But isn't investment about spreading risk? The more risk you spread, the less founders would have to a) give up in ownership and b) answer to anyone but their own vision.
I think the reason why kiva (and even prosper) works is that risk is spread widely to individuals with common vested interest and enough skin in the game to make it sting but not be completely in-shambles devastating; as opposed to rich people trusting a richer VC to make them foo% return and putting it all in Color.
"The right way to get money from large numbers of people is to sell them your product, like Inpulse did, not to sell them your stock."
What if the product isn't one? What if it's a service like Facebook or (gasp!) Instagram? If you believe in a vision, and you want to contribute to it monetarily -- perhaps even see a return on that money -- why is that bad?