Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

U.S. Startups Fail to Attract Expected Crowd of Small Investors

bloomberg.com

Post reply on HN
Print view View original

161–168 of 168 posts

Re: U.S. Startups Fail to Attract Expected Crowd of Small Investors

#161

Post by Animats »

tptacek wrote: post #55

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…

Crowdfunding appears to be a terrible deal for retail investors.

Probably. It's too soon to have hard numbers, but once we see 3-year returns on JOBS act IPOs, we'll have a sense of whether this is a good idea. Historically, it's not, which is why there are "blue sky" laws.

Re: U.S. Startups Fail to Attract Expected Crowd of Small Investors

#162

Post by watwut »

mowenz wrote: post #159
sigil wrote: post #156

Earlier quoted context omitted.

> 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.

>By the same logic... 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 base…

Sometimes it is different person being attracted to different topic. E.g. libertarians like to argue when it is easy for them to defend their opinions and are silent when it is harder.

Moreover, most people opinions are not systematically based on ideology - they are based on their own observations about what worked well in their opinion.

Re: U.S. Startups Fail to Attract Expected Crowd of Small Investors

#163

Post by watwut »

lettergram wrote: post #53
zebrafish wrote: post #43

Earlier quoted context omitted.

as they should have tried to raise from high quality individuals first.....got a check from Andreessen Horowitz and the CTO of LinkedIn Exactly the point the parent was making. Those are big time contacts. Somebody outside of the valley now has a chance to get $1MM(!!!!) of seed money for their idea without having to relocate and schmooze and network. I'm as big a proponent of real world social skills as anyone, but…

I actually am torn on the subject. I'm not a VC, but I do invest heavily and regularly track various companies. That being said, I recognize my opinion might mean little, but... Product-market fit is definitely a good sign a company is on the right track in terms of product. However, 99% of what makes a company successful is execution. A crowd funded campaign on Kickstarter doesn't need to even be possible[1] or it c…

I dunno, the vetting of SV teams leads to pretty strange signaling behaviour of wannabe startups.

Re: U.S. Startups Fail to Attract Expected Crowd of Small Investors

#164

Post by tptacek »

sigil wrote: post #156
tptacek wrote: post #154

Earlier quoted context omitted.

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.

I think you've confused positive with normative arguments: you're rebutting a normative argument I did not make. I'm simply describing a fact: the Accredited Investor Rule is not excluding average people from processes that, like the rich, would make them richer.

Re: U.S. Startups Fail to Attract Expected Crowd of Small Investors

#165

Post by luckydata »

tptacek wrote: post #55

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 think while most understand why VCs behave the way they do, there's a general understanding that a well run non-traditional fund where investments are made in well-run companies like Basecamp, for example, would over the long run beat the returns of the gambler style that's so prevalent right now. I don't know if that has ever been tried before, if not then we need to wait for the Warren Buffet of tech investing to prove us right or wrong.

Re: U.S. Startups Fail to Attract Expected Crowd of Small Investors

#166

Post by luckydata »

FailMore wrote: post #37
seibelj wrote: post #25

This is anecdotal, but I chatted with a VC for a while at an event and he said their firm will not invest in anyone who did equity crowd funding, on the theory that it signals a weaker company. If they were stronger, they would have raised proper VC. I think the existing VC investment structures hate the idea of crowdfunded VC as it threatens their model, which is personal connections and an old boys (and girls) netw…

I was a VC. I think it is mainly that it is a very weak signal. A good VC or a select group of high quality angels does help a company get itself in order, so raising money from a large collection of distant angels tends to be a signal that the quality of the company must be low - as they should have tried to raise from high quality individuals first. A company with crowdfunding will have to display stronger metrics…

The VC crowd in Silicon Valley prizes themselves as great out of the box thinkers while, in reality, they are intellectually lazy and quite conventional.

Re: U.S. Startups Fail to Attract Expected Crowd of Small Investors

#167

Post by tptacek »

luckydata wrote: post #165
tptacek wrote: post #55

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 think while most understand why VCs behave the way they do, there's a general understanding that a well run non-traditional fund where investments are made in well-run companies like Basecamp, for example, would over the long run beat the returns of the gambler style that's so prevalent right now. I don't know if that has ever been tried before, if not then we need to wait for the Warren Buffet of tech investing to…

There's no evidence that a portfolio of Basecamps would beat a portfolio of Twitter-hopefuls, and a lot of reasons to think it wouldn't. Most companies fail. They fail when they're carefully run companies on organic growth paths, and they fail when they're reckless moon-shots.

There's an important fact I think people here miss. We tend not to consider a quiet, well-run small organic tech company that generates great salaries for a team for 10-15 years a "failure". And, in the sense that it's lucrative and pleasant and enriching for everyone directly involved, it isn't. But if it doesn't ultimately generate liquidity for investors, it is, for those investors, a failure. Startup investing isn't a charity run by pension funds for the benefit of software developers and product managers, or even for the users who enjoy the products built by those teams. For investment to make sense, it has to generate returns --- not just steady ticking returns, but enough to offset all the other failures.

Companies like Basecamp are great. Incidentally: they're the only kind of company I ever think about starting! But we shouldn't kid ourselves that they should attract investment dollars. Reckless moon-shots are intrinsic to the model of investment-funded companies.

Re: U.S. Startups Fail to Attract Expected Crowd of Small Investors

#168

Post by mhluongo »

guntars wrote: post #83
mhluongo wrote: post #77

Earlier quoted context omitted.

Clearly the expected value should be higher investing. You don't win blackjack by playing more games, but you can improve returns by spreading out your investments.

Spreading out investments does not improve expected return which is just a ratio to the invested amount.

Fair enough, maybe I should've said it reduced variance? Good for power-law investments, trending toward zero for house-edge blackjack.
Post reply on HN