It's a joke that in this day and age the funding process that seeds silicon valley startups is only legal offline and to the privileged rich. Democratized access to small equity investments in germinating companies that may one day be giants, is exactly what is necessary to help the non-rich get richer too. The social and economical benefits of the need for this democratized access is real. Even if the SEC ruling does not go in favor of it next week, the US government should not and can not deny its citizens such benefits for much longer. It's clear that Funders Club has got the right idea of what needs to be in place to enable this change in history.
You are so unbelievably wrong that it is quite simply incredible to behold. I'm talking about where this is going to lead (specifically the JOBs act).
We deny people many rights for the simple reason that they abuse a lot of them. Or conversely, they get abused by others who use those rights for personal gain. This is such a bad idea and it kills me that I know that it's going to happen anyway.
Unsophisticated investors should not be able to invest in start-ups - at all - ever. They can barely handle regulated houses, bonds and equities - and you're throwing things at them that even VCs can't handle - what is wrong with you?
This is bad - it will happen - and I will watch it burn for the same reason that shoe shine boys shouldn't be recommending stocks - they just don't know what the hell they are doing.
> We deny people many rights for the simple reason that they abuse a lot of them.
There is a vast amount of elitism embedded in your thought process. I don't fully disagree with your view point, but that line of reasoning scares me. We sell the poor lottery tickets hand over fist, but I get to buy a $2800 lottery ticket with better odds.
You don't give inexperienced people guns. That's just stupid - they'll shoot themselves in the foot.
Oh wait this is America - carry on.
Lottery tickets are heavily regulated industries with defined probabilities, players and outcomes conditional on government oversight. These tickets aren't.
I am missing your point about firearms. I am from the south where is it tradition to give a person their first firearm on their 10th birthday. I don't know anyone that has shot themselves in the foot... except for my neighbor who shot his foot off while climbing down from a deer stand. He now has a prosthetic foot. He gets around fine as far as I can tell.
As for the lottery being regulated, do you really believe that it is okay given the terrible odds? If the lower class are suggested to bet on the lottery, and I invest startups, how are the poor ever going to escape poverty?
Yay dead people! You don't give unsophisticated people access to firearms - they get dead. Same with most investment options - do not allow people to trade derivatives, over lever their houses or borrow for stocks.
> believe that it is okay given the terrible odds?
No I don't - but its regulated and small stable losses in comparison to unsophisticated losses that destroy lives in housing, equities and bonds. This will expand those losses.
> how are the poor ever going to escape poverty?
Have you ever been poor?
Here is how you escape poverty - you don't. I'm not kidding.
There is no such thing as social mobility - it's false to argue that the poor can in any way benefit from this.
Whenever I walk through airport security, I have Osama to thank for the millimeter wave inspection. And for the pain of raising money from non-accredited investors I have hundreds of historical and would-be scammers to thank. Bad guys make us limit our freedom.
Although we ask the government to protect us, they usually mess it up by ham-handed regulation. At the airport, the big show makes us feel safer, even though some experts say we aren't. The same thing has been going on in finance for years with Congress and regulators asleep at the switch with no idea how to control the bankers. They lack imagination and incentives.
We need to completely rethink regulation for investment vehicles. The goal should be to improve post-issuance transparency. Real transparency.
First thing we need is a live feed of transactions logs. All of them. Dirt cheap these days. No fancy accounting, I'll model the company myself thanks. I can share models with fellow investors. I/you/we can sell modeling capability to investors. More sunlight--less corruption, less risk.
The lack of transparency and disclosure that may about to be enshrined in Regulation A is like handing out the box cutters on the airplane to al Qaeda. The threat is not you or me. It's scammers. Right now about all the protection Mom will have is the SEC banning "bad actors" years later--if they get caught. Just like they caught Madoff. Professional financial accounting? Enron's books were audited by a top firm.
Instead regulation should require you to show me the money, continuously, with timestamps, please. Oh, and send me my government mandated Salesforce.com login too please. Let's do for banks too. Make it fair for everyone.
Perhaps its just the accredited investor limits then? $1MM in assets (less primary residence) or $200k per year in individual income... I know lots of savvy investors below those caps.[1] Why should they be denied access to investment vehicles where they (arguably) know as much as incumbents?
My suggestion: treat it like options trading. At many brokerages, getting options enabled (esp. uncovered options) requires proof of investment acumen and specific forms to be filled out. Can you seriously make the case that small-scale angel investing is more risky that options investing?
[1] Many of them chose to work at lower-paying positions (eg. startups or research-type positions), or just in relatively lower-earning areas (aka, the MidWest).
These limits are ridiculous. There is nothing that protects a bad investor from spending their life savings on RIM stock, penny stocks, or a roulette wheel in Vegas. Or spending 5 years of their lives and going up to their armpits in debt trying to build a pet-food startup. People should be able to take risks.
I used Funders Club to make a small investment and it worked flawlessly for me. It has document signing and wire transfers built in. After reading legal documents for a few hours, it took about 3 minutes to make a $2500 investment in virool.com.
I am completely impressed by what the Funders Club has built. It is easy, complete, and actually works. Kudos to the team.
I unfortunately missed the $250,000 cutoff, so I'll get to see how they handle the overage or reimbursement.
This is a bit like Seedrs (www.seedrs.com) in the UK, except with Seedrs more or less anyone can make investments and the minimum investment is only £10 so you can get real crowd-sourced funding.
