gbelote

At the seed stage you're looking at returns of 50-5000x if you "win" so there's more margin of error in the 1/10 statistic.

To be clear: I think investing $5k in one startup (and only one startup) is dumb. I'm not saying that's what people should do. And there are legal limits to how much people can invest and requirements for platforms to educate (and ensure investors understand basic risks like failure rates and need for diversification). When you invest $5k across 50 startups that starts behaving like an index fund.

The caveat to the "big win" returns is that it's traditionally hard to get access to the companies that have a real chance at IPO. A small group of people with privileged access make an obscene amount of money and it's hard to break into that insider club due to structural issues with non-JOBS Act regulations.

The health of the asset class, IMO, is dependent on platforms' ability to attract those companies. For equity crowdfunding (when restricted to rich people) it's clearly in the realm of plausibility. The three major platforms all have at least one "Unicorn" under their belt. For unaccredited crowdfunding I'm optimistic given the information I've seen that this is doable, but if I'm wrong it'll be because the new regulations scare away the "good" companies. Not because retail investors are dumb or there's an inherit issue with democratizing access. There will be a law or amendment in the future that fixes any regulatory issue. I'm pretty certain this or something like it is the future if you look forward far enough.

Platforms are also required by law to have educational material. And, annoyingly, investors have to fill out a small questionnaire about the risks of investing every single time they invest. So if you invest $100 in 10 companies you'll have to fill out a thing saying you know you could lose all your money and you should be diversifying, 10 times.

Plus, it's in our own economic interest to make it clear how and why diversification is important and that investors make smart decisions. Our whole business model depends on investors making a return since we charge carried interest (i.e. a percent of profits that investors make). This is standard practice for accredited crowdfunding and I expect it to carry over to the unaccredited world.

This is less of a concern when non-accredited investors are investing alongside accredited investors under the same terms. I also think it's the duty of a platform to make sure unaccredited investors don't get unfair treatment.

> First, most Americans are currently not investing in the public markets[1], many because they don't have the money to.

True, but I'm not advocating that every American should invest in super-risky companies. Plenty of Americans (actually, folks from all over the world) definitely want to invest small amounts of money in companies they believe in and want to support. They try, but can't. If the investor limits magically went away tomorrow we'd see an order magnitude more money invested in startups on our platform.

Even though startup investing may not be right for everyone doesn't mean that most people should be legally prohibited from doing it. There are plenty of products I use in my life (personally and for business) that I would love to invest $100 in. I understand the risks, what's inherently wrong with me investing with 10k other people? There's a lot of potential issues with the _implementation_ of a platform (e.g. do investors get enough information? is there adverse selection?), but I don't think there's _inherent_ issue with all possible implementations.

> Second, there are plenty of publicly-traded vehicles that provide access to private market investments.

I didn't realize CSV Capital was publicly traded, that's great - thanks for pointing it out! Maybe I'll buy some shares.

> Are you referring to 506(c)?

No, I meant 506(b) earlier in 2013. The argument was that only companies desperate for money would resort to listing on a crowdfunding platform.

506(c) has a few problems that makes it a pretty weak and ineffective regulation. There isn't much upside in generally soliciting to accredited investors only to counteract the legal uncertainty with the way accredited verification was implemented.

I don't think startup investing is for everyone, for some of the reasons you mention below. And I agree there's a risk of the ecosystem developing poorly to be a "market for suckers". But I think the JOBS Act is a net good thing and the concerns you highlight are addressable.

The main problem I have with the "old rules" of investing is that wealth is used as a proxy for sophistication. If you happen to have a PhD in Machine Learning, for instance, you're unable to invest even $100 in AI companies unless you're literally a millionaire. With companies staying private longer, most of the growth in high growth startups is only available to the wealthy.  From the data we've seen so far from unaccredited investors trying to invest in startups (but failing the financial requirements) we haven't seen any correlation in financial status and savviness. Unaccredited investors try to invest in the same companies as the accredited investors, and they all avoid the weaker startups. So I'm optimistic about that, at least for the early adopter crowd. And I think as the ecosystem matures fundraising platforms will look less like Kickstarter campaigns and be more optimized for groups of people assessing/vetting startups. (But I'm an optimist and obviously biased.)

The biggest problem with the JOBS Act is the potential for adverse selection. If "the best" startups don't want to touch it with a 10-foot pole for legal reasons, that's a serious issue for the ecosystem. We've been spending a bajillion dollars on legal research and think we have something that makes this nearly a no-brainer for startups, but time will tell. Startup lawyers hate being guinea pigs with new regulations.

At best I think we'll see a lag in mainstream startups using Title III. Instead we'll see small businesses that are underserved by current investors first. With more precedent and familiarity with unaccredited crowdfunding I'm pretty sure we'll see more startups use it. A similar thing happened three years ago with "rich person" crowdfunding – many critics speculated only bad companies would use it, not-bad companies started using it, and now it's generally accepted.

Index funds would be great. The JOBS Act prohibits investment funds explicitly and it's prohibitively expensive to create a fund for early stage startups that unaccredited investors can participate in. However we're working on ways to emulate index funds, and I think it'll be doable by someone in the long-run.