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Ask HN: How come there is no Kickstarter for investing?
11–20 of 22 posts
Re: Ask HN: How come there is no Kickstarter for investing?
#12Securities regulations. As soon as you're issuing stock, there are many legal requirements, and you can't just advertise/issue stock to the general public without the same complexity that accompanies being listed on big stock exchanges. If all you want from an 'investment' is warm fuzzies and perhaps some token product/service or swag – like Kickstarter campaigns offer – then Kickstarter itself can be the Kickstarter…
There are many ways to raise money without selling company's shares: specifically, issuing securities (bonds are the simplest examples). There are many legal issues indeed but I still see none that cannot be resolved.
Example from profounder: https://www.profounder.com/term_sheets/profounder_public-rev...
The distribution of commitment (money and time) vs number of people who are willing to give it for a startup project has a valuable tale that is underestimated in my view.
It seems to me that there is a big market for such projects and it is an opportunity for someone alert out there.
Re: Ask HN: How come there is no Kickstarter for investing?
#13There sort of is: Profounder. More info here: http://techcrunch.com/2010/11/30/profounder-launches-to-help... and interesting thread of whether this is actually legal here: http://www.quora.com/Is-ProFounder-in-violation-of-any-secur...
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Re: Ask HN: How come there is no Kickstarter for investing?
#14Could you do this in Asia, or Ireland?
Re: Ask HN: How come there is no Kickstarter for investing?
#15Companies can have a very limited number of investors before they run foul of a different set of laws. So it does not make any sense to take small amounts.
How much are you thinking of investing?
Re: Ask HN: How come there is no Kickstarter for investing?
#16Securities regulations. As soon as you're issuing stock, there are many legal requirements, and you can't just advertise/issue stock to the general public without the same complexity that accompanies being listed on big stock exchanges. If all you want from an 'investment' is warm fuzzies and perhaps some token product/service or swag – like Kickstarter campaigns offer – then Kickstarter itself can be the Kickstarter…
There are many ways to raise money without selling company's shares: specifically, issuing securities (bonds are the simplest examples). There are many legal issues indeed but I still see none that cannot be resolved. Example from profounder: https://www.profounder.com/term_sheets/profounder_public-rev... The distribution of commitment (money and time) vs number of people who are willing to give it for a startup proj…
Even issuing debt (i.e. loans) still falls under the securities regulation just like equity.
Re: Ask HN: How come there is no Kickstarter for investing?
#17What about a Kickstarter community of only Accredited Investors? Sure, this would be very tough given the requirements... but not impossible.
Re: Ask HN: How come there is no Kickstarter for investing?
#18I think it's more because you're a minority. Investment projects like this work because of the number of people investing at once. All invest a little and little is lost if it fails.
Kickstarter projects are cool and people love the idea of investing in something where they actually get to own a shiny gadget if it succeeds. Most startups are not and the thing that people own can take a long-long time to reap any value.
Re: Ask HN: How come there is no Kickstarter for investing?
#19What about a Kickstarter community of only Accredited Investors? Sure, this would be very tough given the requirements... but not impossible.
I worked on a project like this a while back. The heavy regulations eventually broke the whole concept. We had built a system for startups to pitch their businesses, and the investors would have been limited to accredited investors (those with > $1M or who make > $200K/year for two years). They would have bid for startups in a Dutch auction format, like the way Google went public.
However, to do this you need to be not just a startup, but an NASD certified "broker dealer." This imposes a couple things that software startups aren't good at:
1. You need $500K in the bank, just because of regulations. This means you need to raise much more than usual.
2. Several founders/early employees need to study for and pass Series 7 exams, which is what you need if you're a stockbroker. At least one person also needs to study for a similar test for brokerage management. Coding + learning to be a stock brokerage was not easy!
3. The associated legal costs were extremely high.
Kickstarter of course avoids all this by not dealing with any transfer of ownership so they don't need to worry about the government. They just sell access to creative folks, which is a good idea.
PS - Angel investors and VCs hate this concept, which makes it much harder to raise money. We brought it in front of all the biggies and were well connected, and each one argued about the personal value of their involvement, which may or may not be true.
Re: Ask HN: How come there is no Kickstarter for investing?
#20What about a Kickstarter community of only Accredited Investors? Sure, this would be very tough given the requirements... but not impossible.
I worked on a project like this a while back. The heavy regulations eventually broke the whole concept. We had built a system for startups to pitch their businesses, and the investors would have been limited to accredited investors (those with > $1M or who make > $200K/year for two years). They would have bid for startups in a Dutch auction format, like the way Google went public. However, to do this you need to be n…
Awesome analysis. Honest to god, I get pitched this idea of a "social network for startups to get funded by accredited investors" at least once a month. A friend wanted me to develop this application for her, and was convinced every investor would be all over this. I wasn't able to show her the light, but I agree: Angels would hate this.