You don't get shares if you invest -- you get something called a "crowd safe": https://republic.co/learn/investors/crowdsafe More info here: http://www.crowdfundinsider.com/2016/06/87034-republic-adds-... I'm a bit leery of these. According to the article, "unless specifically negotiated, SAFE holders do not have any voting or information rights." I also suspect that the shareholders get taken care of before crowd sa…
Because Kickstarter! The uneducated financier model works well for everyone involved there, right? Right guys??
Interesting. These appear to be JOBS act short-form mini-IPOs.[1] That's something new, which just became possible this year and hasn't been used much. Here's Farm from a Box's SEC filing.[2] Typical crappy terms - no voting rights, no anti-dilution, no transferability for one year, insiders have control. Nobody associated with the project has a farming background. They have two employees. One is a liberal arts major…
Regardless of the terms, all of these companies appear to be just terrible investments.
I think it is healthy strategy to dedicate 5-10% of investment portfolio to high risks investments like this, even for average investor.
"SAFE holders do not have any voting or information rights". With this kind of agreement, it's basically gambling since most info on start-ups is basically PR fluff. At least public companies have to publish annual reports and real investors get information rights.
Most of the startups have negative cashflow anyway. Early investors invest into potential, idea, team, tech, know how, market share.
You don't get shares if you invest -- you get something called a "crowd safe": https://republic.co/learn/investors/crowdsafe More info here: http://www.crowdfundinsider.com/2016/06/87034-republic-adds-... I'm a bit leery of these. According to the article, "unless specifically negotiated, SAFE holders do not have any voting or information rights." I also suspect that the shareholders get taken care of before crowd sa…
You raise some good points. The Crowd Safe is essentially a YC Safe (which in turn is a standardized convertible note) that gives companies control over when to convert, rather than conversion necessarily happening in the following financing round. Given the ubiquity of convertible notes in early stage financings, legal treatment shouldn't be a unique concern. To your point on startups not being able to convince VCs…
The Crowd Safe is not similar to YC Safe or any convertibles issued in pre seed financing that I have seen or received. Crowd Safe seems to cap upside for investor during conversion and defers everything to company's discretion. Even the example in OP's link shows in the event of exit, the investor upside is capped at company's discretion. The whole thing is structured pretty badly. I have stayed away from equity crowdfunding because no corporate governance, no voting and information rights, and lack of influence. There is no way to diversify away the risks that come with early stage investing. And platforms can't be trusted to do due diligence or put investor interest above their own.
Interesting. These appear to be JOBS act short-form mini-IPOs.[1] That's something new, which just became possible this year and hasn't been used much. Here's Farm from a Box's SEC filing.[2] Typical crappy terms - no voting rights, no anti-dilution, no transferability for one year, insiders have control. Nobody associated with the project has a farming background. They have two employees. One is a liberal arts major…
Regardless of the terms, all of these companies appear to be just terrible investments.
Never stopped terrible products on Kickstarter from goosing thousands of dollars from naive backers.
How is an investor in such a company supposed to actually get a return? Unless the company is paying dividends or something similar, the only payout comes from selling your shares or if the company is acquired at a premium. But who is going to buy these companies with a conservative "slow and steady" growth rate and market share?
I think you have to get in early and hope for an IPO. But anyone who buys after the IPO is probably a sucker.
You don't get shares if you invest -- you get something called a "crowd safe": https://republic.co/learn/investors/crowdsafe More info here: http://www.crowdfundinsider.com/2016/06/87034-republic-adds-... I'm a bit leery of these. According to the article, "unless specifically negotiated, SAFE holders do not have any voting or information rights." I also suspect that the shareholders get taken care of before crowd sa…
Because Kickstarter! The uneducated financier model works well for everyone involved there, right? Right guys??
Works great for good talkers regardless of product quality.
You don't get shares if you invest -- you get something called a "crowd safe": https://republic.co/learn/investors/crowdsafe More info here: http://www.crowdfundinsider.com/2016/06/87034-republic-adds-... I'm a bit leery of these. According to the article, "unless specifically negotiated, SAFE holders do not have any voting or information rights." I also suspect that the shareholders get taken care of before crowd sa…
You are absolutely right about the discount. Being skeptical is also good, but on the flip side there is a lot of money floating around in peoples private bank accounts that is seeking an investment target. I mean, how would one invest $10 in a startup through the traditional VC model? There's no way. This model can be seen as an alternative. There's no inherent reason to think of it as a backup for startups that fai…
If your life savings is 10k or even 100k you don't need to invest in startups. Try an index fund.