Crowdfunding is Great, But is it Right For Startups? • Hacker News Board

Re: Crowdfunding is Great, But is it Right For Startups?

#21

Post by rsmiller510 » Fri, Feb 10, 2012, 12:47 AM UTC

dchmiel wrote: post #18

pors wrote: post #5

Earlier quoted context omitted.

True, but the chance of having picked Facebook is about 0, and there is no second Facebook, which makes your math void.

You're right that there won't be another Facebook. Just as there hasn't been another Microsoft or Google. But thinking that there isn't going to be anymore large up and coming companies that change the competitive landscape is false. It'd be like saying in the 1800's that now that railways have drastically changed everything there won't be any new railways game changers. There wasn't much development/change in railwa…

That's not a given by any means. For all we know, the next big thing is being started by some kid in a dorm room right this minute. I would hate to think it was otherwise and I believe there will always be a new disruptor. Technology marches on and we have not reached the end, not by a long shot.

Re: Crowdfunding is Great, But is it Right For Startups?

#22

Post by dchmiel » Fri, Feb 10, 2012, 2:03 AM UTC

wtvanhest wrote: post #19

dchmiel wrote: post #17

Earlier quoted context omitted.

So creating a fund that has a clear investment strategy of investing in a particular startup. How about creating mutual funds that invest in startups in general. It'd allow for diversification of multiple startups and give founders one concentrated voice. That way retail investors can get exposure to startups as venture funds are beyond this investor class.

Venture Capitalists are basically mutual funds that invest in startups. The y get most of their investment from pension funds who are investing for a large chunk of Americans.

I guess I was looking to see if there could be a more direct approach to it. Your pension fund invests in multiple assets classes and in multiple industries because of diversification. With a mutual fund that strictly invests in startups individuals with small amounts of money could gain access to the startup market in a direct way but still with professional money management. It essentially would be a VC fund composed of retail investors where traditional VC funds are composed of institutional (pension funds, etc) and high net worth individuals.

Re: Crowdfunding is Great, But is it Right For Startups?

#23

Post by wtvanhest » Sun, Feb 12, 2012, 10:17 PM UTC

dchmiel wrote: post #22

wtvanhest wrote: post #19

Earlier quoted context omitted.

Venture Capitalists are basically mutual funds that invest in startups. The y get most of their investment from pension funds who are investing for a large chunk of Americans.

I guess I was looking to see if there could be a more direct approach to it. Your pension fund invests in multiple assets classes and in multiple industries because of diversification. With a mutual fund that strictly invests in startups individuals with small amounts of money could gain access to the startup market in a direct way but still with professional money management. It essentially would be a VC fund compos…

I don't know if you will ever see this response because I took so long to write it but you do have a point. The casual investor cannot invest in venture funds. One problem with funds like this is that they could end up going to zero if they miss everything or could invest in businesses which are not sound to help their friends.

In an effort to prevent this type of mistreatment of investors it is harder for them to raise money from individuals. In my opinion, the returns to VC firms on the average (not just the home runs) are not worth the potential losses.

But, the reverse argument could certainly be made and it will be an issue that I'm sure is discussed long in to the future.

*One area that most people are not aware exists is the area of fund manager vetting and analysis. This is mostly done by institutional investors and is something the average retail investor would have a lot of difficulty with.