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Crowd Investing: Wefunder

174 points by ysilver 15y ago

zeratul 15y ago
We are getting the news too late. Did you know that there are 7 bills that might change how startups operate? H.R.3427 - Startup Technical Assistance for Reemployment Training and Unemployment Prevention Act H.R.3571 - Entrepreneur Startup Growth Act of 2011 S.1965 - Startup Act of 2011 S.1826 - Startup Technical Assistance for Reemployment Training and Unemployment Prevention Act H.R.2941 - Startup Expansion and Investment Act H.R.1114 - StartUp Visa Act of 2011 S.565 - StartUp Visa Act of 2011 We need a web service that is more robust than http://www.opencongress.org/ http://www.opencongress.org/ . We need a web service that has proper data mining, visualization, and notification system. The big guys have their lawyers - we need a proper web service. Who can help to build that?
- vyrotek 15y ago
  Plenty of people would like to. But, more importantly... who will help pay for that?
  - marcidale 15y ago
    At POPVOX, our first investor was Tim O'Reilly. Legislative advocacy is a huge market -- and one in great need of disruption.
- untog 15y ago
  > Who can help to build that? I would love to. But it's difficult to justify when there is no payoff for it.
- thinkcomp 15y ago
  That's what we're working on with http://www.plainsite.org http://www.plainsite.org.
- davidcuddeback 15y ago
  Well, there's already https://www.popvox.com/ https://www.popvox.com/. They show bills currently in Congress, organized by category or what's most popular on the site. They also send alerts that recommend bills based on your interests, although it seems to be in the alpha stage right now. I'm not sure if Popvox has all the features you have in mind. Rather than starting a new web service from scratch, you might find it easier to request certain features from an existing one.
  - marcidale 15y ago
    Thanks, David - yes, we would love the input at POPVOX (info@popvox.com) New alerts system is imminent, so please check it out. BTW - we had our own go at crowdfunding for POPVOX. I explained on Quora how we had to turn down non-qualified investors: http://b.qr.ae/nXFsiM http://b.qr.ae/nXFsiM We ended up with a crowdfunding variation to raise the money for our iPad app for Congress through Appbackr (MarkUp - the first app designed for Congress http://bit.ly/uLSrOT http://bit.ly/uLSrOT). See article in Entrepreneur magazine on the fundraising: http://bit.ly/rKQSzS http://bit.ly/rKQSzS
    - wtvanhest 15y ago
      Marci, I saw you guys present at Dingman (capital access network). Glad to hear you got funded in an innovative way. Did you guys move or stay in DC?
- marcidale 15y ago
  Here are links to take action on the bills you list. Your message will be sent to the appropriate legislators and aggregated on the public bill report so that you can see how sentiment is shaping up across the country. (The "sentiment across the country" part is important. Even if everyone in Silicon Valley thinks this something is great, the case has to be made to legislators who represent very different districts.) https://www.popvox.com/bills/us/112/hr3427 https://www.popvox.com/bills/us/112/hr3427 https://www.popvox.com/bills/us/112/hr3571 https://www.popvox.com/bills/us/112/hr3571 https://www.popvox.com/bills/us/112/s1965 https://www.popvox.com/bills/us/112/s1965 https://www.popvox.com/bills/us/112/s1826 https://www.popvox.com/bills/us/112/s1826 https://www.popvox.com/bills/us/112/hr2941 https://www.popvox.com/bills/us/112/hr2941 https://www.popvox.com/bills/us/112/hr1114 https://www.popvox.com/bills/us/112/hr1114 https://www.popvox.com/bills/us/112/s565 https://www.popvox.com/bills/us/112/s565
dclaysmith 15y ago
I think the need to stop SOPA and the need to legalize this funding model are apples and oranges. I would love to see some changes to funding laws but many of these laws exist to prevent the defrauding of smaller, less "sophisticated" investors. Simply making the investment legal wouldn't do much without modifying the disclosure requirements the start-up faces. These disclosures will remain very important to prevent scams. So, great idea but not simple. And not a "cause" like fighting SOPA was...
- ysilver 15y ago
  To me it's about getting congress to legislate in favor of startups and young tech companies rather than big business interests. With the SOPA protests, we showed what is possible with a grassroots effort. I think a similar effort could work with startup funding.
- zapnap 15y ago
  Agree that it's largely apples and oranges. I think the poster was more calling attention to the fact that SOPA showed a lot of people that their voices do matter, and can affect change in government. So in that way, at least, they're related. Fraud is certainly a concern, and the reason that the laws were introduced in the 1930s in the first place. But the S.1791 bill has provisions for dealing with this through (relatively) strict individual investing limits and reputation via crowdfunding intermediaries. A balance needs to be struck between protecting "less sophisticated" investors and giving those of us who want the opportunity the chance to get involved, help support entrepreneurs, and create jobs (on main street and in silicon valley). There's still a lot to be hashed out of course, but this would be a step in the right direction. Disclaimer: I'm one of the people who worked to put the petition together.
  - B0Z 15y ago
    One of the things The Securities Act of '33 was established to do was to protect the general public from themselves and from predatory brokers who were loaning a generally ignorant public caught up in speculative bubbles. Brokers were lending people up to 2/3rds of the face value of stock they were purchasing. When the market started to get cold feet and rumors ran rampant, people were selling every stock they owned just to cover the amount they were leveraged. I haven't read the bill before Congress, but I would think if there are provisions that prohibit borrowing as a mechanism for financing stock purchases, this would benefit the start up ecosystem. The system in it's current state only benefits the very, very wealthy, and forces young start ups into term negotiations with people who do it for a living. Methinks there is / will be heavy lobbying on behalf of the major investment banks who would naturally oppose any new members in their club. http://en.wikipedia.org/wiki/Wall_Street_Crash_1929 http://en.wikipedia.org/wiki/Wall_Street_Crash_1929
JumpCrisscross 15y ago
There used to be a time when anyone could sell shares in any company. That didn't work out and so we got the Securities and Exchange Act of 1933. Crowd-funding isn't fatally flawed, but it needs a lot more time to integrate the last 400 years of capital market development history.
- npt4279 15y ago
  Limiting an individual's investment to a maximum of $1000 goes a long way to making sure Grandma doesn't lose her life's savings. As does the requirement for companies to use an Internet intermediary that performs background checks, verifies identity, holds funds in escrow, etc. The world is different from the 1930's.
  - jerf 15y ago
    What's the difference between being able to invest $1000 and $0? That's not helpful to anybody. If I want to invest $30,000, I have to go find 30 startups? That doesn't make any sense.
    - npt4279 15y ago
      If you are an accredited investor (i.e., make over $200,000), current law allows you to invest any amount you like. If you are not an accredited investor, you likely can't afford to invest $30,000... so the thinking goes in Congress.
- drhowarddrfine 15y ago
  You still can. My company, for instance, has but two investors holding all company stock. My wife and me. If we wished, we could sell a portion of our company to others even though it is not publicly traded. Privately held companies like ours can still sell portions of their company to other investors, or even take investment capital without selling private stock.
  - _delirium 15y ago
mapleoin 15y ago
All Americans—not just the wealthy and well-connected ... How about we turn that into: All people—not just the wealthy and well-connected Americans ...
MikeNorman 15y ago
This is super important. Everyday Americans should have the right to invest in businesses. Think of the jobs we could create? Government shouldn't be telling me I dont know what Im doing if I want to help a friend start a company that I think can succeed. I get that unsophisticated investors need some protection, but $1000 seems like a reasonable risk to allow folks to take on something they believe in.
appswell 15y ago
I fully support this! To someone's point, we have an outdated system of balances that are based on 400 year old common law, and put in place as a consequence of the great depressions. S.1791 is a good bill, that puts the proper protections, capping investments at $1k. Not riskless, but appropriate amount of risk for investing. A fairer shake than the individual investor gets in the days of algorithmic, fraud ridden Wall street, or for that matter, the keno tickets the govt is happy to let them purchase.
- lukeschlather 15y ago
  It should be stated as a percentage of gross income. Magic numbers are bad, in software and law.
deleted 15y ago
[deleted]
robmay 15y ago
I have a lot of experience here because a) in 2005 I started something called "The Business Experiment" which was an attempt to have a purely crowd sourced business. (http://www.fastcompany.com/magazine/101/next-essay.html http://www.fastcompany.com/magazine/101/next-essay.html) At the time, I spent a lot of my own money on lawyers trying to figure out how to give equity to people who aren't accredited investors. b)I have since raised $10.5M in venture capital for Backupify.com, so I have also learned that side of the world. From my view, allowing anybody to invest a few hundred or a few thousand dollars in a startup is a bad idea for a few reasons. First of all, the startup world is glamorized by the media. Most startups fail. Most capital is erased. No one writes about those companies, unless the failure is spectacular. Studies have shown that on average, entrepreneurs will do better financially in the "real world" of work than in startups. But the media doesn't play this up, and as a result, society has a bias that is a combination of the survivorship bias and recency bias that makes them think startups are a good investment. Many wealthy people that I have dealt with don't really understand the odds and risks of startups, so all the less likely that your average Joe can do it. Secondly, capital structure matters a lot as your company grows. If you are successful, a bad capital structure can really fuck you over down the road when you need bigger rounds. And some issues require a shareholder vote. Average Joe doesn't know how to deal with these issues, and that scares professional investors. An idea like this will get a lot of companies seed capital, and they won't be able to raise later stage. Third point - startups are really fucking hard, and will strain all of your relationships in your life, including those with your investors. Hell, Backupify is doing pretty well and it's still hard. Having to manage a bunch of small investors can be a nightmare, and going through difficult times with people you barely know, who don't do this professionally, will just make it worse. Here is my prediction about how this legislation plays out. 1. It will eventually pass, because it is sexy and cool and part of the American dream. 2. Media will point to examples of companies getting funded that wouldn't normally get VC/Angel funding, to show how great it is. These examples will be thinks like companies outside of major startup hubs, companies that don't put profit/shareholder value / growth first, companies that are highly unusual, weird, or even too risky for VC, and companies that have non-sexy ideas that can't get VC because they aren't mobile/social/sharing/whatever. 3. Many will fail, but there will be at least one massive success, and that success will become the poster child for why this works. 4. But really, it won't work. People will lose money. There will be lawsuits and complaints. There will be a bubble after point #3 happens, and some 60ish dude will invest too much of his retirement in a dozen startups only to see every one of them fail and his whole net worth wiped out. 5. There will be outcry against this, and we will pass laws to regulate it, taking us back to where we began, only in a much worse situation. Now, all that said, I will say there is probably room for a new investment scenario under two conditions. 1. The amount is so low it doesn't matter. For example, the bar is $100 and you can't invest in more than 5 at any one time. This makes your returns so small, even with homeruns, to be almost irrelevant, but maybe it's fun and cool and people will like it. 2. There is probably room for an "almost accredited investor" clause. I'm a perfect example for this. I'm not quite accredited, but probably will be by this time next year. I understand startups quite well. So maybe a clause saying that if you have worked 2 years in a venture backed startup, you can invest up to $10K, that might be ok. Anyway, those are my thoughts. It will be interesting to see how this will play out.
ck2 15y ago
You really want this current congress to set it's eyes on something? You honestly believe that will make something BETTER? They blocked something as basic as consumer protection for over a year and would have kept doing it for years more if they could have. It's an election year, forget it. Try again in 2013 maybe.
lcusack 15y ago
This should go without saying - but please don't use the petition to populate Wefunder's mailing list.
jchung 15y ago
We should all support this. We could unlock millions of dollars of crowd-sourced funding for startups, supporting more innovation, creating more jobs, and driving a healthy democratization of the spirit of investment. As an added benefit, I think it is worth considering that allowing small-scale investments will help to educate a large number of Americans on the basics of investing and financial management. I think we'll all agree that we wouldn't want folks investing their life savings, but $1,000 isn't going to break the bank.
vaksel 15y ago
I think something like what Goldman Sachs did with Facebook would work. You create a Startup Mutual Fund...where regular folks can sign up and deposit money into. The fund then uses that money to invest into companies. i.e. they'd issue a notice that a week from now they'll be investing into Startup Z and each share would cost $X(actual cost per share + 10% fund operating premium) If the round is limited, the shares would be assigned on first come first serve basis. Essentially a venture capital company but without requiring huge investments to participate. Then also create a marketplace where shares can be sold on the secondary market. Fund's revenue would come from a) fund's fee when purchasing b) fund's fee for secondary sales c) yearly membership fee. And this way you essentially just have the one investor and those who want to invest small investments won't need to get accredited to get into the game.
dxbydt 15y ago
Democratizing startup investing is a much bigger problem than democratizing very simple speculation, so simple & straightforward a child can figure it out. Look at google. Its trading around $580. Just 2 weeks back it was well over $610. So you say, okay in a month it'll be back above $610. The 1 month otm call on goog is $10 for a 600 strike. You check your pockets. You have $10. You figure, you plonk down $10. Then check back on March 17th. If goog crosses $610 you make the difference. Here I'll even do the math for you: (580,-10),(590,-10)...(599,-10),(600,0),(601,-9),(602,-8),...(610,0),(611,1),(612,2)....(650,40) etc. so that's the list of tuples, one has the google stock price & the other the money you make. So you break even at 610 & after that the sky's the limit. So can you bet $10 ? No. Why not ? Beats me. You can put down $1000 for a 100 bets. But you say, I don't want 100 bets. I just want 1 bet. 1 bet is $10. I have $10. Let me bet. Nope. Sorry. You think this will change anytime soon ? If you can legalize single option trading, you can structure any startup investing on top of that. Many people will lose many $10, but some people will make $10 too, and life will go on.
frobbin 15y ago
What if you got a 'startup investor license' with the same effort and cost as getting a real estate license? That way only the motivated who prove some basic knowledge can participate. A side industry of investor courses and test study materials would spring up. Even as someone trying to raise funding I would like to educate myself with such a course.
padobson 15y ago
I love this because it is effectively disrupting wall street from a legal perspective. You don't need giant public markets anymore when you have the internet, and entrepreneurs that know how to build applications that generate money from lots of people should also be able to raise money from similar people. Although, if we as a an industry are going to focus on something legislatively, I think we should start thinking about going on the offensive in the copyright war. The MPAA and the RIAA are going to regroup and then try to push a similar piece of legislation through. If we go on the offensive now and attempt to pass legislation that will protect user-uploaded content sites and apps like MegaUpload, Dropbox, Box.net, and others, then the web will be a much better place for eveyone building apps like these in the future.
vsl2 15y ago
The key here is the "accredited" investor restriction for funds that invest in anything other than the most vanilla of securities (i.e. stocks and bonds). This is also why most of us cannot invest in hedge funds or private equity funds. In protecting people from themselves, the government is limiting participation in a potentially very lucrative area of investment to only those with money (the rich get richer). I don't believe that everyone is equipped with the financial knowledge to deal with the risk associated with participating in alternative investment funds, but I'd much rather that everyone have the opportunities to take the risks that they choose. Casinos are legal in many areas, strip clubs are legal in even more areas, and shopping malls are everywhere - all of these cause people to take arguably unnecessary risks with their financial health (and some would say even greater than investing). Particularly with the plethora of financial information available on the Internet, the everyday Joe has more resources than ever. I'd love to see Congress eliminate the "accredited investor" requirement for investing in alternative funds so that everyone can have the same access to investing in startups, private companies, etc. I'm sure more than enough funds will spring up to meet investor demand, this being a capitalistic sociey and all. Finally, startups can choose to avoid the problem of many small direct investments by ordinary investors (i.e. too many people to report to). by accepting money only from the investment funds or from few large investors, if such sources are available and willing. If such sources are not available to a startup, then you have to go with the options you have, (e.g. many small direct investors, self-funding, fail), as has always been the case.
dancole 15y ago
This is a great way for Wefunder to attract future funders to their site. Besides the traditional name and email address for a signup list, they're also finding out how much people are willing to fund each year. To add to that, it's also an open list where you can see who and how many people are going in on it. One way to solve the chiken-and-egg problem.
billshander 15y ago
Definitely - kickstarter and peer-to-peer lending have proven the greater public can make decisions like this - especially if there are some protections and risk-abatement tactics such as background checks for founders and maximum investment amounts per company.
OpenStartup 15y ago
HR. 2930 is the Bill that should be supported. 10k a year (less than 1 cup of coffee a day) Why is wefunder supporting the LOUSY Senate CF bill and not McHenry's?! Does it have to do with the fact you are in Cambridge and you are supporting MA Senator? http://j.mp/wefundertalk http://j.mp/wefundertalk

174 points by ysilver 15y ago

We are getting the news too late. Did you know that there are 7 bills that might change how startups operate? H.R.3427 - Startup Technical Assistance for Reemployment Training and Unemployment Prevention Act H.R.3571 - Entrepreneur Startup Growth Act of 2011 S.1965 - Startup Act of 2011 S.1826 - Startup Technical Assistance for Reemployment Training and Unemployment Prevention Act H.R.2941 - Startup Expansion and Investment Act H.R.1114 - StartUp Visa Act of 2011 S.565 - StartUp Visa Act of 2011 We need a web service that is more robust than http://www.opencongress.org/ http://www.opencongress.org/ . We need a web service that has proper data mining, visualization, and notification system. The big guys have their lawyers - we need a proper web service. Who can help to build that?

vyrotek 15y ago
Plenty of people would like to. But, more importantly... who will help pay for that?
- marcidale 15y ago
  At POPVOX, our first investor was Tim O'Reilly. Legislative advocacy is a huge market -- and one in great need of disruption.
untog 15y ago
> Who can help to build that? I would love to. But it's difficult to justify when there is no payoff for it.
thinkcomp 15y ago
That's what we're working on with http://www.plainsite.org http://www.plainsite.org.
davidcuddeback 15y ago
Well, there's already https://www.popvox.com/ https://www.popvox.com/. They show bills currently in Congress, organized by category or what's most popular on the site. They also send alerts that recommend bills based on your interests, although it seems to be in the alpha stage right now. I'm not sure if Popvox has all the features you have in mind. Rather than starting a new web service from scratch, you might find it easier to request certain features from an existing one.
- marcidale 15y ago
  Thanks, David - yes, we would love the input at POPVOX (info@popvox.com) New alerts system is imminent, so please check it out. BTW - we had our own go at crowdfunding for POPVOX. I explained on Quora how we had to turn down non-qualified investors: http://b.qr.ae/nXFsiM http://b.qr.ae/nXFsiM We ended up with a crowdfunding variation to raise the money for our iPad app for Congress through Appbackr (MarkUp - the first app designed for Congress http://bit.ly/uLSrOT http://bit.ly/uLSrOT). See article in Entrepreneur magazine on the fundraising: http://bit.ly/rKQSzS http://bit.ly/rKQSzS
  - wtvanhest 15y ago
    Marci, I saw you guys present at Dingman (capital access network). Glad to hear you got funded in an innovative way. Did you guys move or stay in DC?
marcidale 15y ago
Here are links to take action on the bills you list. Your message will be sent to the appropriate legislators and aggregated on the public bill report so that you can see how sentiment is shaping up across the country. (The "sentiment across the country" part is important. Even if everyone in Silicon Valley thinks this something is great, the case has to be made to legislators who represent very different districts.) https://www.popvox.com/bills/us/112/hr3427 https://www.popvox.com/bills/us/112/hr3427 https://www.popvox.com/bills/us/112/hr3571 https://www.popvox.com/bills/us/112/hr3571 https://www.popvox.com/bills/us/112/s1965 https://www.popvox.com/bills/us/112/s1965 https://www.popvox.com/bills/us/112/s1826 https://www.popvox.com/bills/us/112/s1826 https://www.popvox.com/bills/us/112/hr2941 https://www.popvox.com/bills/us/112/hr2941 https://www.popvox.com/bills/us/112/hr1114 https://www.popvox.com/bills/us/112/hr1114 https://www.popvox.com/bills/us/112/s565 https://www.popvox.com/bills/us/112/s565

dclaysmith 15y ago

I think the need to stop SOPA and the need to legalize this funding model are apples and oranges. I would love to see some changes to funding laws but many of these laws exist to prevent the defrauding of smaller, less "sophisticated" investors. Simply making the investment legal wouldn't do much without modifying the disclosure requirements the start-up faces. These disclosures will remain very important to prevent scams. So, great idea but not simple. And not a "cause" like fighting SOPA was...

ysilver 15y ago
To me it's about getting congress to legislate in favor of startups and young tech companies rather than big business interests. With the SOPA protests, we showed what is possible with a grassroots effort. I think a similar effort could work with startup funding.
zapnap 15y ago
Agree that it's largely apples and oranges. I think the poster was more calling attention to the fact that SOPA showed a lot of people that their voices do matter, and can affect change in government. So in that way, at least, they're related. Fraud is certainly a concern, and the reason that the laws were introduced in the 1930s in the first place. But the S.1791 bill has provisions for dealing with this through (relatively) strict individual investing limits and reputation via crowdfunding intermediaries. A balance needs to be struck between protecting "less sophisticated" investors and giving those of us who want the opportunity the chance to get involved, help support entrepreneurs, and create jobs (on main street and in silicon valley). There's still a lot to be hashed out of course, but this would be a step in the right direction. Disclaimer: I'm one of the people who worked to put the petition together.
- B0Z 15y ago
  One of the things The Securities Act of '33 was established to do was to protect the general public from themselves and from predatory brokers who were loaning a generally ignorant public caught up in speculative bubbles. Brokers were lending people up to 2/3rds of the face value of stock they were purchasing. When the market started to get cold feet and rumors ran rampant, people were selling every stock they owned just to cover the amount they were leveraged. I haven't read the bill before Congress, but I would think if there are provisions that prohibit borrowing as a mechanism for financing stock purchases, this would benefit the start up ecosystem. The system in it's current state only benefits the very, very wealthy, and forces young start ups into term negotiations with people who do it for a living. Methinks there is / will be heavy lobbying on behalf of the major investment banks who would naturally oppose any new members in their club. http://en.wikipedia.org/wiki/Wall_Street_Crash_1929 http://en.wikipedia.org/wiki/Wall_Street_Crash_1929

JumpCrisscross 15y ago

There used to be a time when anyone could sell shares in any company. That didn't work out and so we got the Securities and Exchange Act of 1933. Crowd-funding isn't fatally flawed, but it needs a lot more time to integrate the last 400 years of capital market development history.

npt4279 15y ago
Limiting an individual's investment to a maximum of $1000 goes a long way to making sure Grandma doesn't lose her life's savings. As does the requirement for companies to use an Internet intermediary that performs background checks, verifies identity, holds funds in escrow, etc. The world is different from the 1930's.
- jerf 15y ago
  What's the difference between being able to invest $1000 and $0? That's not helpful to anybody. If I want to invest $30,000, I have to go find 30 startups? That doesn't make any sense.
  - npt4279 15y ago
    If you are an accredited investor (i.e., make over $200,000), current law allows you to invest any amount you like. If you are not an accredited investor, you likely can't afford to invest $30,000... so the thinking goes in Congress.
drhowarddrfine 15y ago
You still can. My company, for instance, has but two investors holding all company stock. My wife and me. If we wished, we could sell a portion of our company to others even though it is not publicly traded. Privately held companies like ours can still sell portions of their company to other investors, or even take investment capital without selling private stock.
- _delirium 15y ago

mapleoin 15y ago

All Americans—not just the wealthy and well-connected ... How about we turn that into: All people—not just the wealthy and well-connected Americans ...

MikeNorman 15y ago

This is super important. Everyday Americans should have the right to invest in businesses. Think of the jobs we could create? Government shouldn't be telling me I dont know what Im doing if I want to help a friend start a company that I think can succeed. I get that unsophisticated investors need some protection, but $1000 seems like a reasonable risk to allow folks to take on something they believe in.

appswell 15y ago

I fully support this! To someone's point, we have an outdated system of balances that are based on 400 year old common law, and put in place as a consequence of the great depressions. S.1791 is a good bill, that puts the proper protections, capping investments at $1k. Not riskless, but appropriate amount of risk for investing. A fairer shake than the individual investor gets in the days of algorithmic, fraud ridden Wall street, or for that matter, the keno tickets the govt is happy to let them purchase.

lukeschlather 15y ago
It should be stated as a percentage of gross income. Magic numbers are bad, in software and law.

deleted 15y ago

[deleted]

robmay 15y ago

I have a lot of experience here because a) in 2005 I started something called "The Business Experiment" which was an attempt to have a purely crowd sourced business. (http://www.fastcompany.com/magazine/101/next-essay.html http://www.fastcompany.com/magazine/101/next-essay.html) At the time, I spent a lot of my own money on lawyers trying to figure out how to give equity to people who aren't accredited investors. b)I have since raised $10.5M in venture capital for Backupify.com, so I have also learned that side of the world. From my view, allowing anybody to invest a few hundred or a few thousand dollars in a startup is a bad idea for a few reasons. First of all, the startup world is glamorized by the media. Most startups fail. Most capital is erased. No one writes about those companies, unless the failure is spectacular. Studies have shown that on average, entrepreneurs will do better financially in the "real world" of work than in startups. But the media doesn't play this up, and as a result, society has a bias that is a combination of the survivorship bias and recency bias that makes them think startups are a good investment. Many wealthy people that I have dealt with don't really understand the odds and risks of startups, so all the less likely that your average Joe can do it. Secondly, capital structure matters a lot as your company grows. If you are successful, a bad capital structure can really fuck you over down the road when you need bigger rounds. And some issues require a shareholder vote. Average Joe doesn't know how to deal with these issues, and that scares professional investors. An idea like this will get a lot of companies seed capital, and they won't be able to raise later stage. Third point - startups are really fucking hard, and will strain all of your relationships in your life, including those with your investors. Hell, Backupify is doing pretty well and it's still hard. Having to manage a bunch of small investors can be a nightmare, and going through difficult times with people you barely know, who don't do this professionally, will just make it worse. Here is my prediction about how this legislation plays out. 1. It will eventually pass, because it is sexy and cool and part of the American dream. 2. Media will point to examples of companies getting funded that wouldn't normally get VC/Angel funding, to show how great it is. These examples will be thinks like companies outside of major startup hubs, companies that don't put profit/shareholder value / growth first, companies that are highly unusual, weird, or even too risky for VC, and companies that have non-sexy ideas that can't get VC because they aren't mobile/social/sharing/whatever. 3. Many will fail, but there will be at least one massive success, and that success will become the poster child for why this works. 4. But really, it won't work. People will lose money. There will be lawsuits and complaints. There will be a bubble after point #3 happens, and some 60ish dude will invest too much of his retirement in a dozen startups only to see every one of them fail and his whole net worth wiped out. 5. There will be outcry against this, and we will pass laws to regulate it, taking us back to where we began, only in a much worse situation. Now, all that said, I will say there is probably room for a new investment scenario under two conditions. 1. The amount is so low it doesn't matter. For example, the bar is $100 and you can't invest in more than 5 at any one time. This makes your returns so small, even with homeruns, to be almost irrelevant, but maybe it's fun and cool and people will like it. 2. There is probably room for an "almost accredited investor" clause. I'm a perfect example for this. I'm not quite accredited, but probably will be by this time next year. I understand startups quite well. So maybe a clause saying that if you have worked 2 years in a venture backed startup, you can invest up to $10K, that might be ok. Anyway, those are my thoughts. It will be interesting to see how this will play out.

ck2 15y ago

You really want this current congress to set it's eyes on something? You honestly believe that will make something BETTER? They blocked something as basic as consumer protection for over a year and would have kept doing it for years more if they could have. It's an election year, forget it. Try again in 2013 maybe.

lcusack 15y ago

This should go without saying - but please don't use the petition to populate Wefunder's mailing list.

jchung 15y ago

We should all support this. We could unlock millions of dollars of crowd-sourced funding for startups, supporting more innovation, creating more jobs, and driving a healthy democratization of the spirit of investment. As an added benefit, I think it is worth considering that allowing small-scale investments will help to educate a large number of Americans on the basics of investing and financial management. I think we'll all agree that we wouldn't want folks investing their life savings, but $1,000 isn't going to break the bank.

vaksel 15y ago

I think something like what Goldman Sachs did with Facebook would work. You create a Startup Mutual Fund...where regular folks can sign up and deposit money into. The fund then uses that money to invest into companies. i.e. they'd issue a notice that a week from now they'll be investing into Startup Z and each share would cost $X(actual cost per share + 10% fund operating premium) If the round is limited, the shares would be assigned on first come first serve basis. Essentially a venture capital company but without requiring huge investments to participate. Then also create a marketplace where shares can be sold on the secondary market. Fund's revenue would come from a) fund's fee when purchasing b) fund's fee for secondary sales c) yearly membership fee. And this way you essentially just have the one investor and those who want to invest small investments won't need to get accredited to get into the game.

dxbydt 15y ago

Democratizing startup investing is a much bigger problem than democratizing very simple speculation, so simple & straightforward a child can figure it out. Look at google. Its trading around $580. Just 2 weeks back it was well over $610. So you say, okay in a month it'll be back above $610. The 1 month otm call on goog is $10 for a 600 strike. You check your pockets. You have $10. You figure, you plonk down $10. Then check back on March 17th. If goog crosses $610 you make the difference. Here I'll even do the math for you: (580,-10),(590,-10)...(599,-10),(600,0),(601,-9),(602,-8),...(610,0),(611,1),(612,2)....(650,40) etc. so that's the list of tuples, one has the google stock price & the other the money you make. So you break even at 610 & after that the sky's the limit. So can you bet $10 ? No. Why not ? Beats me. You can put down $1000 for a 100 bets. But you say, I don't want 100 bets. I just want 1 bet. 1 bet is $10. I have $10. Let me bet. Nope. Sorry. You think this will change anytime soon ? If you can legalize single option trading, you can structure any startup investing on top of that. Many people will lose many $10, but some people will make $10 too, and life will go on.

frobbin 15y ago

What if you got a 'startup investor license' with the same effort and cost as getting a real estate license? That way only the motivated who prove some basic knowledge can participate. A side industry of investor courses and test study materials would spring up. Even as someone trying to raise funding I would like to educate myself with such a course.

padobson 15y ago

I love this because it is effectively disrupting wall street from a legal perspective. You don't need giant public markets anymore when you have the internet, and entrepreneurs that know how to build applications that generate money from lots of people should also be able to raise money from similar people. Although, if we as a an industry are going to focus on something legislatively, I think we should start thinking about going on the offensive in the copyright war. The MPAA and the RIAA are going to regroup and then try to push a similar piece of legislation through. If we go on the offensive now and attempt to pass legislation that will protect user-uploaded content sites and apps like MegaUpload, Dropbox, Box.net, and others, then the web will be a much better place for eveyone building apps like these in the future.

vsl2 15y ago

The key here is the "accredited" investor restriction for funds that invest in anything other than the most vanilla of securities (i.e. stocks and bonds). This is also why most of us cannot invest in hedge funds or private equity funds. In protecting people from themselves, the government is limiting participation in a potentially very lucrative area of investment to only those with money (the rich get richer). I don't believe that everyone is equipped with the financial knowledge to deal with the risk associated with participating in alternative investment funds, but I'd much rather that everyone have the opportunities to take the risks that they choose. Casinos are legal in many areas, strip clubs are legal in even more areas, and shopping malls are everywhere - all of these cause people to take arguably unnecessary risks with their financial health (and some would say even greater than investing). Particularly with the plethora of financial information available on the Internet, the everyday Joe has more resources than ever. I'd love to see Congress eliminate the "accredited investor" requirement for investing in alternative funds so that everyone can have the same access to investing in startups, private companies, etc. I'm sure more than enough funds will spring up to meet investor demand, this being a capitalistic sociey and all. Finally, startups can choose to avoid the problem of many small direct investments by ordinary investors (i.e. too many people to report to). by accepting money only from the investment funds or from few large investors, if such sources are available and willing. If such sources are not available to a startup, then you have to go with the options you have, (e.g. many small direct investors, self-funding, fail), as has always been the case.

dancole 15y ago

This is a great way for Wefunder to attract future funders to their site. Besides the traditional name and email address for a signup list, they're also finding out how much people are willing to fund each year. To add to that, it's also an open list where you can see who and how many people are going in on it. One way to solve the chiken-and-egg problem.

billshander 15y ago

Definitely - kickstarter and peer-to-peer lending have proven the greater public can make decisions like this - especially if there are some protections and risk-abatement tactics such as background checks for founders and maximum investment amounts per company.

OpenStartup 15y ago

HR. 2930 is the Bill that should be supported. 10k a year (less than 1 cup of coffee a day) Why is wefunder supporting the LOUSY Senate CF bill and not McHenry's?! Does it have to do with the fact you are in Cambridge and you are supporting MA Senator? http://j.mp/wefundertalk http://j.mp/wefundertalk