gbelote

pg was already planning to run this conference before the whole press thing happened. See http://paulgraham.com/wids.html (towards the end)

Balanced is a great service. We use them at Wefunder and are very happy with their product and customer support. They're worth checking out, especially if you want to do ACH.

How is blaming Google employees any more righteous than blaming gays for wanting to live in Oakland and driving up prices? How is bullying in general a better strategy than attacking the root of the problem – conservative zoning policy?

It seems clear that the issue here is that more people want to live in Oakland than places to live and this drives rent up. If you want to bring prices down you need to build more housing, specifically denser housing.

Some people oppose this because it changes the character of the neighborhood, and that's a valid criticism. But the consequence of that stance is constrained supply which drives prices up, gentrifying the poor. Doesn't it make more sense to blame those who oppose high-density zoning?

Unless you want everything - strong local economy, low density, low prices – then I don't know what to say, that seems pretty naive.

Someone posted Loop in another thread: http://www.kickstarter.com/projects/loop/pay-with-loop

While not as close to Coin as Wallaby and Echo, it feels like it belongs in the group. Can't wait to see these all in the wild!

It's impressive to see the collection of Coin competitors hit the HN frontpage and comments today. Best of luck to all of them!

Thanks!

One of the more pleasant surprises having read through the SEC's proposed rules is how much they make an effort to get feedback from the community. It's nice to see a little humility in government and encouraging that we can influence regulations for the better.

We actually have 35 unaccredited investors in Wefunder and they have been valuable investors, some have been a lot more helpful than some of our accredited investors. A crowd of investors doesn't have to be all strangers and randos. They can be other founders, VPs in big tech companies (who don't quite pass the accredited bar yet), domain experts, someone famous (or internet famous), and people you know and trust. Or they could be your customers who love what you're doing.

> Obviously "healthy, high-caliber" means different things to different people.

That's true, there's definitely subjectivity here. I make the assumption that YC companies are a proxy for "healthy, high-caliber" startups and my opinion of what will be deal breakers for that category of company is shaped by our customer development in the YC network. I could be wrong for a few reasons.

> As for how the market is behaving: I have personally heard several attorneys state that they're advising their clients to be very cautious about Rule 506(c) and according to media reports[1], this is the advice of many attorneys.

Indeed. I think there's a natural lean for attorneys to be more conservative and wait for things to play out a little. I believe that in the next year or two it will be commonly accepted, I've already seen a lot of attitude change over the past year. We'll see. I think this is something startups ultimately want - assuming all the concerns can be addressed. More fundraising options and a wider pool of value-add investors is a good thing if crowdinvesting can be done practically, IMO.

> You cited the $1 million cap as an example of a rule that is of concern to you. To my knowledge, this cap was an explicit part of the bill that Congress passed. As such, I don't see how the SEC could eliminate that restriction.

I did, in the 585 page document the SEC released they suggest a few adjustments to address the concerns people have. For example, the $1m limit might be applied to the fees collected by the funding portal.

That excerpt is taken out of context but to respond to the point you make: that's why there are income-based caps to how much you can invest as an unaccredited investor.

That's what many critics said before 506(c) but that's not how the market is behaving [1]. There's more value to a crowd of investors than easy dumb money, and I don't see why the personal wealth of an investor really matters.

I disagree with your interpretation of the intention of the JOBS Act. As I interpret it it's meant to allow all Americans the opportunity to invest in startups and small businesses while protecting them from losing all their money. Introducing regulations that cause severe adverse selection outweighs the benefit of those specific rules, in my opinion.

[1] I think the quality of companies raising publicly on Wefunder and AngelList speak to that, but I'm heavily biased. I respect your opinion even though I disagree with it. :)

The SEC has enough power to shape regulation to neuter some of those clauses. For instance, they're able to apply the $1m cap to fees collected by the portal (not amount raised) or add exceptions for certain types of offerings. [1]

So in theory they could add exemptions or weaken other clauses. I'm not sure exactly where the line is drawn (e.g. can they entirely rewrite the JOBS Act?) but I believe the rules outlined in the JOBS Act are mostly to express intent of Congress and it's the job of the SEC to implement them in a way that works and maintains the intent.

[1] They request comments on those ideas and more in the big PDF. See page 20 of http://www.sec.gov/rules/proposed/2013/33-9470.pdf

I'm really excited that we've made it to this point. The implementation of the full JOBS Act has been on the horizon for over a year and I think it has a lot of potential to do good.

That said, I'm nervous about overzealous regulations. There are a few ways this can create severe enough adverse selection that healthy, high-caliber companies will avoid raising from the unaccredited crowd.

I'm still reading the details in the 585 page PDF of proposed rules but some concerns come to mind:

    - Capping the whole round to $1m
    - Forcing unnecessary financial disclosures
    - Inability to use a single purpose fund for aggregating small investors (forcing every unaccredited to be a direct investor)

I believe these are all feel-good but destructive rules that will poison the unaccredited crowdinvesting ecosystem. At Wefunder we've learned a lot about what it takes to get high caliber startups to use our platform and I'm pretty confident that those three things can each be deal breakers.

If you're a part of the startup ecosystem I encourage you to pay attention to this law, get informed, and give the SEC your feedback. These are only -proposed- rules and the SEC will listen and adapt (at least, they have in the past). Someday you may want to raise money or invest in a company!

One of the cool things about your car and plane being the same is when weather gets shady you can always land and drive. This makes it easier to make the safe choice - not flying through bad weather.

> From the standpoint of a founder, I know that raising small chunks of money from lots of investors is more likely to be problematic than it is likely to be beneficial. There are numerous logistical and legal downsides to this.

We've fixed this with WeFunds - our LLC fund that bundles many small investors into a single item on a cap table, relieving the logistical and legal downsides.

We also believe in the crowd as a value-add investor. For example, Casetext (YC S13, SV Angel) is raising on Wefunder because they'd love to have lawyers who are outside the Silicon Valley bubble invest in them.

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

You need an income of $200k/yr ($300k/yr if married) for at least two years, or a wealth of over $1m (excluding the value of your primary residence).

Hey Dan, no question just a small gush: this is one of the best KickStarter campaigns I've seen in a while. The video is great, it's fun reading the story and seeing the extra content, and I think more toys like this should exist in the world. I don't have kids but I feel excited about it anyways - best of luck to you!

Cofounder of Wefunder here. I disagree with the author. He makes a few assumptions that I believe to be false and makes a strong conclusion that crowdinvesting as a whole is doomed to low quality startups.

Some points of disagreement:

- Startups choose either crowd-funding -or- VC. It's not VC or crowd. Nor is it angel or crowd. High quality startups can raise traditional seed rounds and allocate a slice of that round for a crowd of investors. One example is Zenefits (YC W13), which is an awesome company that's kicking ass (IMO). They raised part of their round on Wefunder even though they had tons of investor interest after Demo Day.

- The author assumes the investor selection will be inherently poor with crowd-funding. I disagree with this, too. The universe of great investors isn't a subset of investors active enough to angel invest. Imagine being an API company and having 50 developer-investors.

Plus, crowdinvesting platforms allow investors to invest smaller amounts in many companies. Imagine investing $5k in 20 of your favorite YC companies. Good luck trying to get one-on-one meetings for $5k checks. Especially if you don't live in San Francisco.

- The author assumes that raising from a crowd means you'll have to wrangle thousands of investors. It doesn't have to be that way, especially with the common practice of using LLCs to group many small investors into one item on your cap table.

- I do agree with the author that too much adverse selection can create a marketplace for lemons. I worry about that all the time. However I think we do a pretty good job of mitigating that.

There will absolutely be a lot of mediocre crowdinvesting platforms and companies trying to raise on them, but it doesn't mean the whole industry is doomed. I encourage the author to check us out in a month once the general solicitation ban is lifted and reconsider his view of crowdfunding as an asset class. :)

People are working on it: http://www.terrafugia.com/ :)

To amend: two new rules were proposed as investor protections. They will have their own comment period and may or may not be adopted. They are:

    - Companies need to file with the SEC 15 days prior to generally soliciting.
    - Companies need to provide additional information about the offering.

That's correct. I changed the post to say "accredited" - thanks!

You don't need to comply with the blue sky law investor limits. And the 500 investor limit has been increased to 2000, which doesn't include non-accredited investors (once that part of the JOBS act is implemented).

The accredited investor requirements are a little silly and outdated. Good news is that more change is on the way in the form of Title III of the JOBS Act, which was signed into law last year. Removing the ban on general solicitation was Title II of the JOBS Act.

Good catch, I've s/qualified/accredited. Thanks!

I think you're right this will be a mixed blessing. There will be companies desperate to raise money, and when a "million bucks of funding" is at stake some companies will spend a lot of time and energy creating noise and spam. In fact you might find that the companies who are making great progress spend less time promoting themselves, because they're busy kicking ass. (We've already seen behaviors similar to that at Wefunder.)

My hope is that the noise most people hear will be like my experience with Kickstarter: I only hear about the projects that are up-and-coming and have merit.

Yes

There are no new protections for accredited investors. To be accredited you need to either have over $1m in net worth (excluding your primary residence) or have earned an income of $200k/yr as an individual (or $300k/yr as a joint couple) for the past two years. The philosophy here is and has been: if you're wealthy then you can probably take care of yourself.

The last remaining piece of the JOBS act is Title III, the part that allows non-accredited investors to invest. There are protections for this class of investors, including income-based limits (you can't invest more than 5%-10% of your income a year) and it requires investments to be made through a crowd on a crowdinvesting platform. The SEC is still working on the exact rules and regulations for this.

No. Our expectation is within 30 days, as that's usually the delay, but we don't know for sure.

Good questions. The Facebook/Goldman style investment vehicles have been blessed by the SEC in the form of a No Action letter back in March. For readers unfamiliar: an LLC fund is created that investors invest in, and that fund makes a single investment in the target company. The company only has one investor listed on their cap table and it makes several things (e.g. collecting signatures) significantly simpler. Investors maintain financial rights, but don't have voting rights in the company.

We can offer that vehicle to companies as a fundraising option. We also have a standard convertible note specifically for a large number of small investors that we've been using ourselves which addresses "large number of investor" concerns in a different way.

The JOBS act has already increased the accredited investor limit to 2000, and once the unaccredited investor legislation takes effect, those unaccredited investors won't count against that total.