The problem with crowdfunding (he says) is not that it doesn't work for companies, who'd love if it worked, but that users can't make independent judgments. They're overwhelmed with too many choices, and revert to the judgment of traditional VCs. Sam didn't say it should be this way, as though he were trying to make the current model sound better than it is, but that this is in reality what users currently do. That sounds like an actual insight problem.

I want crowdfunding to work, but your claim that Sam can't see straight about it isn't supported by the video.

"YC is threatened by crowdfunding" Maybe, or maybe he actually thinks its not a great idea.

""Kickstart with equity" is clearly the model of the future. " Clearly? I would disagree.

Is crowdfunding the way to go for all new companies? No, but it's clearly a good model for some.

Crowdfunding seems to work well when you've already got an experienced team, have an advanced prototype of your product/service, and just need funding to scale up that prototype.

If you've got an inexperienced team, an MVP-style prototype, and could use extra guidance and support, then going with crowdfunding would probably end up being problematic.

What are examples of successful crowdfunded companies?

How does the crowd determine the difference between your type 1 and your type 2 companies?

>"What are examples of successful crowdfunded companies?"

I can talk about successful crowdfunded products, including products made by companies.

To give one example to start with, Formlabs has used crowdfunding to help generate money to manufacture their 3D printers:

https://formlabs.com/

>"How does the crowd determine the difference between your type 1 and your type 2 companies?"

I'd suggest it comes down to experience. With experience in crowdfunding you can spot the campaigns that are likely to succeed, and which ones are likely to fail. The main problem I see is when campaigns are too ambitious based on the background of the people involved. For example, high volume manufacturing in China without prior experience of working with Chinese manufacturing companies.

In formlab's case they had a 1.8MUSD seed round prior to the crowdfunding. They raised ~3MUSD from crowdfunding.

This probably helped give them some runway to put together a series A. However they still raised an additional 50MUSD.

So, I don't think they're a great example of a company bootstrapping from crowdfunding. It's more of a traditional play, with some validation (and some runway) from crowdfunding.

How about Pebble? They did start being funded by Y Combinator and angels but got most of their funding from Kickstarter https://en.wikipedia.org/wiki/Pebble_(watch)#History

But now they got bought out by FitBit after going too much in debt (?).

Occulus. That one ended well for the founders.

Bought out by Facebook -- which is not the norm of most crowdfunded companies. In my personal belief, the crowdfunding model as it exists now is not a form of investment that will scale well. When a kickstarter company fails, it's not liable to all the people it took money from unless by fraudulent circumstances. What I believe will be more viable is a crowdsourced capital fund where an executive acts as a trustee representative and makes investing decisions for us.

Just curious as to why you would disagree. The way I see it -issue more shares with lesser face value when the company is valued. So if you are valued at $4 million issue 400,000 shares of $10 each and crowd fund. If you can't set the valuation, use a bidding process and let the crowd value. No ?

It's a model that could work, but it's not "clearly the model". One reason is that VCs add more value than just money, at least ideally they do. Also, there might be a lack of oversight and accountability. Btw, what you are suggesting sounds alot like an IPO.

Here's what I took from his response: people aren't ready to invest without some strong of signal of worth. Makes total sense.

And his response of current signaling coming from well-known investors does jive with my own experience, esp. for seed stage.

But, a lot of this starts to disappear once a company is looking for Series A+. Because now you have actual financials/product+market to look at. I would also argue the value of "smart" money is more towards the seed stage anyway.

So, shift focus away from seed stage, and into crowdfunding Series A+.

In other words, enable a) bootstrappers who have found product/market fit to take things to the next level b) the common man to invest in a way a bank might.