This is the future of startup funding. Money isn't the big problem with VCs, it's the lack of vision and old boys network mentality.
Real people with small amounts of money can easily fund all of the great ideas in the world. Even big ones I think, like cancer research. If properly controlled (diversified, limited) it really could be the best way for people to invest maybe 10% of their savings.
We just need a lot more work done in this area until it's safe and simple for people and companies. This will be one of the many things that cause technology to accelerate even more in the future.
I don't know why this isn't the top comment. I feel that Hacker News readers, despite their demographic, are often surprisingly averse to new ideas that challenge current tropes.
There are a number who are afraid of equity crowdfunding for the reason that some consumers will get fleeced. While that is an admirable sentiment, if it was frankly more genuine there would be more effort put into curbing the thousands of "financial vehicles", payday loan companies and MLM's that scourge the poor. This isn't that. Yes, we need limits and constraints, but there's too much at stake to throw the baby out with the bath water.
I think that it needs to be paired with an elaborate vetting process that still is missing in crowd funding projects. Why can't we have organizations that provide Technical Due Diligence, etc.?
In other words, I completely agree with you. Currently VCs (and many Angels) are like major label record companies: they are more risk-averse than they realize, they operate in a strict handful of myopic categories, and they are unashamed of the old boys network aspect of it. It's all ripe for disruption, and while the effect of that might mean some consumers will be cheated, we can mitigate that portion. And the upside is huge. You are right, it would absolutely "cause technology to accelerate even more in the future." The future could be much brighter if we can figure this out.
I think the concern is that before the laws limiting this went into action in the 30s, some people got fleeced for a huge chunk of what they had. It's extremely hard and time consuming to do proper due diligence on bleeding edge companies, and many consumers don't have even the basic background for evaluating technical ideas. See the massive Kickstarter success of the razor that cuts with a laser, run off of a couple of AAs or some nonsense.
Your idea for technical vetting organizations is an interesting one that might solve some of this, but unless it's mandatory for getting investment, I imagine that most companies won't bother.
This is sort of the function that syndicate leads can provide, though.
I get that concern, and make no mistake it's mine as well. The Kickstarter laser razor can be matched, though, by venture-backed nonsense like uBeam. And that will happen. VC's aren't better, they are just fewer. We can't stop people from taking their paycheck to Vegas, but we can enable those who want to invest responsibly to do so to a greater degree.
And my point is that I'm really driven by the upside here. We're on the cusp of huge technological change and what's holding us back is the pedestrian way we're approaching it. We're facing 21st century potential with 1960's Mad-Men-styled cigars and handshakes.
This tide will lift all boats. (Yes, silly and fraudulent projects will get funded, maybe even more so, but so also will the truly innovative projects we didn't even know we've been waiting for.) This is the moment in history when we need to liberate innovation from the current gatekeepers of sweaty bald men in suits who are really just looking for Facebook and Snapchat clones, to the public to better unleash the potential of what's possible.
I get what you're saying, and I want to be optimistic about this too. I agree that it will likely spur a lot of innovation if we make it easier to invest in interesting early-stage projects. And yeah, VCs definitely do get fleeced as well, I like Theranos as an example. They're more disciplined than many investors because their funds are structured, though, so they're not likely to dump their entire life savings into the hands of a charlatan, unlike many private investors.
Maybe there's a way to structure this to get the benefits while still protecting the little guys. Maybe the new law's restrictions are enough, since they'll ostensibly be enforced by the gatekeepers who facilitate the investment. I certainly hope so.
Wow, they're operating like a casino with awful payout ratios, and then they don't even let you cash out? That's terrible, I hope those people get shamed thoroughly for working there.
Well, some Hacker News readers would certainly have a financial stake in preserving the VC model by any means necessary.
There are risks indeed to crowdfunding, but not wholly unique ones. All one has to do is browse penny stock boards, or perhaps Bitcoin boards, these days, to find scams currently in progress and bagholders left with nothing but broken hope. Equivalently, a lot of VC-funded companies are in it to build up an impressive but fragile organization quickly and then hand it over to someone else before it explodes.
The change here is merely that we are removing gatekeepers to participating in the action at all, and the illusory veneer of stability that affords. Every company is built on some degree of faith, and that makes early investment a largely irrational proposition. The question to focus on is not "how much abuse will ensue" but "how do we mitigate damage", a question not really asked at the high levels because it is dangerously close to revealing how power works.
As someone who's been following this for years now, I couldn't agree more. Private investments into startups is the next financial market to be disrupted. Many VCs and Angels know this too but won't publicly acknowledge it.
If anything, Kickstarter et al have proven there's a massive market demand for it. It's just been the good old boys at the SEC who have been slow to catch up, even when given the mandate to.
The problem is that a huge number of the big wins in investment are quasi-legal in ways that indiegogo/etc won't permit. That's why I can't run my company raise there. Neither could have Uber, AirBNB, any of the marijuana wave that's coming, et cetera.
The purpose of VC and angel investing is to be risk tolerant, and this is extremely risk intolerant.
The downside is having X amount of shareholders you may not even know of over time. A decade down the line you may find yourself in difficult situations if you need to make some major changes. Especially with shares changing hands (e.g. inheritance).
I'd personally rather have few major shareholders on board who understand business and get it, than X amount random people all having their own ideas.
It does give more power to entrepreneur, as with more options you negotiate better investment deals.
I strongly disagree. There is HUGE value in VCs. The top ones are worth it. This is not serious. You can't have random people as shareholders. You'd be inundated with calls constantly from people who invested 500 dollars and now feel like they want to tell you what to do. No way.
Real people with small amounts of money can easily fund all of the great ideas in the world. Even big ones I think, like cancer research. If properly controlled (diversified, limited) it really could be the best way for people to invest maybe 10% of their savings.
We just need a lot more work done in this area until it's safe and simple for people and companies. This will be one of the many things that cause technology to accelerate even more in the future.