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Comment by pg_bot | Hacker News Reader

Seed investing is not something for amateurs, in fact frankly I don't think investing in public companies is for amateurs. I would tell ordinary people to invest in index funds and don't invest in startups at all. You should not be investing in startups because you think it is going to change your life. You shouldn't be doing it unless you're rich enough that your life wouldn't be changed by making lots of money. - Paul Graham

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Wow, that's funny. As I was reading that, I was thinking "what a thoughtful comment for HN." At least I'm consistent.

Twould be nice if you punctuated it properly though.

Interesting. It looks like one can summon PG by just quoting him. We should try this more often.

You have to say his name 3x.

Sorry transcribing from video is a little harder than from an essay. You try to tow the line between the speaker's rhythm and correct syntax to form the natural voice of the person speaking. Here is the video for the actual quote. http://www.bloomberg.com/video/breaking-down-billion-dollar-... skip to 4:47.

I'm a bit confused by this...why did you fund Wefunder then? "Amateurs" are exactly the people that will be funding startups on Wefunder...

If you imagine investors organized concentrically with the sort who physically show up on Demo Day at the center, I think the sweet spot for this type of thing is the next ring out: people who are not focused on startup investing, but who either understand startups well (like rdl) or are rich enough to learn about them by trial and error.

Ok I see your point and agree with it, but Wefunder is metaphorically opening up to nearly the entire universe by eventually allowing anyone to invest--it doesn't seem to be doing anything to stop 'amateurs' from investing.

I'd like to believe that there are many people have a couple thousands dollars that they'd be willing to invest in a startup that seems promising. In the next year, I will theoretically be able to invest in startups via Wefunder...and I am in college with just one startup under my belt. I like to think I understand startups well but given my age and experience, I bet there are people who understand them far better than I do...and far less as well.

> but given my age and experience

Given your age and experience you have NOHTING to loose. Experiment. Fail. Learn. Succeed.

One of my all-time favorite sayings is by Mark Twain: "A man holding a cat by the tail learns something he can learn no other way".

If you think you understand startups enough to risk $1,000, by all means, do it! You will learn something regardless of the outcome. And, frankly, at your age, if you are intelligent about it there are virtually no negatives.

Yes sir, I plan on doing so!

I was only responding to the seemingly-odd assumption that only the "next ring" of investors is what Wefunder is going for--at least that's what I got from pg's response to why he/YC funded Wefunder. To me, there is no way to keep it to only this "next ring" and it doesn't seem that Wefunder is trying to do this. They are trying to appeal to those who are even several "rings" away.

Good! Be absolutely fearless. Intelligent, but fearless.

Regarding funding for your venture/s. Forget it. Don't do it. At least not at first. Save money and bootstrap one or a couple of ideas yourself. You will earn you honorary MBA that way. You have to be smart about business before venturing out into a larger domain (unless you have good mentors who can guide you).

Companies like Facebook --where the founders had absolutely zero business experience and zero idea of where the thing was going or how it was going to make money-- are exceptions to the rule. Most businesses require a reasonable grip of business management and the identification of a good business model from the very start. And even with that failure is far more likely than success. So, have fun with it and don't risk too much on each experiment. Once you find something that gains traction take a huge leap and go for it.

Investing is not just about returns anymore.

On Kickstarter, millions of people invest in products, not for a return but because they want the product to exist.

I would very willingly toss my money down the blackhole of seed markets, because it is a "fair shot." Other markets are not.

The stock market and index funds are driven by volume (i.e. rich people) fear, our economy, or stupid politicians.

I would gladly fund a product to see it exist, and all the better if I have a shot at making a return on something I believe in. People don't invest in the stock market because they believe in the company, they do it because they have a gut-feeling it might move up that day.

In '96 or '97, I predicted that Valve was going to be very successful, just based on a very early preview I saw of Half-Life - I was just a teenager at that time. I have made many similar calls (honest to god) across many companies including NVidia, Intel, Google -- because I believed in them before any of them went public (for the record, there is not a single public company that I believe in). What I wouldn't give to be able to invest my money where I believed it would do good.

In most circles the definition of investing is the deployment of capital for some expected return on that capital. You can't just take something else that feels like investing and start calling it that.

I agree - what I am trying to say is that there is more to investing than money in, money out, and risk. For example, I would feel a lot better losing money by investing in an innovative product, than losing money because the economy went down. Investing in progress, return or not, is its own reward.

This is a devil's advocate question, but what's the difference between investing one's money, and one's own time & labor at a possibly high opportunity cost in a startup. Or stated another way, if an amateur shouldn't invest their money, what makes it ok for a startup employee to invest their labor?

Employment at a good-ish startup is a good investment in your skill set. Yes, ideally you will make a lot of money on an IPO or acquisition, but even if not you will develop expertise and broaden your network. Just throwing a few thousand at something you can only watch from afar won't get you that.

I agree that ordinary people shouldn't bet their life savings on startups. But this allows an average well-informed SF employee to invest $1,000-2,000/month of his/her salary into any startup they like - hardly a life changing amount. See it as a Kickstarter on steroids. At least this gives us a chance too to invest in the next Dropbox and Airbnb.

Worth noting: $1,000-2,000/month stashed in a less risky asset class (e.g. index funds) over 30 years is likely to be enough for most people to retire comfortably. That's potentially life changing over the long term.

Indeed. Nobody should limit their investments to just these. For every $1,000 you put into a crowdfunded company, you should be investing at least $4,000 in more traditional and safe investments. And 20% is even a lot. That assumes a young person who has high future earnings potential and a high risk tolerance. 5-10% would be more reasonable for most people.

That said - this is certainly an asset class one could beat the S&P500 with, as long as you aren't just throwing darts and are actually investing in companies you know a lot about and understand.

> traditional and safe investments

This made me chuckle.

The "traditional" investment vehicles of US stocks, real estate and bonds are anything but "safe" these days.

The last few years are not representative of the long term. Over the long term stocks, bonds and real estate - in aggregate - rise in value.

If you don't want to risk short or medium term fluctuations and black swans, the ultimate traditional and safe investment is a savings account. If you're the type that thinks fiat currency is only worth it's weight in toilet paper, then buy gold.

For any of these investments you'll have more left at retirement than if you put 100% of your capital into startups that ended up going out of business.

But this allows an average well-informed SF employee to invest $1,000-2,000/month of his/her salary into any startup they like - hardly a life changing amount. See it as a Kickstarter on steroids. At least this gives us a chance too to invest in the next Dropbox and Airbnb.

These aren't "ordinary" people? This model's only barrier to entry is the $1k it takes to get in (AFAICT) its not limited to "well-informed SF employees".

> At least this gives us a chance too to invest in the next Dropbox and Airbnb.

And the next Webvan, Pets.com, Kozmo, Flooz, eToys, Boo, etc etc etc, saying nothing of the huge number of failures we don't even know about.

Shouldn't that read "...unless you are rich enough that your life wouldn't be changed by losing lots of money."?

I'm not rich enough that my life wouldn't be changed by lots of money, but I know startups pretty well.

I invest around $10K once a year in a startup, usually with a friend who I believe strongly in. One of them so far was a disaster, and oddly enough he was the highest profile of these investments. One was quite lucrative. Another is looking to be a great return, having recently raised at more than 10x.

I don't think investing 5% of your income and/or capital in startups is a bad idea if you have reason to believe someone will be successful.

The key is to consider the money lost once you invest it. Don't expect anything back.

This begs an interesting question: perhaps the way for the public to become seed investors is through diversification (i.e. index-style investing applied to small companies as well). Already, something analogous is possible through micro-cap index funds. That said, I agree that ultra-small companies are not a place to put all of your capital for the long haul, but they could provide correlation advantages with respect to the broader market in small doses.

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