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Crowd Investing: Wefunder

wefunder.com

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Re: Crowd Investing: Wefunder

#41

Post by marcidale »

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…

Here are links to take action on the bills you list. Your message will be sent to the appropriate legislators and aggregated on the public bill report so that you can see how sentiment is shaping up across the country. (The "sentiment across the country" part is important. Even if everyone in Silicon Valley thinks this something is great, the case has to be made to legislators who represent very different districts.)

https://www.popvox.com/bills/us/112/hr3427

https://www.popvox.com/bills/us/112/hr3571

https://www.popvox.com/bills/us/112/s1965

https://www.popvox.com/bills/us/112/s1826

https://www.popvox.com/bills/us/112/hr2941

https://www.popvox.com/bills/us/112/hr1114

https://www.popvox.com/bills/us/112/s565

Re: Crowd Investing: Wefunder

#42

Post by robmay »

webwright wrote: post #39
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…

Well, but here's the problem... Backupify was my third attempt at raising VC. Before I did it, I would have jumped at the chance to raise money from anybody, even average Joes. But now that I know the difficulty in managing investors and their expectations, I would never consider it. So this idea will develop a lemons problem (similar to what you see in penny stocks) which is that any entrepreneur who understands the game well won't participate and won't raise this kind of funding, so you end up with the bad ones, and the uneducated/inexperienced ones. Some of the latter will ultimately be successful, but not enough.

Re: Crowd Investing: Wefunder

#43

Post by marcidale »

vyrotek wrote: post #14
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…

Plenty of people would like to. But, more importantly... who will help pay for that?

At POPVOX, our first investor was Tim O'Reilly. Legislative advocacy is a huge market -- and one in great need of disruption.

Re: Crowd Investing: Wefunder

#44

Post by robmay »

te_platt wrote: post #38
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.

And protecting startups. There are disclosure issues here that are much more risky for startups. For a publicly traded company to disclose a lot about its business is one thing... but such disclosures could kill a startup.

Re: Crowd Investing: Wefunder

#45

Post by rmc »

te_platt wrote: post #38
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.

protecting people from themselves

Which is not a bad thing in principle. We do it with lots of things.

Re: Crowd Investing: Wefunder

#46

Post by vsl2 »

The key here is the "accredited" investor restriction for funds that invest in anything other than the most vanilla of securities (i.e. stocks and bonds). This is also why most of us cannot invest in hedge funds or private equity funds.

In protecting people from themselves, the government is limiting participation in a potentially very lucrative area of investment to only those with money (the rich get richer). I don't believe that everyone is equipped with the financial knowledge to deal with the risk associated with participating in alternative investment funds, but I'd much rather that everyone have the opportunities to take the risks that they choose. Casinos are legal in many areas, strip clubs are legal in even more areas, and shopping malls are everywhere - all of these cause people to take arguably unnecessary risks with their financial health (and some would say even greater than investing). Particularly with the plethora of financial information available on the Internet, the everyday Joe has more resources than ever.

I'd love to see Congress eliminate the "accredited investor" requirement for investing in alternative funds so that everyone can have the same access to investing in startups, private companies, etc. I'm sure more than enough funds will spring up to meet investor demand, this being a capitalistic sociey and all.

Finally, startups can choose to avoid the problem of many small direct investments by ordinary investors (i.e. too many people to report to). by accepting money only from the investment funds or from few large investors, if such sources are available and willing. If such sources are not available to a startup, then you have to go with the options you have, (e.g. many small direct investors, self-funding, fail), as has always been the case.

Re: Crowd Investing: Wefunder

#47

Post by chernevik »

lukifer wrote: post #33
chernevik wrote: post #26

Earlier quoted context omitted.

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.

I don't know anything about Kickstarter. But:

has ks been around long enough to attract / surface fraud?

incentives for fraud go up at stakes of 1 - 2mm

public investment models anticipate social disconnection bw funder and funder -- if ks depends on verification through social network linkage, that's an element potentially missing from the proposal. again, not for _you_, for the sort of people targetted by predators

Re: Crowd Investing: Wefunder

#48

Post by ssharp »

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…

It seems entirely unreasonable to manage a bunch of "tiny" investments. It just sounds like a legal nightmare.

I think you'd have to pool all of the tiny investments into one large investment, and then that investment would have to have one person (or a small few) handle all interactions between the investment block and the startup. You'd essentially be creating a fund, in which investors of the fund would have a wall between their investment and the funds ultimate investment.

Even with all that, it seems like a very easy way for a person to lose their money. Startups are very risky investments and the people who succeed at investing are the ones who have developed a strategy for picking winners. Even if smart people decide that their strategy will be piggybacking off of more experienced investors' decisions, the market would still be ripe for drawing in lots of suckers to make really stupid investment decisions, though there are already lots of currently legal alternatives for that.

Financial literacy is already bad enough in this country, does it make sense to make learning it even harder?

Re: Crowd Investing: Wefunder

#49

Post by chernevik »

zapnap wrote: post #30
chernevik wrote: post #26

Earlier quoted context omitted.

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…

I'm worried about the same things that you are worried about. They are legitimate concerns, and they need to be addressed. No one is saying they are unimportant. This legislation is a vehicle for addressing them. This is also why I personally believe that the extra protections found in the Senate version of the bill actually make it more relevant than the loosely-worded HR2930. No one is saying that regulation isn't…

Okay, maybe you don't mean to, but this sounds a little talky-pointy to me. Who's against allowing people to make up their own minds and bring new ideas to life? Most of the people I know who talk that way live on K Street.

If you want to avoid sounding like a lobbyist, address the heart of what someone is saying. Who denied you think regs are important?

The point was that effective regulation is very likely _impossible_ at a cost consistent with the scale available at these funding levels. How do we regulate a bunch of these things, from a variety of sources, inside the budgets available to them? I don't see it.

Re: Crowd Investing: Wefunder

#50

Post by chernevik »

te_platt wrote: post #38
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.

Merits to one side, this sort of argument is going nowhere in the aftermath of the subprime loan mess.

Which people really should look at as a stress test on how something like this could be abused.

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