Invest in Startups

by npt4279 • 13 years ago

136 93 13 years ago

neonkiwi• 13 years ago

Your progress bar active areas have two percent signs in the width property, which breaks them (at least for me) to all show 50%.

npt427911• 13 years ago

I'll get this fixed. Thank you.

pesenti• 13 years ago

Reading on YC about investing through a YC company into YC companies.

aegiso• 13 years ago

...sell?

I kid, but the flavor is indeed a bit bubbly.

ChuckMcM• 13 years ago

It worries me too, although an acquaintance of mine has a bumper sticker that reads "just one more bubble, this time I'll sell."

My concern is that non-qualified investors will once again be participating in a complex equities market with technology companies that are pushing the edge of the envelope. That will fund companies that should not be funded, lose money for people who cannot afford to lose it, and create another period of ill will for "tech" investment.

minimaxir• 13 years ago

It's not a bubble, it's vertical integration! :)

hpvic032• 13 years ago

This looks great. I'm just curious, what is the difference between wefunder and FundersClub.com?

samspenc• 13 years ago

And AngelList, if I might add?

npt427911• 13 years ago

AngelList is optimized for professional investors in Silicon Valley. It's a little like inside baseball - "Oh, Dave McClure invested - now I gotta get in!"

We're optimized for people who love a particular startup because they use the product, but may not be as well networked in Silicon Valley or as familiar with startup financing. Ultimately, we're all about everyday Americans investing as little as $100.

We also have fully-integrated self-service fundraising software, since we're not relying on SecondMarket like AngelList does. This gives us a little more flexibility. Startup founders can use our software to do digital signatures, escrow, investor accredited verification, contract generation, etc, for as little as $100.

npt427911• 13 years ago

The main similarity, besides both being YC alumni: FundersClub and Wefunder both form single-purpose LLC's that aggregate small investors, and then make one investment into the startup. So the startup only has one investor on their cap table.

The main difference is one of long-term vision. FundersClub is invite-only and exclusive. Wefunder is designed for everyone to be able to invest in startups. We're most excited by Title III JOBS Act, which will let unaccredited investors invest as little as $100.

We believe that the true value of crowdfunding comes from having your most passionate users and customers invest, not just C-level execs in an invite-only club who you've never met. The people who love your product can invest small amounts on the same terms as professional investors.

stirno• 13 years ago

One would hope that, in the future, a $100 investment doesn't cost the startup $25. ;)

hpvic032• 13 years ago

Thanks for the reply. That's interesting, I wonder what Fundersclub aims to gain from excluding smaller investors.

I have another question for you. What prevents your investment from getting squished in future rounds?

I've been wanting to use a platform like this for a while, and that's one of my main concerns.

ph0rque2• 13 years ago

Can anyone link to/explain what the 10% carry means?

vu0tran• 13 years ago

The website looks very well put together!

In case you guys missed it, the SEC in Title II of the JOBS Act rolled out TODAY. That means startups can now raise funds from accredited investors on Wefunder site itself. This is HUGE but that's not all.

Next summer SEC will roll out Title III which means EVERY SINGLE AMERICAN can now invest in startups for as little as $100. This will be a massive boost for all startups everywhere, especially for non-traditional startups that couldn't get funding before. I'm very excited to see all the new startups coming out of this.

Great job Wefunder! The website looks amazing!

3pt141593• 13 years ago

This is the beginning of Bubble 2.0. I'm a libertarian, but this decision is fucking scary.

I invest a lot of money for people in my life (for free), so I fairly regularly get emails effectively saying: "Oh look at this stock my friend forwarded to me (pump and dump scam)" which I then have to explain why it isn't going anywhere. So it is already pretty bad (especially on venture exchanges), BUT when thirty thousand startups start taking investments from mom and pop investors the consequences are going to be massive. We're talking tens or hundreds of thousands of dollars from MILLIONS of people. Right into the lap of startups that don't even have a merchant account.

So the lesson here is get in on this early, profit harvest, and get the fuck out before it crashes due to irrational exuberance.

7Figures2Commas4• 13 years ago

So the lesson here is get in on this early, profit harvest, and get the fuck out before it crashes due to irrational exuberance.

Investments in early-stage startups are highly illiquid so in most cases, getting in early won't mean a thing because you will never be able to get your money out.

npt427911• 13 years ago

I can understand your viewpoint, and I'm usually pessimistic about human nature... But in this one thing, I'm an optimist.

I think it's a problem that the rich and well-networked effectively had a government-protected oligarchy to investing in the best private companies. Much of the capital appreciation in this country over the last couple decades went to private companies before they IPO, of which mom and pop investors had no access too... because the government 'protected' them by not allowing them to invest their money where they see fit.

The JOBS Act has a good balance. No one making $90k will be able to invest more than 5% of their income in startups. That makes sense.

EGreg4• 13 years ago

It's kind of funny. Some libertarians who want economic freedom might actually be against it. And I am for it, even though I am in favor of a welfare state with safety nets. I guess it's all about what we are faced with on a day to day basis.

tlrobinson3• 13 years ago

How does JOBS Act (and platforms like Wefunder, FundersClub, AngelList) handle small investors selling their stock, pre-IPO? i.e. is it even possible to "get the fuck out"?

krmmalik• 13 years ago

With Title III - does that mean anyone can invest, say outside of America?

paultannenbaum2• 13 years ago

The ASCII art in the javascript console is a very nice touch: http://cl.ly/image/3B1d1k1H1902

paultannenbaum2• 13 years ago

If you guys are using heroku, you might want to scale up your dynos right now. I am getting the application error page when I try to sign up.

npt427911• 13 years ago

Thanks! We're on Heroku, and we're cranking those babies up right now.

gbelote2• 13 years ago

Yikes - thanks Paul! Adding more dynos now...

ringdabell• 13 years ago

Website looks great. I'm sure the crowdfunding niche will explode even more in the next couple of years.

That said, does anyone else think this will just feed into existing/new bubble?

Title III in particularly will bring in a flood of dumb money. What a beacon for #startupbros everywhere.

coryfklein• 13 years ago

What is the reasoning behind limiting non-accredited investing anyway? Why is it a crime for me to give somebody else money if I am happy with the terms of the contract?

crisnoble• 13 years ago

I guess they think that they know what's best for you. Either that or they want the good investments for themselves.

sanderjd• 13 years ago

I think it's the same as the reasoning behind limiting any form of gambling -- there is a savviness imbalance between the gamblers and the house, and the potential cost to society of gamblers losing more than they can afford is thought to outweigh the benefit of people being completely free to make their own decisions with their own money.

npt427911• 13 years ago

Thankfully, this will be legal in mid-2014, when the SEC finishes implementing the JOBS Act.

In the 1930's - pre-Internet - people were more easily scammed by traveling salesmen selling oil wells and such.

We have a lot more information at our fingertips these days.

jbooth• 13 years ago

We have a lot more information at our fingertips these days, and 25% of the country is convinced that Barack Obama was born in Kenya.

I feel like we're just running the cycle on this one, someone should put up a countdown to the next Enron and these investments being made illegal again.

tlrobinson3• 13 years ago

To be fair, people are still easily scammed on the Internet. See: Bitcoin stock exchanges.

vladimirralev10• 13 years ago

A quick warning for everyone. Investing without having a complete access to the books of the company you invest in is extremely stupid. No serious investor would do that. Don't be stupid.

You must make sure the valuation is fair, this means - check the valuation report, check the reputation of the company who did the valuation report, sanity check it, look for signs of bullshit.

Keep in mind, even if the founders have solid reputation there may be some unethical MBA behind the scenes who can act without founders understanding exactly what he is doing.

irollboozers4• 13 years ago

Most early stage deals, like the ones you'll find on WeFunder or AngelList, typically do not have valuations or financials to share simply because it's too early on for a company to seriously offer that. Why waste time putting together financial and valuation models, when you could be working on the product and trying to grow?

agilebyte2• 13 years ago

Because if you can be working on a product right now you don't need outside investment?

vladimirralev10• 13 years ago

These guys are asking for very specific prices on their website. They must have some kind of valuation behind it. I just need to know how they came up with this number. Also, both IRS and SEC have rules and guidelines on how to do valuation on startups - they use things like committed potential customers, founder reputation, CVs and things like this. Every startup has to do valuation before issuing stock options for example.

EGreg4• 13 years ago

Because a basic model can take 20 hours, and then is useful in supporting the valuation in discussions. It can literally bump the value of your company post-investment, similar how an MS on your resume can get you a bigger salary. You COULD do without it, but it's not so obvious why you should always omit it.

momchenr• 13 years ago

some unethical MBA behind the scenes

Yes, because MBA's have a monopoly on unethical behavior.

agilebyte2• 13 years ago

This post by Forbes would say otherwise, but I stopped reading after they said average righteous blogger in leftish spheres:

http://www.forbes.com/sites/freekvermeulen/2010/11/22/does-a...

vladimirralev10• 13 years ago

They don't have monopoly, but their job is essentially to take as much of your money as possible and give back as little as they can. When you have a party like this involved you watch your back.

jonnathanson2• 13 years ago

"there may be some unethical MBA behind the scenes..."

This is an unnecessary smear on MBAs. There are bad ones out there, and there are plenty of good ones. Just like with any other degree.

Your points are completely sound, and I agree, but it's time we ended the knee-jerk hatred of those three letters. There are YC-backed startups with MBAs at the helm, and there is an increasing number of engineers with MBAs or dual degrees.

vladimirralev10• 13 years ago

MBAs are fine. But their job is to take as much money as possible and give back as little as they can. This is fine when they are dealing with other equally equipped parties (YC, vc funds etc). If you don't understand the game, there is almost no doubt that an MBA will try to offer you the worst possible deal for you. If you have no means to examine the details of the deal, that's a guarantee. That's how business works. It is their job and they would be doing a bad job if they do otherwise.

kansface• 13 years ago

Valuation of the company is determined by supply and demand (of the company itself in the form of stock). Supply is of course limited; companies will only raise a few 100K$ max in a seed round. Demand on the other side, is largely decoupled from how the company is doing in the market since its just too damn early. In other words, the only things that matters at this point are the founders and the market. If there is high demand, companies can raise their market cap. When companies struggle to raise money, they lower their cap. Established business can use revenue as an indicator to potential investors. This makes little sense to companies that have a few months of revenue total.

photorized• 13 years ago

People invest in OTC BB and pink sheets stocks all the time - no access to books.

It will take a couple of spectacular failures for people to reevaluate current crowd funding model.

greenyoda• 13 years ago

I don't think I'd invest in a privately owned company unless they opened their books up to me in a completely transparent manner (I'd expect the same information that I'd have access to when buying stock in a company traded on a stock exchange). My guess is that this level of information will not be provided, which means that any "investment" in a company like this would be more like betting at a casino.

ilamont• 13 years ago

I received a promo email from WeFunder this morning. To mark the occasion of the change in the law, this was the messaging:

To celebrate, we are featuring great 25 startups from Y Combinator, Techstars, and MIT!

Clicking through to the "Raise Funding" page, which includes the pricing, this message appears at the bottom:

We offer a 100% discount to select high-tech startups that recieved funding from Y Combinator, SV Angel, or Andreessen Horowitz.

Not to dump on the accomplishments of the featured startups and those who have received funding from SV Angel or Andreessen Horowitz, but the message to everyone else seems to be: It doesn't matter how great your team is or how well you execute, if you are not part of the incubator/angel A-list, don't expect any breaks from us when it comes to promotions or pricing.

SwellJoe2• 13 years ago

They needed a seed pool of already vetted companies. This is extremely rational on their part, and probably helps their early funders make reasonable decisions.

The biggest concern I think one should have about this is that dumb companies will be paired up with dumb money at a much greater rate than great companies being paired up with lucky (or smart) money, making the whole concept look bad.

huhtenberg• 13 years ago

Do non-US investors need certification?

Major_Grooves4• 13 years ago

It still doesn't really strike me as crowd-funding so much when the minimum investment is still $1000. Is that some legal limitation in the US?

In the UK we can do equity-crowd investments as small as £10 - as I did when I raised money on Seedrs: http://www.seedrs.com/startups/satago?promo_code=V5EKZUV4

Disclosure: That is a referral link - Seedrs give me 5% to invest myself if anyone invests an amount through that link, which I think is astonishing in itself and worthy of comment.

tlrobinson3• 13 years ago

You still need to be an accredited investor until next year anyway. I'm not sure where the $1000 minimum comes from but it sounds like they intend on lowering it to $100 eventually.

tristan_juricek• 13 years ago

I love this idea. I think this is a fantastic opportunity for us plebs to start speculating.

It would be very nice to see if the crowd has a different kind of investment trend from the accredited investors.

Edit: Mostly, I'm curious if there will be enough numbers to see a "wisdom of the crowd" effect or if it will actually just amplify whatever the big money tends to be attracted to.

ismail• 13 years ago

I noticed a number of startups are listed (and publicly raising) both on wefunder and angellist. How does it work if they raise >50% on each platform?

Also showing the % raised the way it is now is a bit misleading, it gives off the impression that that was the amount that went through the wefunder.

Try maybe different colours so we can see easily what has been raised via the platform.

6thSigma• 13 years ago

I'm curious - does anyone know if someone who doesn't qualify to be an accredited investor can use power of attorney for someone who does qualify to be an accredited investor to make 50/50 investments?

marincounty• 13 years ago

1. Why does this website feel slimy? 2. Maybe, I just I got used to the status quo? 3. I do think this website is a disaster waiting to happen? I hope not, but I see nothing but lawsuits down the line. 4. Taking money from people who understand the risks involved in start ups is fine, but taking the money from the average dude who was inspired by Steve Job's movie is Wrong. 5. To anyone who's rushing over to this site expecting to make money one your investment; Guy's like Steve Jobs and Mark Zuckerburg had a lot of luck on their sides too. Mark would have probably never started Facebook, without stealing the idea from the rich twins. And the god Steve; he got fired from his own company. 6. I wish start ups well, but be honest. Or, at least take money from the people who can afford to lose it. It's not cool to lose money from the middle class and poor. There might not be a God, but personal integrity is the one thing that money can't buy.

basicallydan• 13 years ago

Can anybody tell me anything about the possibility of non-Americans investing in startups in the US any time soon?

kfk• 13 years ago

So, I put the money, they tell me that:

1. I am gambling

2. They decide when to cash in. Usually it takes up to 10 years...

3. I would be a "bother" for the founders (true, but no nicer way of saying this?)

To me, and I am happy to waste HN points on this comment, this feels snarky and offending. They seem to say "we are the cool guys", come join us, maybe you ll be cool too, just gives us the money.

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