Republic – Now everyone can invest in startups • Hacker News Board

Re: Republic – Now everyone can invest in startups

#81

Post by rlucas » Sat, Sep 03, 2016, 3:55 PM UTC

mdorazio wrote: post #65

rlucas wrote: post #28

Earlier quoted context omitted.

There are lots of ways to get a return. I helped start Lighter Capital (originally "RevenueLoan"), which invests a lump sum that gets repaid as a percentage of revenue (like a royalty). That model, Revenue-Based Financing, is harder to game than dividends (management can and often does make profit "disappear" but rarely has any incentive to make revenue disappear). You can also have redemption rights or dividends. De…

I totally agree, but in cases like Republic with a Crowd Safe, none of those options seem to apply unless I'm missing something. My question was for crowd funded smaller companies that have low potential of an exit - in those cases how is a crowd funding "investor" going to realize a return?

Very fair critique. The SAFE for all its merits is an exit-centric security.

Re: Republic – Now everyone can invest in startups

#82

Post by jomamaxx » Tue, Sep 06, 2016, 4:44 AM UTC

twblalock wrote: post #22

skrebbel wrote: post #20

Wow, 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…

> Why is it stupid to invest $5k in a startup but not to invest $500k in a startup? Because if you invest $500k, you get information rights, and a significant number of votes. If you invest $5k, you get nothing, and you just have to hope the company makes good decisions. It's like buying a $5k lottery ticket -- it's an investment based entirely on trust without any information, accountability, or influence over the o…

"Because if you invest $500k, you get information rights, and a significant number of votes. If you invest $5k, you get nothing, "

No - not at all.

First, there is no such thing as 'information rights'.

Second - when you 'invest' - you get shares. Those shares have 3 'rights' generally: 'votes', 'dividend rights' and 'liquidity preference'

Those rights differ depending on class of shares and specifics of the deal.

Whether you invest $5 or $5 million - it could very well entail the exact same terms.

For example, most later stage investors do not get enough votes to influence the outcome, they don't get a seat on the board, and they don't get any real liquidity preference.

Re: Republic – Now everyone can invest in startups

#83

Post by jomamaxx » Tue, Sep 06, 2016, 4:44 AM UTC

twblalock wrote: post #22

skrebbel wrote: post #20

Wow, 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…

> Why is it stupid to invest $5k in a startup but not to invest $500k in a startup? Because if you invest $500k, you get information rights, and a significant number of votes. If you invest $5k, you get nothing, and you just have to hope the company makes good decisions. It's like buying a $5k lottery ticket -- it's an investment based entirely on trust without any information, accountability, or influence over the o…

"Because if you invest $500k, you get information rights, and a significant number of votes. If you invest $5k, you get nothing, "

No - not at all.

First, there is no such thing as 'information rights'.

Second - when you 'invest' - you get shares. Those shares have 3 'rights' generally: 'votes', 'dividend rights' and 'liquidity preference'

Those rights differ depending on class of shares and specifics of the deal.

Whether you invest $5 or $5 million - it could very well entail the exact same terms.

For example, most later stage investors do not get enough votes to influence the outcome, they don't get a seat on the board, and they don't get any real liquidity preference.

Re: Republic – Now everyone can invest in startups

#84

Post by twblalock » Tue, Sep 06, 2016, 5:05 AM UTC

jomamaxx wrote: post #82

twblalock wrote: post #22

Earlier quoted context omitted.

> Why is it stupid to invest $5k in a startup but not to invest $500k in a startup? Because if you invest $500k, you get information rights, and a significant number of votes. If you invest $5k, you get nothing, and you just have to hope the company makes good decisions. It's like buying a $5k lottery ticket -- it's an investment based entirely on trust without any information, accountability, or influence over the o…

"Because if you invest $500k, you get information rights, and a significant number of votes. If you invest $5k, you get nothing, " No - not at all. First, there is no such thing as 'information rights'. Second - when you 'invest' - you get shares. Those shares have 3 'rights' generally: 'votes', 'dividend rights' and 'liquidity preference' Those rights differ depending on class of shares and specifics of the deal. Wh…

> First, there is no such thing as 'information rights'.

Information rights are real, and they are defined in statute law.

But, that's not why you are posting here. I see that you have been attacking my posts because of a vendetta you have in an unrelated thread. How pathetic!