Retail investors aren't, even traditionally, excluded from investing in startups. It's just that startups are required to make certain SEC disclosures prior to taking investment from the general public, so that the public can have information about what it's actually investing in. There are exemptions for startups that only seek money from institutional and wealthy investors, on the theory that such investors can hire their own attorneys and accountants to do an SEC-like job. So, the theory goes, they don't need the SEC vetting the transparency of the offering, because they will pay for a similar vetting process themselves.

This changes the rules so retail investors can invest blindly in stocks, i.e. without being first informed about the nature of the investment opportunity through the SEC disclosures. It seems pretty reasonable to me that if someone wants to raise money, they should be required to disclose, to the potential investor, enough information about the financial position of the company and the nature of the investment for the investor to make an informed decision. If you want it leveled between institutional and retail investors, I'd prefer leveling in the direction of more transparency for both classes of investors, rather than less. If the issue is just that the SEC process is too bureaucratic, then propose a reform to streamline it, rather than bypassing disclosures entirely.

One thing that makes it particularly needed is that a possible alternative, dealing with misleading fundraising through after-the-fact lawsuits, is mostly ineffective, since successful suits end up as judgments against bankrupt companies, who won't pay them. If a company gets a bunch of investors while not being entirely truthful with them about its financial position/revenues/etc., suing them after it collapses doesn't help you at that point. That's the situation we had before the SEC was created, and was the motivation for the 1933 Securities Act requiring companies to register an offering and make certain disclosures, prior to selling securities to the public.

People are terrible at assessing risk, especially when it's not their day job. Even when it is their job, assessing risk in an adversarial environment is an extremely difficult thing.

Your dad (not really your dad, but for sake of example) is a retail investor. He has no idea what he's doing, but he heard "through the grapevine" that he should invest in this one particular startup. He sends them his IRA balance.

A year later the startup exits, but he hasn't been paying attention and turns out he's been diluted to 10% of what he thought he had. Now he has nothing.

...okay? That is different how than the craps tables in Vegas, state lottery commission, or... picking regular stocks?

The craps table is marketed as a gambling game and has a published payout figure. Startups crowdfunding for equity usually have a slick pitch video about how this excellent opportunity to tap into a £1bn market is a great investment. An opportunity which for a retail investor with adverse selection problems and no influence over company decisions is likely a vastly worse "investment" compared with a game of craps (the expected return on craps is probably less negative and the probability of at least breaking even is certainly higher at the craps table)

And people comparing crowdfunding with "regular stocks" - even on here where it's well known most startups fail - are prime example of which the public in general doesn't know enough about investment to consider it...

Every single one of those has substantially more regulation about what they can do with how much of his money, and what they must and must not say when they do it.

I'm not at all sure all of that makes sense, but it's a huge difference.

Exactly, the post reads as investor-class propaganda.

At the moment, the only logical explanation I can think of for posting such a piece is that you wish to reduce competition for equity by limiting the number of participants in the market. If you can limit the supply of cash, those with the cash can make many demands on those without. tptacek advocates for a limited supply of cash, carefully metered out by the cash-class, so as to preserve their position at the spigot (don't forget, those at the spigot get to take 'their' dividends/interest-payments/management-fees/transaction-fees/what-have-yous out of the stream; before anyone else even gets to see them).

I don't invest in startups; I work for them, and plowing the proceeds of that work back into startups (or any other tech company) seems like bad diversification to me. So no, I don't have an ulterior motive.

>I don't invest in startups; I work for them

OK

>plowing the proceeds of that work back into startups

So, you receive only cash for your work? No equity?

> seems like bad diversification to me

Ok, so you are invested in startups or tech companies then (if not, what are you diversifying from)? [Note: we have now contradicted claim 1]

>So no, I don't have an ulterior motive.

Maybe. I'm still not convinced that you aren't an investor though.

>Retail investors should get exposure to [x] through carefully managed funds that own lots of [xs], not by trying to pick individual winners themselves.

Said every fund manager ever [who, note, try to pick individual (for some definition) winners].