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I find the number of articles/shoddily rewritten press releases that claim that Startup X "is disrupting" something, when Startup X barely exists, extremely amusing.
Has FundersClub actually disrupted venture capital? Is this a claim that they intend to do so? Do they know what "disruption" actually means? I find the number of articles/shoddily rewritten press releases that claim that Startup X "is disrupting" something, when Startup X barely exists, extremely amusing.
Earlier quoted context omitted.
The article, and your comment, suggests that this move is strongly connected to general solicitation, but I think the connection implied does not exist. In this context, Regulation D applies to the companies raising money through a private offering. Companies that want to avail themselves of general solicitation will need to take additional steps to be in compliance with the law. This includes filing a Form D 15 days…
Confirmed that FundersClub Refer is not connected to general solicitation or the JOBS Act. We are simply rewarding members (accredited investors) who are referring us companies that end up making it past our vetting and due diligence processes and becoming portfolio companies.
-- https://fundersclub.com/site/faq/
Refer looks like the beginning of a kickback scheme a la Morgan Stanley stock tech analysts circa 1994.
Furthermore, it is true that you are only targeting "accredited investors" for now. Two things should be noted. Firstly, accredited investors aren't necessarily smart investors. Earning $200K a year or having a networth of $1 million is a fairly common thing and is unconnected to financial literacy and startup valuation (see actors/doctors/lawyers/baby boomers investing in startups).
Secondly, are you honestly telling me that you are just going to stick with soliciting accredited investors if the legal obligations you are presently under were to be lifted?
Please.
A side point. A lot of people think that making startups an investment option for all is a good thing. I'm fairly certain that's a stupid idea, for the simple fact that if VCs, whose full time job it is to solely invest in startups, suck at investing in startups, what chance do normal investors with other jobs have exactly? A lot of people thought that online trading was an amazingly good idea during the late 90s (it sure was for eTrade), but the individual returns of sole traders illustrate that this was not the case, and in fact most investors would've been better off holding a diversified low-fee index fund.
Not all "disruption" is good disruption.
To the downvoters, may your ignorance go forth and multiply.
Has FundersClub actually disrupted venture capital? Is this a claim that they intend to do so? Do they know what "disruption" actually means? I find the number of articles/shoddily rewritten press releases that claim that Startup X "is disrupting" something, when Startup X barely exists, extremely amusing.
"disrupting" is some marketing bullshit. When I hear someone mention that word... I'm far more interested in "remaking" and "reforming" which imply some sort of constructive outcome rather than just fucking shit up.
Corollary (quoted from elsewhere):
"If the established players in the industry are trying to smack your new model down, that's a sign that your innovation isn't disruptive -- it means its utility is oriented similarly to theirs, so they could in principle adopt whatever use it has.
The canonical example is steel micro-mills ... They started off being only good enough for low-margin, cruddy steel like rebar, business which the real steel mills was delighted not to have to deal with any more. Only the micro-mills got better and better and kept taking the lowest-margin business away from the mills until most of them couldn't function any more."
(Related corollary, disruption = innovation through inferiority: http://www.mrteacup.org/post/startups-innovation-through-inf...)
Of course somewhere along the line someone decided that disruption = the new hotness, so now no matter what you do, even if it's something that's been done forever (e.g. renting clothes out short-term), you have to call it "disruptive".
Has FundersClub actually disrupted venture capital? Is this a claim that they intend to do so? Do they know what "disruption" actually means? I find the number of articles/shoddily rewritten press releases that claim that Startup X "is disrupting" something, when Startup X barely exists, extremely amusing.
Has FundersClub actually disrupted venture capital? Is this a claim that they intend to do so? Do they know what "disruption" actually means? I find the number of articles/shoddily rewritten press releases that claim that Startup X "is disrupting" something, when Startup X barely exists, extremely amusing.
The 20% carry FundersClub charges seems really disproportionate to the value they add. A 20% carry for a VC makes some sense — the carry applies across the entire fund, not just for one specific company. So a VC fund can wind up net negative, and therefore charge no carry. It's ridiculous for FundersClub to charge the same carry as a VC, but on each specific company. They're not taking any risks, or even providing mu…
Business is all about getting away with the maximum that your customers (cough cough) will let you get away with and the minimum your employees will let you get away with. I agree with your assessment but also see why Fundersclub would want to try to get away with this gouging their clientele :P
I am a bit confused as to YC's thinking with encouraging a startup like this. What are the revenue opportunities - not necessarily short-term, but even long-term - like? Do they charge a fee on each investment made? Or do their fees just come from exits? If so, then their cash flows will look even more ridiculous than a regular startup - if you assume they only admit 'early stage' startups for starters to their platf…
1) investing themselves, and keeping the carry
2) investing through FC, paying the carry
For (2) to happen, a few things must resonate:
1) The deal flow is that good. A potential investor cannot fund the companies that go through FC on AngelList or through other venues.
2) The investor is not an accredited one, but can invest due to JOBS act.
It seems that once again (2) is the real market they're after. I have not yet seen an entrepreneur limiting their fundraising to FundersClub, and refusing other venues.
I recognize that this isn't a pyramid scheme, but it does look a lot like a multi-level marketing structure. MLMs can be viable, real businesses, but this may open the opportunity for abuse. I'm very interested to see how the SEC handles this. I understand the founders want rapid growth, but accredited investors can make mistakes, and big ones. They are not professional investors, just accredited.
Yes there are frauds and "exploiters" out there, but they are there no matter what. FundersClub is one startup that acts to reduce fraud and exploitation by curating the best startups. Were I an investor, I'd trust that any FC startup has had serious due diligence, not only because the founders are good guys, but because it's good for their business.
PS: congrats Alex and Boris .. "refer" is a brilliant idea.