Better investment plan: Send me your money via paypal and I'll call you an idiot.
Republic – Now everyone can invest in startups
11–20 of 84 posts
Re: Republic – Now everyone can invest in startups
#12Startups as investments are very risky with long payoff horizons. With their limited funds, this is a poor investment for the average investor. I can't help but feel like this will hurt more people then it will help.
I think it is healthy strategy to dedicate 5-10% of investment portfolio to high risks investments like this, even for average investor.
"SAFE holders do not have any voting or information rights".
With this kind of agreement, it's basically gambling since most info on start-ups is basically PR fluff. At least public companies have to publish annual reports and real investors get information rights.
Re: Republic – Now everyone can invest in startups
#13Startups as investments are very risky with long payoff horizons. With their limited funds, this is a poor investment for the average investor. I can't help but feel like this will hurt more people then it will help.
> With their limited funds, [startups are] a poor investment for the average investor
They're not great for institutional investors either: http://www.bloomberg.com/news/articles/2016-08-10/venture-ca...
Re: Republic – Now everyone can invest in startups
#14You don't get shares if you invest -- you get something called a "crowd safe": https://republic.co/learn/investors/crowdsafe More info here: http://www.crowdfundinsider.com/2016/06/87034-republic-adds-... I'm a bit leery of these. According to the article, "unless specifically negotiated, SAFE holders do not have any voting or information rights." I also suspect that the shareholders get taken care of before crowd sa…
> I would also be skeptical of the potential of a startup that can't convince normal VCs to fund them. If people who do this for a living don't think a startup is worth investing in, why should I?
There are plenty of SaaS companies that are naturally limited in revenue potential.
In my experience, VCs are not interested in a company with a conservative forecast of 10MM ARR in 5 years. These are still viable businesses that need capital to actualize the plan.
Alternative lending sources are crucial to these companies. While the terms of this particular idea are not ideal, I think we will see a lot of new ideas in this realm over the coming years and some will be great!
Re: Republic – Now everyone can invest in startups
#15You don't get shares if you invest -- you get something called a "crowd safe": https://republic.co/learn/investors/crowdsafe More info here: http://www.crowdfundinsider.com/2016/06/87034-republic-adds-... I'm a bit leery of these. According to the article, "unless specifically negotiated, SAFE holders do not have any voting or information rights." I also suspect that the shareholders get taken care of before crowd sa…
You raise some good points.
The Crowd Safe is essentially a YC Safe (which in turn is a standardized convertible note) that gives companies control over when to convert, rather than conversion necessarily happening in the following financing round. Given the ubiquity of convertible notes in early stage financings, legal treatment shouldn't be a unique concern.
To your point on startups not being able to convince VCs to fund them: much of the value of crowdfunding, from our perspective, is the ability to democratize the fundraising process by putting the decision of which companies get financed into the hands of the average person. While VC investment is surely a signal to take into account, the VC industry as a whole has shown itself to be biased in who it chooses to fund (more here: https://medium.com/equitycrowdfunding/new-impact-new-inclusi...).
For many companies, there are also significant brand loyalty and marketing benefits to doing a crowdfunding campaign and letting their users play a role in their growth as a company.
Re: Republic – Now everyone can invest in startups
#16You don't get shares if you invest -- you get something called a "crowd safe": https://republic.co/learn/investors/crowdsafe More info here: http://www.crowdfundinsider.com/2016/06/87034-republic-adds-... I'm a bit leery of these. According to the article, "unless specifically negotiated, SAFE holders do not have any voting or information rights." I also suspect that the shareholders get taken care of before crowd sa…
You are absolutely right about the discount.
Being skeptical is also good, but on the flip side there is a lot of money floating around in peoples private bank accounts that is seeking an investment target. I mean, how would one invest $10 in a startup through the traditional VC model? There's no way. This model can be seen as an alternative. There's no inherent reason to think of it as a backup for startups that failed to get VC funding. It's just money from people who are not VCs.
Re: Republic – Now everyone can invest in startups
#17You don't get shares if you invest -- you get something called a "crowd safe": https://republic.co/learn/investors/crowdsafe More info here: http://www.crowdfundinsider.com/2016/06/87034-republic-adds-... I'm a bit leery of these. According to the article, "unless specifically negotiated, SAFE holders do not have any voting or information rights." I also suspect that the shareholders get taken care of before crowd sa…
Shareholders rarely get anything in a bankruptcy, and at best it tends to be pennies on the dollar, so that seems like a minor concern.
Voting rights are more interesting, but my impression is that tiny shareholders in startups are usually bound by tight shareholders' agreements so that they must vote along with the majority investors anyway. (That at least seems to be the practice in Europe.)
Re: Republic – Now everyone can invest in startups
#18Better investment plan: Send me your money via paypal and I'll call you an idiot.
Those are called findoms, but you'll have to try advertising somewhere else.
Re: Republic – Now everyone can invest in startups
#19> Crowdfunding investing is highly speculative and every investment may result in a loss. By investing small amounts across multiple companies, you can reduce your risk compared to a large investment in a single company.
But there's only four companies.
> Do your own research. Read the documents provided by each company you plan on investing in. Get independent legal, accounting, financial advice. If you have any questions or need more information, ask the company.
Sounds expensive.
Maybe we crowdfund the advice too? Is someone going to make a robo-VC like lendingrobot?
Re: Republic – Now everyone can invest in startups
#20Wow, I'm blown away by the negativity in this thread. I know Silicon Valley is conservative but this is killing it.
In Europe (of all places), this sort of stuff has been going on for a number of years now. The first startup I worked for had gathered its €150k preseed funding from over 20 people. Not even with a convertible note, they really all went to the lawyer's office together. It was pretty nuts, but it got the product out (and then tanked miserably but hey, people knew what they were getting into).
Sites like Leapfunder (https://www.leapfunder.com/) have been doing what Republic does for years, but then in Europe. As far as I can see, the only reason the US is behind on this one is the "accredited investor" rule that European countries don't appear to have. I wonder how Republic works around that but I guess it's a good development. I have a hard time understanding how any "you're only allowed to X if you're rich" law can be fair (and I'd assume that especially libertarian HN would be with me on that one).
But still, HN's conclusion is that it's stupid to do this? What? Why is it stupid to invest $5k in a startup but not to invest $500k in a startup? If you ask me, that's irrational to the bone. If you really can't imagine some good reasons why a company wouldn't want to raise from a VC but would prefer to crowdfund, you didn't really try very hard.
I can't find it back but did HN react the same when Kickstarted got launched? Is there really that big a difference between "first to get a Pebble" and "first to get some Pebble shares"?