If there are initial investors into a startup via crowdsourcing, are there any protections given to these investors against the tricks that veterans would play, like dilution, preferred shares, etc?
It seems pretty easy to me for someone to set up a startup, get initial funding through crowdsourcing, and then as it needs another round of cash infusion, it lets a bigger VC come in and dilute the hell out of the initial investors.
It's actually less of a risk for VCs because they can let retail suckers take on the higher risk during the initial round, and if the startup survives, then they can swoop in and invest in a more promising company, and dilute the initial investors into nothingness.
It seems pretty easy to me for someone to set up a startup, get initial funding through crowdsourcing, and then as it needs another round of cash infusion, it lets a bigger VC come in and dilute the hell out of the initial investors.
It's actually less of a risk for VCs because they can let retail suckers take on the higher risk during the initial round, and if the startup survives, then they can swoop in and invest in a more promising company, and dilute the initial investors into nothingness.