151–160 of 168 posts
Hmmm. I'm an accredited investor. I'd have to be crazy -- or altruistic -- to invest in a typical SaaS / software / Sili Valley startup via crowdfunding. Why? * Waste: Absurdly high cost of living in places with startup culture means labor costs must be excessive or you can't get the people you want. * Focus: Not every software-style startup has Joel Spolsky or another leader with his kind of focus. * Unicorns. For i…
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> "the industry's deal flow is large enough that they are fine with a small number of false negatives since false positives in their portfolio hurt more" This is backwards. Funding a company that goes nowhere is far smaller an error than turning down the next SpaceX.
A fund only has 10~20 bets it can make though. That likely influences the human decision making (could still be suboptimal). Afterall didn't A16Z catch some criticism for not investing a large enough sum into Instagram (which iirc had 500x returns or something) to make a large enough difference to the fund?
A costly adherence to their own ethical rules, but it reinforces how seriously Andreessen Horowitz takes portfolio conflict.
source: https://bits.blogs.nytimes.com/2012/04/20/how-andreessen-hor...
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Crowdfunding nukes VC's downside protection. VC funds invest through preferred stock or convertible debt for its downside-protection features. If that downside protection comes at the expense of unaccredited investors, the risk that one of them sues or a regulator gets involved on their behalf goes up. That could easily neutralise or even outweigh the benefits of the protection. This isn't limited to crowdfunding, by…
> A cap table of a hundred $10,000 cheques (I've seen these), even if all are from accredited investors, will have a harder time raising venture capital than one with a handful of early backers. Hundreds ?!?
(I originally wrote "doesn't sound crazy," but in fact it sounds totally crazy. Just not impossible.)
Crowdfunding appears to be a terrible deal for retail investors: * VCs survive by maintaining portfolios of companies in which 1-2 in 10 survive (most VCs fail to generate returns that beat the public markets). This means more than that you need 10 companies --- it also governs the kinds of companies you can invest in. Despite being a message board in part dedicated to startups, it feels like very few of the relative…
Will VCs make better investments, on average, than retail crowdfunders? Probably. That's their job after all. Does that mean the law should protect crowdfunders from themselves? That I'm not so sure about. I can think of no more "Rich Get Richer" law than the accredited investor law [1]. It literally says: if you aren't already rich, you don't have access to this entire set of opportunities that could make you rich.…
Crowdfunding appears to be a terrible deal for retail investors: * VCs survive by maintaining portfolios of companies in which 1-2 in 10 survive (most VCs fail to generate returns that beat the public markets). This means more than that you need 10 companies --- it also governs the kinds of companies you can invest in. Despite being a message board in part dedicated to startups, it feels like very few of the relative…
I can see this working for a few niche markets that fall in between the gaps of kickstarter and VC. One market that immediately comes to mind is microbreweries. Small to midsize microbreweries have pretty good margins because they are usually selling their beer directly out of their taproom (as opposed to distributing their product, which results in a few other people taking a cut of your sales). But expanding to the…
Kickstarter works because nobody funds a Kickstarter with the expectation that they'll be able to return to those funds later to fund college, a house purchase, or a retirement. That's not the case with equity crowdfunding.
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Will VCs make better investments, on average, than retail crowdfunders? Probably. That's their job after all. Does that mean the law should protect crowdfunders from themselves? That I'm not so sure about. I can think of no more "Rich Get Richer" law than the accredited investor law [1]. It literally says: if you aren't already rich, you don't have access to this entire set of opportunities that could make you rich.…
I don't know what other financial services the Accredited Investor Rule deprives ordinary consumers of, but to the extent that it deprives them of access to VC investments: it's increasing their wealth. Most VC firms fail. A significant chunk of assets under VC management are there as part of a hedging strategy for a much larger portfolio; it's not parked there with the expectation that any one person's retirement ca…
By that same logic, we should deprive engineers of the ability to start companies, and push them instead towards AmaGooBookSoft. We would undoubtedly be increasing their wealth.
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I can see this working for a few niche markets that fall in between the gaps of kickstarter and VC. One market that immediately comes to mind is microbreweries. Small to midsize microbreweries have pretty good margins because they are usually selling their beer directly out of their taproom (as opposed to distributing their product, which results in a few other people taking a cut of your sales). But expanding to the…
There's embedded survivorship bias here that is distorting your analysis. The median successful microbrewery does a fine, if quiet, business. But most new business starts, especially in the food and hospitality sectors, fail. Lots of attempts at microbreweries never find a market fit, or are unable to execute with sufficient margins to stay afloat. Kickstarter works because nobody funds a Kickstarter with the expecta…
My thought is that crowdfunding could be a good financing option for someone like this[2]. They have already established themselves, but are trying to get to the next stage. If I was local beer fan, I might support them on kickstarter, but if they offered a crowdfunding option, perhaps with some perks like an annual tasting, than I would probably be a lot more enthused. Also keep in mind, that a lot of specialty microbreweries already have 'fan clubs' that cost a few hundred dollars a year. In return, you get access to limited releases. It seems like a creating a 'lifetime fan club' for a few thousand dollars would be doable, with the added bonus that the supporter gets some equity.
[1]http://www.sfgate.com/food/article/San-Francisco-s-popular-M... [2]https://www.kickstarter.com/projects/findlaybrewing/findlay-...
Crowdfunding appears to be a terrible deal for retail investors: * VCs survive by maintaining portfolios of companies in which 1-2 in 10 survive (most VCs fail to generate returns that beat the public markets). This means more than that you need 10 companies --- it also governs the kinds of companies you can invest in. Despite being a message board in part dedicated to startups, it feels like very few of the relative…
I can see this working for a few niche markets that fall in between the gaps of kickstarter and VC. One market that immediately comes to mind is microbreweries. Small to midsize microbreweries have pretty good margins because they are usually selling their beer directly out of their taproom (as opposed to distributing their product, which results in a few other people taking a cut of your sales). But expanding to the…
Pretty sure no one expected -- given their very loud anti-'sell-out' rhetoric -- that they would sell a 22% stake for £100M to a private equity firm (TSG Consumer Partners) and actually deliver a serious return to said 'punks.'
Edit - 'Serious Return' per BrewDog's own reporting at anywhere between 2,765% and 177% depending on the 'fund' you invested in (https://www.brewdog.com/lowdown/press-hub/tsg-deal)
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I don't know what other financial services the Accredited Investor Rule deprives ordinary consumers of, but to the extent that it deprives them of access to VC investments: it's increasing their wealth. Most VC firms fail. A significant chunk of assets under VC management are there as part of a hedging strategy for a much larger portfolio; it's not parked there with the expectation that any one person's retirement ca…
> I don't know what other financial services the Accredited Investor Rule deprives ordinary consumers of, but to the extent that it deprives them of access to VC investments: it's increasing their wealth. By that same logic, we should deprive engineers of the ability to start companies, and push them instead towards AmaGooBookSoft. We would undoubtedly be increasing their wealth.
It's a very fair point.
I just wanted to note something about this that is part of a broader pattern of something I notice about HN posters. They will generally argue in favour of personal liberties, and even go so far to do it based on principle, but only when it comes to a case where liberties they personally care about are taken away. There is a contrast between this argument for liberty based on principle--which is by definition libertarian ideology (but note: not necessarily US Libertarian Party followers)--and the pattern of anti-libertarian rhetoric seen around here sometimes in threads where it comes up.
It seems perhaps there is a disconnect: people appear to generally care a lot about their liberties when suddenly it comes the ones they care about being taken away, and they will be argued for them based on principle. However When others generally want liberties they care about, then, that's apparently a different story.
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I can see this working for a few niche markets that fall in between the gaps of kickstarter and VC. One market that immediately comes to mind is microbreweries. Small to midsize microbreweries have pretty good margins because they are usually selling their beer directly out of their taproom (as opposed to distributing their product, which results in a few other people taking a cut of your sales). But expanding to the…
BrewDog is an increasingly bizarre case study in the microbrewery/crowdfunding space. Their 'Equity For Punks' money- raising efforts received a wide range of legal opinions in different jurisdictions. Pretty sure no one expected -- given their very loud anti-'sell-out' rhetoric -- that they would sell a 22% stake for £100M to a private equity firm (TSG Consumer Partners) and actually deliver a serious return to said…
Also, looks like they are offering another round of equity in the US[1]. I was under the impression that crowdfunding was limited to $1M, but looks like they are raising $50M under 'Regulation A+'. Not sure what that is.