Does that mean the law should protect crowdfunders from themselves? That I'm not so sure about.

I can think of no more "Rich Get Richer" law than the accredited investor law [1]. It literally says: if you aren't already rich, you don't have access to this entire set of opportunities that could make you rich.

This was less of an issue when we had a healthier IPO market. With more companies staying private now, and more of the actual IPOs coming later when there's less growth left, how can we continue to deny retail investors (read: the not-rich) access to the best opportunities?

Many of us on HN can start tech companies to gain access. Maybe the person down the street can't do that, but once in a while they might have valuable insights into an industry or the people in it, insights that others (yes even VCs perhaps) lack. Saying "sorry, you can't play this game" seems immoral to me. How can we give regular folks -- non-rich, non-tech people -- access to the same opportunities? If not the current crowdfunding laws, then what?

[1] https://en.wikipedia.org/wiki/Accredited_investor#United_Sta...

Or alternatively "If you aren't already rich, you don't get marketed at by people offering opportunities so bad they've been passed on by high-risk investors who underperform the returns the non-rich get on less risky asset classes despite working full time on managing their investments whilst having significant power to induce exits in their favour." Or rather, the general public actually does have the opportunity to invest in startups if introduced by genuine friends and family but random mountebanks don't have the right to run slick campaigns to dupe non-rich people into believing that Startup X is a good place to put life savings despite offering lower expected returns than a roulette wheel and zero liquidity. I mean, it'd be nice if the law was as restrictive on more blatant attempts to scam like penny stock pump and dumps and MLM, but it's difficult to argue the general public would be better off for having comparatively sincere people beguile them with Powerpoints involving hockey stick curves.

It's not a "Rich Get Richer" provision when it's obvious that on average the poor will get poorer from random startups being able to present themselves as investment opportunities to them.

Maybe treat being an accredited investor like a driver license and not tie it to your net worth?

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.

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 based on principle--which is by definition libertarian ideology (but note: not necessarily US Libertarian Party followers)--and the pattern of anti-libertarian rhetoric seen around here sometimes in threads where it comes up.

It seems perhaps there is a disconnect: people appear to generally care a lot about their liberties when suddenly it comes the ones they care about being taken away, and they will be argued for them based on principle. However When others generally want liberties they care about, then, that's apparently a different story.

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

Thus more people could expose themselves to VC but in a diversified manner. Also, more capital would be available for startups.

And, again: most VCs fail! A lot of money is invested in VCs not in the expectation of those investments being lucrative, but instead in the hopes that VC returns are uncorrelated with the public markets. But no retail investor does that.

Are there meta-VC's that treat VC funds like startups and invest in multiple VC funds with the understanding that most will fail? That is, can you confirm my suspicion that it really is turtles all the way down (or up)?

Larger VCs will become LP in smaller upstart ones to have better visibility into earlier stage companies [1].

[1] Bessemer, Emergence, Social, and Sapphire are LPs in Saastr Fund http://www.saastrfund.com/strategic-partners-1/

They Usually invest a very small amount of their money in this sector, usually a fee percent at most.

Can you expand on this?

Administrators would be terribly prone to be influenced by more or less open kickbacks, because what they could potentially skim would far outweigh their personal investment or any piece tag you could put on whatever little reputation they might have. A conventional big name VC won't ever be impressed be the CEO of the startup he funded meeting him at a fancy restaurant, not so sure about the representative of some hypothetical crowd-VC subreddit. And keep in mind that most methods used to keep regular investment funds accountable cannot be applied to VC investments.

The "everything up for a vote" path has a trust problem as well because that kind of popularity contest is totally unpredictable. A perfectly rational crowd today could tomorrow decide to go all in on a fake startup promising the energy revolution based karmavoltaic modules. All it would take is some vocal minority that is good at agitating everybody else into submission through the online arsenal of strawman tricks, shaming, tactical trolling and the like.

[1] http://www.alliedminds.com/

Because then you need to find someone with the skill to be a VC fund principal who is satisfied to work as an employee magnifying other people's capital rather than magnifying his own.

Or, have a fund run by someone without the requisite skill.

So a "fund" wouldn't legally be allowed to raise money using equity crowdfunding. But a "conglomerate" that invests in startups structured as a C-Corporation could raise money through equity crowdfunding. Hope my reply helps!

The advantage of crowdfunding would be that you can offer some upside to your supporters (M&A[1] or maybe dividends?). Assuming you are already established and are trying to take it to the next level, you can generate support for your crowdfunding campaign by advertising to your existing clientele. They already have a connection to the business and that can also result in creating a small army of brand ambassadors.

There are probably a few other niche businesses out there that could follow this playbook. Use existing local support/community to help fund expansion. One possible hang up is that there would need to be a path to an exit or some type of return. With the microbrewery market, as mentioned below, M&A is happening, but for other markets that don't have that, I would be interested to know if dividends are a possibility.

[1] There is a decent amount of M&A activity going on as the major beer companies try to maintain market share as the micros take over.

Kickstarter works because nobody funds a Kickstarter with the expectation that they'll be able to return to those funds later to fund college, a house purchase, or a retirement. That's not the case with equity crowdfunding.

My thought is that crowdfunding could be a good financing option for someone like this[2]. They have already established themselves, but are trying to get to the next stage. If I was local beer fan, I might support them on kickstarter, but if they offered a crowdfunding option, perhaps with some perks like an annual tasting, than I would probably be a lot more enthused. Also keep in mind, that a lot of specialty microbreweries already have 'fan clubs' that cost a few hundred dollars a year. In return, you get access to limited releases. It seems like a creating a 'lifetime fan club' for a few thousand dollars would be doable, with the added bonus that the supporter gets some equity.

[1]http://www.sfgate.com/food/article/San-Francisco-s-popular-M... [2]https://www.kickstarter.com/projects/findlaybrewing/findlay-...

Pretty sure no one expected -- given their very loud anti-'sell-out' rhetoric -- that they would sell a 22% stake for £100M to a private equity firm (TSG Consumer Partners) and actually deliver a serious return to said 'punks.'

Edit - 'Serious Return' per BrewDog's own reporting at anywhere between 2,765% and 177% depending on the 'fund' you invested in (https://www.brewdog.com/lowdown/press-hub/tsg-deal)

Also, looks like they are offering another round of equity in the US[1]. I was under the impression that crowdfunding was limited to $1M, but looks like they are raising $50M under 'Regulation A+'. Not sure what that is.

[1]https://www.bankroll.ventures/deal/brewdog/

You're assuming all VC funds are like SV/NYC type funds. Most VC funds in FL (and I'm assuming most of the US), are small funds that invest fewer than 10 times a year, and take large equity positions in companies that are steadily profitable (but will NEVER be crazy big). They prefer companies that are making profits over companies that have growth potential, low risk low reward funds.

Sure, but do they outweigh the advantages?

Consider that Mormonism is the fastest-growing (by percentage) world religion. And that Bitcoin is the best-performing investment of the last decade. And that there are so many billion-dollar MLM companies.

I realize the prior rules were there to protect investors from losing their shirts, but simply excluding people without changing the problematic behaviors in the marketplace means that it's harder than ever for small investors to accumulate any kind of meaningful investment capital.

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.

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.

I have done quite well out of my PE trusts got a divi from Electra that is almost the same as my initial investment and have rolled that over into pershing square as an arbitrage play on the FSE 250.

I am unfamiliar with this term, can you say what that is?

I believe in other contexts it simply refers to being in on deals; I think I've heard it elsewhere, too.

[Edited to add second paragraph, generalizing a little bit.]