3 ms·

Just as an idea: what if YC companies all offered stock to HN users as a complete, or portion of their next investment round. So if 15 users put in $5000 each,

Just as an idea: what if YC companies all offered stock to HN users as a complete, or portion of their next investment round. So if 15 users put in $5000 each, that's $75000 - enough for another 6 months runway at least, and they could probably set the valuation higher than they would with a VC. Also, these could well be value-added investors because of the skills, feedback and experience presented.

oliveoil 17y ago
Yes! Why we haven't done this yet?
- markbao 17y ago
  Because most Hacker News users aren't accredited investors (in the US, $1 million net worth, or $200,000+ annual income for 2 years running.) I imagine it'd somehow be possible, but it's legally messy. On the other hand, I imagine it'd be possible to put together a well-sanctioned group of accredited angel investors that would be able to do like a "YC round two financing" if need be. It'd be pretty interesting.
- adrianwaj 17y ago
  For argument's sake, giving 15-25 hackers my business plan for their perusal is a risk in itself. There'd have to be some thought put into how much is revealed, and under what circumstances. You could get around accredited investor rule by having the founder form a contract with each investor. "Whatever profit and earnings I make from startup A, you have xx% up until the year 20xx." In this way, there is no interference in the startup's balance sheet, although there should be some indication of a cash injection by the founder due to their relationship with the hackers.
- philwelch 17y ago
  Offering stock to members of the public is an "initial public offering", which in itself costs millions of dollars just in regulatory costs. Yes, we're still members of the public, except for the millionaires among us.
  - adrianwaj 17y ago
    No, it's bootstrapping from friends and acquaintances who are known within this online community, both in readership and interaction. It really does make sense for hackers to support each other in this way.
    - SwellJoe 17y ago
      No, it isn't. As others have mentioned, most HN readers and YC founders are not (yet) wealthy enough to be accredited investors. If you were to try to treat it simply, you would wind up in serious legal trouble, and possibly in prison. Selling shares to any non-accredited investor, who is not a founder, requires dealing with a lot of legal issues, and potentially opening yourself up to significant liability. The side effect of this law intended to protect people is that the average person can no longer participate in the highest growth sectors of the market. The rich get richer, and the poor don't have as much choice in their investments (and once a company has gone public, its astronomical growth is probably over; it's very rare for a company to be as successful as GOOG or AAPL, and even those, if you'd owned stock pre-IPO, you'd be incredibly wealthy today). I would love to be able to invest in some of the YC companies, other than my own, but I don't have that ability yet. But, the first few rounds of YC companies have produced some accredited investors already, so the circle of available investors who "get YC" is getting wider. You could get a personal loan from friends and family, and then roll the money into the business, but you can't sell shares without dealing with the extra paperwork and liability.
      - adrianwaj 17y ago
        Being an accredited investor to invest less than $10,000 in a small web startup sounds ridiculous to me, especially if one has good knowledge of the startup's business environment and a rapport with the founders. If it's the law, so be it, but there'd have to be a legal workaround for hackers to connect with another hacker's startup financially. This must be Deja Vu, I remember having a conversation with you about Barack Obama after his election win in a thread where I lost over 60 points. -- I wonder how bpick is able to invest legally in this case, because I don't think he fits with the accredited status but is still looking for investments.
deleted 17y ago
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oliveoil 17y ago

Yes! Why we haven't done this yet?

markbao 17y ago
Because most Hacker News users aren't accredited investors (in the US, $1 million net worth, or $200,000+ annual income for 2 years running.) I imagine it'd somehow be possible, but it's legally messy. On the other hand, I imagine it'd be possible to put together a well-sanctioned group of accredited angel investors that would be able to do like a "YC round two financing" if need be. It'd be pretty interesting.
adrianwaj 17y ago
For argument's sake, giving 15-25 hackers my business plan for their perusal is a risk in itself. There'd have to be some thought put into how much is revealed, and under what circumstances. You could get around accredited investor rule by having the founder form a contract with each investor. "Whatever profit and earnings I make from startup A, you have xx% up until the year 20xx." In this way, there is no interference in the startup's balance sheet, although there should be some indication of a cash injection by the founder due to their relationship with the hackers.
philwelch 17y ago
Offering stock to members of the public is an "initial public offering", which in itself costs millions of dollars just in regulatory costs. Yes, we're still members of the public, except for the millionaires among us.
- adrianwaj 17y ago
  No, it's bootstrapping from friends and acquaintances who are known within this online community, both in readership and interaction. It really does make sense for hackers to support each other in this way.
  - SwellJoe 17y ago
    No, it isn't. As others have mentioned, most HN readers and YC founders are not (yet) wealthy enough to be accredited investors. If you were to try to treat it simply, you would wind up in serious legal trouble, and possibly in prison. Selling shares to any non-accredited investor, who is not a founder, requires dealing with a lot of legal issues, and potentially opening yourself up to significant liability. The side effect of this law intended to protect people is that the average person can no longer participate in the highest growth sectors of the market. The rich get richer, and the poor don't have as much choice in their investments (and once a company has gone public, its astronomical growth is probably over; it's very rare for a company to be as successful as GOOG or AAPL, and even those, if you'd owned stock pre-IPO, you'd be incredibly wealthy today). I would love to be able to invest in some of the YC companies, other than my own, but I don't have that ability yet. But, the first few rounds of YC companies have produced some accredited investors already, so the circle of available investors who "get YC" is getting wider. You could get a personal loan from friends and family, and then roll the money into the business, but you can't sell shares without dealing with the extra paperwork and liability.
    - adrianwaj 17y ago
      Being an accredited investor to invest less than $10,000 in a small web startup sounds ridiculous to me, especially if one has good knowledge of the startup's business environment and a rapport with the founders. If it's the law, so be it, but there'd have to be a legal workaround for hackers to connect with another hacker's startup financially. This must be Deja Vu, I remember having a conversation with you about Barack Obama after his election win in a thread where I lost over 60 points. -- I wonder how bpick is able to invest legally in this case, because I don't think he fits with the accredited status but is still looking for investments.

deleted 17y ago

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