enough (risk
tolerant) money to make a difference? (3) Will companies financed these ways
be better in some way.

If we assume the bigger fraud-ish problems get solved, what is the big upside?

I can vaguely see an argument for something between kickstarter/patreon &
NASDAQ enabling new kinds of things, but is there really something here. To
put it more generally, why should people other than Sam Altman agree with him?

~~~
csomar
I'd say the biggest problem is "fraud". Once you make it accessible for the
average person to invest and the sophisticated fraudster to advertise and
raise money, what you get is ... ICOs.

IPOs do have fraud but at least it is controlled a lot. To raise capital you
need to be a specific person/company and you have a set of responsibility
toward your investors.

For ICOs? Not really.

------
crispytx
I bought some Bitcoin for a family member as a gag gift recently thinking we
could have some fun paying each other with Bitcoin for little things like
household chores and whatnot. This was my first time using Bitcoin, and I was
shocked to learn that it costs roughly $5 worth of Bitcoin to make a single
transaction using Bitcoin! The fee is known as a "Bitcoin mining fee." I'm an
open minded person and honestly believe d that Bitcoin might work prior to
actually using it. However, after discovering the actual cost of using
Bitcoin, it is clearly inferior to US Dollars in every way. Bitcoin is a scam,
block chain is all hype, and everyone involved with Cryptomania is going to
look silly when the music stops and someone has to eat the soggy biscuit.

~~~
johnvonneumann
I feel it's necessary to point out some problems with your argument here. "I'm
an open minded person and honestly believe d that Bitcoin might work prior to
actually using it." First of all, it seems kinda strange to me that you say
you believed Bitcoin would work, without even using it. So you made an
approximation of the technologies value before using it. Then, after using it
once, you then totally changed positions. This hardly seems like a decent
analysis of the situation, and I think you should probably do some more
reading and learning.

Number 2, writing off an asset, and furthermore, an entire asset class based
on one instance of a transaction fee (a problem that is being actively worked
on, might I add) is lazy and dangerous, to conflate this to "it is clearly
inferior to US Dollars in every way. Bitcoin is a scam, block chain is all
hype, and everyone involved with Cryptomania is going to look silly when the
music stops and someone has to eat the soggy biscuit" is ridiculous and you
haven't made any decent points. Your entire argument is based on conjecture
and no technical information.

Do yourself a favour next time you decide to shoot Bitcoin and Crytpocurrency
down, ask yourself if you've actually done due diligence on your opinion, or
if you've settled for the lazy option.

PS: If you are that disgruntled, you're welcome to submit PRs.

~~~
crispytx
Maybe if the community can fix the Bitcoin mining fee problem it will work.
But if they can't get the mining fee down to like 30 cents per transaction
like with square or stripe, the overwhelming majority of people aren't going
to want to use it.

And to be specific, I used Coinbase to purchase my Bitcoin and then
transferred it to an Electrum wallet and then to another wallet.

People have told me that you don't have to pay the $5 mining fee, but I did
not see an option anywhere with those two wallets to avoid or substantially
reduce the mining fee.

~~~
johnvonneumann
Eyo, sorry for the delay on this reply. I agree wholeheartedly with everything
you said, and didn't mean to come off too aggressive with my first comment,
even though I probably did. There is a lot of bullshit going around these days
around Bitcoin and Crypto, and sometimes it can be pretty grinding to see "big
media" out-and-out gunning it down without exposing their true intentions and
who it is that they're backing with their comments. Either way, this isn't
your fault. So I apologise for coming off aggro.

The transaction fee thing is a problem many people, in particular new users
notice, and it's on the forefront of issues being solved by the community
right now. In regards to your comments on 30 cent transaction costs, from what
I understand, they are indeed on the path to this. If you are interested in
seeing what this will look/feel like, buy a small amount of LTC, and send it
to another wallet. I had many of the same issues you had with Bitcoin a few
months ago, but as soon as I gave LTC a go I was blown away. This, for all
intents and purposes, is what the BTC Core team intends to bring to Bitcoin.
To give you an idea, transactions cost 2c on the LTC network, with a max time
to completion of 2.5 minutes. When you first experience this, it's a great
feeling.

Coinbase is always gonna be tricky, their transaction costs for buying BTC
are, to put it bluntly, fucking horrendous.

In regards to your comments on not having to pay the fee, there are some
wallets that allow you to pick the priority of your transaction, one that
springs to mind is IndieSquare Wallet. Bear in mind this will affect the way
your transaction goes through, speed wise.

Hope I actually answered your questions on this, sorry for my intial comment.
If you have any more q's, just holla. I can either answer them, or get someone
with more knowledge than I to answer them.

However, in the interest of getting you to fall in love with Crypto, please,
buy a small amount of LTC, transfer it, pay the fractional charges and be
blown away. If you aren't impressed by it, I will be surprised.

------
sulam
YC isn’t even reaching most accredited investors and it wants to go to
unaccredited? Sounds like they want liquidity.

~~~
lvkleist
I'm not sure I understand, could you elaborate?

~~~
sulam
If YC can create a vehicle like this it will give the employees sitting on
relatively small amounts of common shares someone to sell to without an IPO. I
don’t know what their deal might be, but I imagine the partners all have the
equivalent of carry and the run of the mill employees do not.

------
pscsbs
Surprised CoinList isn't mentioned here, as they did a successful ICO for
FileCoin and serve as a platform for pretty much this exact use-case.

~~~
hndamien
That was accredited investor only.

------
grizzles
Personally I think just enabling trading would not be a good idea. That said,
I also want to do something similar to this. Securities laws in the 1st world
are hopelessly out of date.

So I've looked in other jurisdictions but I've had huge problems finding the
right country to do it in.

The last time I tried I got scammed by a Corporate Service Provider in the
Isle of Mann that went out of business about a month after I sent them $$.

If anyone is looking for a co-founder in this space, and is interested in
having a chat, email is in my profile.

------
kecoco0207
There are currently other possible ways to access and invest in the private
markets. For example, EquityZen is a platform that lets people to invest in
private pre-IPO companies.

EquityZen:
[https://equityzen.com/?utm_source=https%3A%2F%2Fnews.ycombin...](https://equityzen.com/?utm_source=https%3A%2F%2Fnews.ycombinator.com%2Fitem%3Fid%3D15299359&utm_medium=Hacker%20News&utm_campaign=Hacker_News&utm_term=news)

------
dharma1
It would be nice to remove some of the complexities, friction and cost of
holding and trading shares in companies beyond the vehicles that exist today,
and I think we can get that via blockchain.

It would need to be regulated though - to reduce scams, and also because
regulators wouldn't allow tokens that are securities (shares in a company)
unless it's regulated. That part, to me, feels like it will take a long time -
would require changing legislation.

------
Animats
OK, so you buy a YC token. What do you have? A share of YC's equity pool? What
makes YC pay you if they have a big win?

~~~
hisabness
what makes them pay investors today if they win big?

~~~
chis
The government, mostly. I guess the investors would sue and a judge would
order them to pay or go to jail.

Your implied point is true though. I'd trust YCombinator to pay out their
tokens as long as they don't go bankrupt.

~~~
b1daly
Don't most ICOs explicitly state that the token does entitle the holder
to...anything? With a stock or bond, there are legal structures that underlay
the promised mechanism by which an investor might get a return on investment.

While it's all nice and fuzzy now, it seems to me that the recipients of the
ICOs funds can do as they please with the money.

They are structured this way as an attempt to avoid the securities
regulations.

It's an interesting solution to the problem. Securities regulations are setup
so that investors have a chance at a return. They are intended to prevent the
situation where companies raise funds, and don't return value to the investor.

So the sponsor of the ICO just says, no worries, we're not even promising an
effort at returning value to investors!

It's unclear how this is going to play out from a regulatory point of view. It
is clear, however, that the chance of these companies generating real value
and returning it to the token holders is close to zero.

My guess is that most people putting their money down recognize, at least on
some level, that they are joining a ponzi scheme. People love to gamble.

~~~
Isomatik
I think the biggest hurdle regulators will have to overcome if they want
anything other than a blanket ban on ICOs will be verifying "good faith"
execution of their business plans.

If you create a cryptotoken that has a real business purpose and sell it with
the expectation that it will be redeemable for that purpose (basically selling
gift cards for a service that doesn't exist yet), and a secondary market forms
that appears to believe that the tokens are stock and trades them accordingly,
are you guilty of securities fraud? What if you never actually develop that
service, would that impact your case? If so, how do you distinguish between
something that was a ponzi from the start and a mismanaged project that failed
to deliver?

------
fortythirteen
Please, let's not attempt to legitimize ICOs.

~~~
Cakez0r
Why not? They can be used legitimately, even if the majority of the use cases
at the moment are cash grabs.

~~~
blueprint
Why do they need to be on a blockchain?

~~~
mbrock
Where else?

~~~
blueprint
A database? Do you understand what blockchains are for? Why does regulated
securities trading need to be censorship resistant rather than just secure?

~~~
mbrock
Those two properties seem to go hand in hand.

How do you imagine an ICO taking place without a blockchain? It seems like a
contradiction in terms: the "C" means a blockchain token.

------
jaunkst
Yes, I would invest.

~~~
Steve_Green
Agree

------
erdle
im good, already invested in one company that a YC company from this summer's
batch ripped off... including copy and vendors

------
Double_a_92
If we could stop hindering real progress with all this blockchain bullshit,
that would be great...

~~~
goertzen
What progress are blockchains hindering?

~~~
Double_a_92
All those investors could actually invest in something with a future.

------
contingencies
This is clearly a good idea. The whole broker/exchange/regulator triumvirate
is a massive overhead for everyone.

Uptime: Trading hours are a 19th century anachronism. Distributed
infrastructure is more reliable.

Management incentive: By removing annual and quarterly investor relations
milestones businesses are incentivized to move more quickly by creating a more
fluid and transparent management and investor relations style.

National access: Being 'listed' on a 'market' is a huge hassle and comes with
fiscal protection mechanisms such as requisite auditing which essentially (not
completely) amounts to a mafia-esque pay to play fee. Why not just go
international and skip the hassle?

Regulation: Of course, the financial services establishment will cry
"Regulators! Consumers need protection! Only we, the few, the humble, the
experienced, can save their financial souls!" but alas their track record is
pretty shocking and regulators with any guts should _encourage_ innovation
with some oversight and involvement. The thing is, since blockchains are
international regulators are nominally sidelined in a default approach. There
should be a middle ground where they can perform basic services such as
corporate registration, legal good standing, fair taxation and IP asset
attestation, for example, without becoming intimately involved in day to day
business.

Transparency: Instead of occasional, high level audits, if transparency is
required why not require that in order to be blockchain listed, companies must
either use a public blockchain or otherwise effectively real time (eg. daily
batched reporting) to transparently manage their financial assets? This would
provide superior transparency than the establishment, potentially with crypto
levels of trust (thus auditors cannot be bought/make mistakes).

Fiscal restructuring: Being able to do stock splits and so forth could work
very well on chains.

Conventional asset financial connectivity: Sooner or later you have to
interact with the off-blockchain world. Gatekeeper financial institutions need
to validate inbound capital by showing things like source of funds. This is
nontrivial with anonymous blockchain inflows, and requires setting up a
significant KYC process as per larger crypto exchanges.

Of course there are issues. If there is a gatekeeper to enforce due diligence
then is it truly blockchain anymore or are you just doing rebranded ICO 2.0
and issuing your own tokens? I fear the latter. We must find a middle ground.
The devil is in the details.

~~~
trophycase
Trading hours aren't an anachronism. As someone who trades cryptocurrencies, I
frequently need to stay up well into the next morning if markets are moving.
It never stops, sleeping is never completely safe. Trading hours make it human

~~~
contingencies
Efficiency is profit and is rewarded by the market. Therefore, humanistic
single timezone centric trading hours are disincentivized, and because they
are not _required_ , they _will_ eventually disappear. Therefore, I view them
as an anachronism.

------
noddy1
SEC regulations are failing the average american in a big way. When it is
impossible to own stock in basically any of the high growth tech companies,
every person with retirement funds/401k in index funds or markets is missing
out, and all the gains are going to a handful of investment banks. I'm not
sure whether this represents an intentional move by banking lobbyists, but
following the money I'm sure it is.

The ICO market may be bubbly and ridiculous, but at least it will make
founders consider an alternative to traditional VC which may give more money
for less equity.

