Crowd Investing: Wefunder • Hacker News Board

Re: Crowd Investing: Wefunder

#31

Post by vaksel » Mon, Jan 30, 2012, 5:10 PM UTC

I think something like what Goldman Sachs did with Facebook would work.

You create a Startup Mutual Fund...where regular folks can sign up and deposit money into.

The fund then uses that money to invest into companies. i.e. they'd issue a notice that a week from now they'll be investing into Startup Z and each share would cost $X(actual cost per share + 10% fund operating premium)

If the round is limited, the shares would be assigned on first come first serve basis.

Essentially a venture capital company but without requiring huge investments to participate.

Then also create a marketplace where shares can be sold on the secondary market.

Fund's revenue would come from a) fund's fee when purchasing b) fund's fee for secondary sales c) yearly membership fee.

And this way you essentially just have the one investor and those who want to invest small investments won't need to get accredited to get into the game.

Re: Crowd Investing: Wefunder

#32

Post by dxbydt » Mon, Jan 30, 2012, 5:11 PM UTC

Democratizing startup investing is a much bigger problem than democratizing very simple speculation, so simple & straightforward a child can figure it out. Look at google. Its trading around $580. Just 2 weeks back it was well over $610. So you say, okay in a month it'll be back above $610. The 1 month otm call on goog is $10 for a 600 strike. You check your pockets. You have $10. You figure, you plonk down $10. Then check back on March 17th. If goog crosses $610 you make the difference. Here I'll even do the math for you: (580,-10),(590,-10)...(599,-10),(600,0),(601,-9),(602,-8),...(610,0),(611,1),(612,2)....(650,40) etc. so that's the list of tuples, one has the google stock price & the other the money you make. So you break even at 610 & after that the sky's the limit. So can you bet $10 ? No. Why not ? Beats me. You can put down $1000 for a 100 bets. But you say, I don't want 100 bets. I just want 1 bet. 1 bet is $10. I have $10. Let me bet. Nope. Sorry. You think this will change anytime soon ? If you can legalize single option trading, you can structure any startup investing on top of that. Many people will lose many $10, but some people will make $10 too, and life will go on.

Re: Crowd Investing: Wefunder

#33

Post by lukifer » Mon, Jan 30, 2012, 5:17 PM UTC

chernevik wrote: post #26

zapnap wrote: post #6

Earlier quoted context omitted.

Agree that it's largely apples and oranges. I think the poster was more calling attention to the fact that SOPA showed a lot of people that their voices do matter, and can affect change in government. So in that way, at least, they're related. Fraud is certainly a concern, and the reason that the laws were introduced in the 1930s in the first place. But the S.1791 bill has provisions for dealing with this through (re…

Fraud is _the_ concern. It isn't hard to imagine a crowdfunding bucket shop flacking shell companies to clueless investors who think they're buying a piece of the future. You can't fit much due diligence expense into a $2mm funding round. I'd also worry about crappy documentation / followthrough. What's to stop management teams from using such ventures to roadtest ideas and architecture and fit, "fail", then launch f…

How is it that Kickstarter has managed to stay mostly free of fraud? What's to stop someone from raising $50k with a slick video and then disappearing?

Crowd funding is a good idea, but Kickstarter has the generally right approach: small amounts, framed as donations rather than investments, and reward(s) rather than an ownership stake.

Re: Crowd Investing: Wefunder

#34

Post by frobbin » Mon, Jan 30, 2012, 5:20 PM UTC

What if you got a 'startup investor license' with the same effort and cost as getting a real estate license? That way only the motivated who prove some basic knowledge can participate. A side industry of investor courses and test study materials would spring up. Even as someone trying to raise funding I would like to educate myself with such a course.

Re: Crowd Investing: Wefunder

#35

Post by padobson » Mon, Jan 30, 2012, 5:26 PM UTC

I love this because it is effectively disrupting wall street from a legal perspective. You don't need giant public markets anymore when you have the internet, and entrepreneurs that know how to build applications that generate money from lots of people should also be able to raise money from similar people.

Although, if we as a an industry are going to focus on something legislatively, I think we should start thinking about going on the offensive in the copyright war. The MPAA and the RIAA are going to regroup and then try to push a similar piece of legislation through. If we go on the offensive now and attempt to pass legislation that will protect user-uploaded content sites and apps like MegaUpload, Dropbox, Box.net, and others, then the web will be a much better place for eveyone building apps like these in the future.

Re: Crowd Investing: Wefunder

#36

Post by gojomo » Mon, Jan 30, 2012, 5:26 PM UTC

robmay wrote: post #20

I have a lot of experience here because a) in 2005 I started something called "The Business Experiment" which was an attempt to have a purely crowd sourced business. ( http://www.fastcompany.com/magazine/101/next-essay.html ) At the time, I spent a lot of my own money on lawyers trying to figure out how to give equity to people who aren't accredited investors. b)I have since raised $10.5M in venture capital for Backu…

If the public and media have a glamorized, romantic view of the reality, what better way to train them than to let them get direct experience? That is, experience not mediated by the 'accredited investor' glass-barrier and carefully-calculated PR fluff pieces?

I think you overestimate the outcry/backlash during/after that necessary learning process. Trillions have been lost in homes the last decade, but very few of the government policies that goosed home prices and encouraged people of limited means to gamble their entire net worth on home ownership have been reversed. (People have learned to be wary, moreso than public policy has adjusted.) Billions have been gambled away as jurisdictions across the US have legalized gambling, and individuals have had to learn, but few if any places have undone gambling legalization, and more cities/states are discussing adding gambling. People with more hope than sense can lose all their money on eBay/Craigslist arbitrage, or margined public stock/option trading, or starting a restaurant/retail-store with friends. And there's no backlash demanding regulatory protection from these risky activities.

I think any backlash will be limited to actual scams, which is as it should be. The individual cases about fraud and malfeasance will be part of the public's learning process.

The "almost accredited investor" idea is a reasonable half-measure to begin the process of removing the discriminatory 'wealth test' from the process.

I would make it so any one of the following allow an individual to invest with the same freedom as someone who's inherited a million dollars or won a lottery:

• a college degree in economics, business, or law

• a related recognized accreditation (eg the 'Series 7' exams to work in certain financial-services roles)

• an amount equal to the desired private investment amount held in tax-advantaged investment accounts (IRA, Roth, etc) for at least 2 years. (For example, if you have $10K in such government-approved 'safe' accounts, you can also invest $10K in any private venture with the same assumption-of-competence that millionaires are granted.)

• an amount double the desired private investment held in public securities for at least 2 years. (For example, if you have $20K in public stocks/mutual funds, then you can invest $10K in any private venture with the same assumption-of-confidence that millionaires are granted.)

I don't particularly like any of these restrictions. If you can legally take $10K off a credit card cash advance, and use it to buy state lottery tickets, you ought to be able to take a chance on a friend's startup stock. But these weaker rules could provide the small dash of paternalism, and speed-bump against totally reckless investing, that helps us phase out the wealth-based-discrimination that rules today.

Re: Crowd Investing: Wefunder

#37

Post by marcidale » Mon, Jan 30, 2012, 5:28 PM UTC

davidcuddeback wrote: post #23

zeratul wrote: post #12

We are getting the news too late. Did you know that there are 7 bills that might change how startups operate? H.R.3427 - Startup Technical Assistance for Reemployment Training and Unemployment Prevention Act H.R.3571 - Entrepreneur Startup Growth Act of 2011 S.1965 - Startup Act of 2011 S.1826 - Startup Technical Assistance for Reemployment Training and Unemployment Prevention Act H.R.2941 - Startup Expansion and Inv…

Well, there's already https://www.popvox.com/ . They show bills currently in Congress, organized by category or what's most popular on the site. They also send alerts that recommend bills based on your interests, although it seems to be in the alpha stage right now. I'm not sure if Popvox has all the features you have in mind. Rather than starting a new web service from scratch, you might find it easier to request ce…

Thanks, David - yes, we would love the input at POPVOX (info@popvox.com)

New alerts system is imminent, so please check it out.

BTW - we had our own go at crowdfunding for POPVOX. I explained on Quora how we had to turn down non-qualified investors: http://b.qr.ae/nXFsiM

We ended up with a crowdfunding variation to raise the money for our iPad app for Congress through Appbackr (MarkUp - the first app designed for Congress http://bit.ly/uLSrOT). See article in Entrepreneur magazine on the fundraising: http://bit.ly/rKQSzS

Re: Crowd Investing: Wefunder

#38

Post by te_platt » Mon, Jan 30, 2012, 5:29 PM UTC

robmay wrote: post #20

I have a lot of experience here because a) in 2005 I started something called "The Business Experiment" which was an attempt to have a purely crowd sourced business. ( http://www.fastcompany.com/magazine/101/next-essay.html ) At the time, I spent a lot of my own money on lawyers trying to figure out how to give equity to people who aren't accredited investors. b)I have since raised $10.5M in venture capital for Backu…

While valid, your points all seem directed to protecting people from themselves. Depending on the details it may be a very bad idea to invest or take investment at this level but who should be the one to make the decision? In this case I don't think the government should have a say.

Re: Crowd Investing: Wefunder

#39

Post by webwright » Mon, Jan 30, 2012, 5:32 PM UTC

robmay wrote: post #20

I have a lot of experience here because a) in 2005 I started something called "The Business Experiment" which was an attempt to have a purely crowd sourced business. ( http://www.fastcompany.com/magazine/101/next-essay.html ) At the time, I spent a lot of my own money on lawyers trying to figure out how to give equity to people who aren't accredited investors. b)I have since raised $10.5M in venture capital for Backu…

Respectfully disagree.

Penny stocks? Real estate? Gambling? Entrepreneurship? Credit cards? No one is stopping people from "investing" their life savings in any of these areas, and people are losing everything in these areas every day.

We don't need to protect people from making bad decisions with their own money.

Your arguments about the capital structure and lawsuits are pretty spot on, though... under the current system. It doesn't seem too hard to bake some protections into the reform. You don't see people suing casinos when they lose their life savings there.

Re: Crowd Investing: Wefunder

#40

Post by robmay » Mon, Jan 30, 2012, 5:32 PM UTC

chernevik wrote: post #27

robmay wrote: post #20

I have a lot of experience here because a) in 2005 I started something called "The Business Experiment" which was an attempt to have a purely crowd sourced business. ( http://www.fastcompany.com/magazine/101/next-essay.html ) At the time, I spent a lot of my own money on lawyers trying to figure out how to give equity to people who aren't accredited investors. b)I have since raised $10.5M in venture capital for Backu…

+1. From what you've seen, what are the prospects of aggregating mini-investment through a registered p.e. fund? Would the registration expenses be too high? If so, is it possible that this sort of thing might be enabled by right-sizing the current public securities regulatory apparatus?

That's probably a better overall idea. To let people by a mutual fund, in effect, that invests in a basket of startups.