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Wefunder (YC W13): Invest in Startups

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Re: Wefunder (YC W13): Invest in Startups

#61

Post by aaronbrethorst »

melvinmt wrote: post #31
pg_bot wrote: post #20

Seed investing is not something for amateurs, in fact frankly I don't think investing in public companies is for amateurs. I would tell ordinary people to invest in index funds and don't invest in startups at all. You should not be investing in startups because you think it is going to change your life. You shouldn't be doing it unless you're rich enough that your life wouldn't be changed by making lots of money. - P…

I agree that ordinary people shouldn't bet their life savings on startups. But this allows an average well-informed SF employee to invest $1,000-2,000/month of his/her salary into any startup they like - hardly a life changing amount. See it as a Kickstarter on steroids. At least this gives us a chance too to invest in the next Dropbox and Airbnb.

> At least this gives us a chance too to invest in the next Dropbox and Airbnb.

And the next Webvan, Pets.com, Kozmo, Flooz, eToys, Boo, etc etc etc, saying nothing of the huge number of failures we don't even know about.

Re: Wefunder (YC W13): Invest in Startups

#62

Post by nlh »

SCAQTony wrote: post #27

I am not impressed. You are issued stock or a convertible note after your initial investment and you can cannot convert that note till the company is either bought-out or goes public. What if they don't do either and simply reinvest the "profits" back into the company thereby showing no profits? What happens if the board of the directors of the company you invested in dilutes your shares by issuing more-and-more stoc…

I hope this doesn't come across as dismissive - but that's kind of the deal you get when investing tiny amounts (relatively) with early-stage startups. You're basically investing in the team (and their assumed honor) in the hopes of a big exit in the future. Or, more idealistically, in the hopes of being part of the Next Big Thing.

If you're looking for dividends (ie profit return) or management oversight - as an investor - you're going to either invest more and get your own terms or stick to the public markets.

Re: Wefunder (YC W13): Invest in Startups

#63

Post by jwallaceparker »

wilfra wrote: post #44
runako wrote: post #40

Earlier quoted context omitted.

Worth noting: $1,000-2,000/month stashed in a less risky asset class (e.g. index funds) over 30 years is likely to be enough for most people to retire comfortably. That's potentially life changing over the long term.

Indeed. Nobody should limit their investments to just these. For every $1,000 you put into a crowdfunded company, you should be investing at least $4,000 in more traditional and safe investments. And 20% is even a lot. That assumes a young person who has high future earnings potential and a high risk tolerance. 5-10% would be more reasonable for most people. That said - this is certainly an asset class one could beat…

> traditional and safe investments

This made me chuckle.

The "traditional" investment vehicles of US stocks, real estate and bonds are anything but "safe" these days.

Re: Wefunder (YC W13): Invest in Startups

#64

Post by wilfra »

jwallaceparker wrote: post #63
wilfra wrote: post #44

Earlier quoted context omitted.

Indeed. Nobody should limit their investments to just these. For every $1,000 you put into a crowdfunded company, you should be investing at least $4,000 in more traditional and safe investments. And 20% is even a lot. That assumes a young person who has high future earnings potential and a high risk tolerance. 5-10% would be more reasonable for most people. That said - this is certainly an asset class one could beat…

> traditional and safe investments This made me chuckle. The "traditional" investment vehicles of US stocks, real estate and bonds are anything but "safe" these days.

The last few years are not representative of the long term. Over the long term stocks, bonds and real estate - in aggregate - rise in value.

If you don't want to risk short or medium term fluctuations and black swans, the ultimate traditional and safe investment is a savings account. If you're the type that thinks fiat currency is only worth it's weight in toilet paper, then buy gold.

For any of these investments you'll have more left at retirement than if you put 100% of your capital into startups that ended up going out of business.

Re: Wefunder (YC W13): Invest in Startups

#65

Post by loganfrederick »

jcampbell1 wrote: post #58

I really hope uncapped notes are not allowed. If you look at the history, Dropbox turned a $6M investment into a $5 billion dollar company. Google turned a $25M investment into a $250 billion dollar company. I have a feeling, one of these startups is going to turn a $1M uncapped investment into a $1B company, and there are going to be some really hurt feelings. Someone is going to invest $1000 in the next Google/Drop…

One of my concerns with this whole crowdfunding model is that if one limits the cap, then surely the expected value of the the returns from crowdfunding will be negative. You need the gains from the uncapped hits to compensate for all the failures. If your downside is potentially losing 100% of your investment and that odds of failure are somewhere (arbitrarily picked) between 70-90%, and your upside is only a 20% gain 10-30% of the time, the math doesn't make it seem like the model is sustainable.

Re: Wefunder (YC W13): Invest in Startups

#66

Post by swalkergibson »

wilfra wrote: post #57
swalkergibson wrote: post #56

Earlier quoted context omitted.

Can you show your work on that math, please? I am at work and do not have the ability to go through it myself, but that seems too good to be true...

These are just rough calculations and they ignore things like whether the valuation is pre or post-money and dilution from additional funding etc, but it gives a ballpark idea of potential returns: $1,000 investment at $8,000,000 valuation = 0.0125% Facebook valuation today of $63 billion x 0.000125 = $7.87 million (was a little off) Dropbox valuation currently at least $5 billion (they raised at a $4 billion valuati…

Okay, thank you. I was wondering if it was just straight division.

Re: Wefunder (YC W13): Invest in Startups

#67

Post by gavanwoolery »

pg_bot wrote: post #20

Seed investing is not something for amateurs, in fact frankly I don't think investing in public companies is for amateurs. I would tell ordinary people to invest in index funds and don't invest in startups at all. You should not be investing in startups because you think it is going to change your life. You shouldn't be doing it unless you're rich enough that your life wouldn't be changed by making lots of money. - P…

Investing is not just about returns anymore.

On Kickstarter, millions of people invest in products, not for a return but because they want the product to exist.

I would very willingly toss my money down the blackhole of seed markets, because it is a "fair shot." Other markets are not.

The stock market and index funds are driven by volume (i.e. rich people) fear, our economy, or stupid politicians.

I would gladly fund a product to see it exist, and all the better if I have a shot at making a return on something I believe in. People don't invest in the stock market because they believe in the company, they do it because they have a gut-feeling it might move up that day.

In '96 or '97, I predicted that Valve was going to be very successful, just based on a very early preview I saw of Half-Life - I was just a teenager at that time. I have made many similar calls (honest to god) across many companies including NVidia, Intel, Google -- because I believed in them before any of them went public (for the record, there is not a single public company that I believe in). What I wouldn't give to be able to invest my money where I believed it would do good.

Re: Wefunder (YC W13): Invest in Startups

#68

Post by csomar »

wilfra wrote: post #57
swalkergibson wrote: post #56

Earlier quoted context omitted.

Can you show your work on that math, please? I am at work and do not have the ability to go through it myself, but that seems too good to be true...

These are just rough calculations and they ignore things like whether the valuation is pre or post-money and dilution from additional funding etc, but it gives a ballpark idea of potential returns: $1,000 investment at $8,000,000 valuation = 0.0125% Facebook valuation today of $63 billion x 0.000125 = $7.87 million (was a little off) Dropbox valuation currently at least $5 billion (they raised at a $4 billion valuati…

Facebook raised a total of $16B. In each round, you get your share diluted. You'll need the history of the funds raising and the dilution your share is taking, but I guess, you'll hardly reach $1m or even $100K after all dilutions take place.

Re: Wefunder (YC W13): Invest in Startups

#69

Post by wilfra »

csomar wrote: post #68
wilfra wrote: post #57

Earlier quoted context omitted.

These are just rough calculations and they ignore things like whether the valuation is pre or post-money and dilution from additional funding etc, but it gives a ballpark idea of potential returns: $1,000 investment at $8,000,000 valuation = 0.0125% Facebook valuation today of $63 billion x 0.000125 = $7.87 million (was a little off) Dropbox valuation currently at least $5 billion (they raised at a $4 billion valuati…

Facebook raised a total of $16B. In each round, you get your share diluted. You'll need the history of the funds raising and the dilution your share is taking, but I guess, you'll hardly reach $1m or even $100K after all dilutions take place.

Peter Thiel invested $500k for 10% and was left with only 2.5% at IPO, so it looks like dilution is indeed stronger than I assumed.

At that dilution rate, $1k in Facebook would be worth "only" about $1.9 million today.

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