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For me, minimum capital requirements to be an accredited investor is already far worse than the disease. I'd prefer to see certification programs that people r

For me, minimum capital requirements to be an accredited investor is already far worse than the disease. I'd prefer to see certification programs that people raising money must apply-for, and have that be the basis of whether an investment is valid for the market, rather than placing a capital requirement on potential investors as the way to determine if an investor is smart enough to reject scams, and thus save the government from complaints and minimize lawsuits than what would happen if joe public and his granny could invest their savings. Perhaps there could be a certification program too for people wanting to invest. This I think would free up capital and opportunity, ie real micro finance.

protomyth 16y ago
Certifications are generally used to keep people out of a market and allow entrenched players to control things. Look at the state of Louisiana's Florist License for and example of the absurd and protectionist.
gojomo 16y ago
Excellent ideas. Why does a $1mm net worth indicate more 'sophistication' than (for example) having an MBA, or business-law-focused JD, or having passed the Series-7 or bar exams? Or, there could be a standard waiver-of-claims-of-unsophistication allowing those under the current 'accredited' limits to get the same legal treatment as those meeting the limits.
- adrianwaj 16y ago
  Precisely. I think the key with micro-finance is that investors can be diverse, and they can actively seek investments which they can then personally assist, and at the same time entrepreneurs can also try and locate the right investors who'll facilitate the growth of their system. This is something baby-boomers would love doing, with the time, disposable income, and connections they can offer. Furthermore, imagine being able to tell a CEO "we'll let you use our api but only if we can have equity in your system." In this case, microfinance supports systems integration. Another benefit, is that micro-finance would allow entrepreneurs to raise funds more quickly to build more systems, with the goal of having 1 or 2 accepted into some larger system that can pay for its usage. -- I am thinking a http://www.kiva.org http://www.kiva.org but for entrepreneurs and investors. It'd have to track reputations and act as a hub for financings and subsequent distributions.
lionhearted 16y ago
> I'd prefer to see certification programs that people raising money must apply-for I like the gist of your point, but this line scares me a lot. Too much opportunity for political favors or political blackballing.
- adrianwaj 16y ago
  Certification would more to do with proving an identity, a physical address, a bank account and being connected to real people. It's to make it more difficult for would-be scammers from being able to hide. Thus, a publically accessible website of who's raising money, for what, their photo, and some references who've vouched for this person would (I think and hope) significantly deter scammy behaviour. (of note, this type of information is becoming more accessible anyhow http://blog.programmableweb.com/2010/09/20/watch-out-for-stealthmodewatch http://blog.programmableweb.com/2010/09/20/watch-out-for-ste... - stealthmodewatch.com) On the other side of the coin, investors could take a simple multi-choice test on ROI, accounting and finance principles .. whatever. I'd have to brainstorm further. If an arm has a problem, you don't cut it off, you fix it and make sure it doesn't happen again with creative solutions - because you're not solving any problem by amputating (or rather not applying that solution correctly if there are healthier alternatives), you're just creating more problems. -- another solution may be to simply cap investments at a certain amount, so people can't invest their life-savings in one go. -- also, a way to search on these micro investments (and micro investors too) would be great: http://www.google.com/finance/stockscreener http://www.google.com/finance/stockscreener http://www.formds.com/filings http://www.formds.com/filings (hat tip gojomo)
lzw 16y ago
I cannot meet those "accredited investor" requirements, which if you think about it, are really meant to cut off dealflow for anyone who isn't already rich. Meanwhile, I have easily lost an angel investment's sized amount of money in equities and derivatives I've controlled. (and made many times that in positive returns... but it is the losses the government pretends like they are protecting me from.) I could have been putting $15k-$20k into several startups a year, for the past 15 years, up to one a month in recent years, if the government would let me. Think about that-- it would have been ILLEGAL for me to invest in these companies (or for them to take my money)... while at the same time I've incurred complete losses of the same size in the public markets, and could blow all of it and more at any casino on the country in a weekend.
- joshu 16y ago
  http://en.wikipedia.org/wiki/Accredited_investors http://en.wikipedia.org/wiki/Accredited_investors If you could put 15-20k a month into startups, how are you not meeting the accreditation reqs? I think the requirements are to cut off companies from taking investments from little old ladies. It's the startup that would get in trouble, not you. You considered talking to a lawyer?
  - lzw 16y ago
    I could put that amount in at the end of the period, not the beginning, and accredation requires either a higher salary than i have, or a net worth over a million, which I don't have. If preventing little old ladies was all that was needed, then it could be accomplished with a wavier.
    - joshu 16y ago
      The other issue that for angel investing is that you really ought to be doing 10+ investments a year to actually even out the risks so that you can get a return. That's a fairly high watermark. I've done approx 45 investments. One has returned (a small amount) of money in five years, so far.
- newman314 16y ago

protomyth 16y ago

Certifications are generally used to keep people out of a market and allow entrenched players to control things. Look at the state of Louisiana's Florist License for and example of the absurd and protectionist.

gojomo 16y ago

Excellent ideas. Why does a $1mm net worth indicate more 'sophistication' than (for example) having an MBA, or business-law-focused JD, or having passed the Series-7 or bar exams? Or, there could be a standard waiver-of-claims-of-unsophistication allowing those under the current 'accredited' limits to get the same legal treatment as those meeting the limits.

adrianwaj 16y ago
Precisely. I think the key with micro-finance is that investors can be diverse, and they can actively seek investments which they can then personally assist, and at the same time entrepreneurs can also try and locate the right investors who'll facilitate the growth of their system. This is something baby-boomers would love doing, with the time, disposable income, and connections they can offer. Furthermore, imagine being able to tell a CEO "we'll let you use our api but only if we can have equity in your system." In this case, microfinance supports systems integration. Another benefit, is that micro-finance would allow entrepreneurs to raise funds more quickly to build more systems, with the goal of having 1 or 2 accepted into some larger system that can pay for its usage. -- I am thinking a http://www.kiva.org http://www.kiva.org but for entrepreneurs and investors. It'd have to track reputations and act as a hub for financings and subsequent distributions.

lionhearted 16y ago

> I'd prefer to see certification programs that people raising money must apply-for I like the gist of your point, but this line scares me a lot. Too much opportunity for political favors or political blackballing.

adrianwaj 16y ago
Certification would more to do with proving an identity, a physical address, a bank account and being connected to real people. It's to make it more difficult for would-be scammers from being able to hide. Thus, a publically accessible website of who's raising money, for what, their photo, and some references who've vouched for this person would (I think and hope) significantly deter scammy behaviour. (of note, this type of information is becoming more accessible anyhow http://blog.programmableweb.com/2010/09/20/watch-out-for-stealthmodewatch http://blog.programmableweb.com/2010/09/20/watch-out-for-ste... - stealthmodewatch.com) On the other side of the coin, investors could take a simple multi-choice test on ROI, accounting and finance principles .. whatever. I'd have to brainstorm further. If an arm has a problem, you don't cut it off, you fix it and make sure it doesn't happen again with creative solutions - because you're not solving any problem by amputating (or rather not applying that solution correctly if there are healthier alternatives), you're just creating more problems. -- another solution may be to simply cap investments at a certain amount, so people can't invest their life-savings in one go. -- also, a way to search on these micro investments (and micro investors too) would be great: http://www.google.com/finance/stockscreener http://www.google.com/finance/stockscreener http://www.formds.com/filings http://www.formds.com/filings (hat tip gojomo)

lzw 16y ago

I cannot meet those "accredited investor" requirements, which if you think about it, are really meant to cut off dealflow for anyone who isn't already rich. Meanwhile, I have easily lost an angel investment's sized amount of money in equities and derivatives I've controlled. (and made many times that in positive returns... but it is the losses the government pretends like they are protecting me from.) I could have been putting $15k-$20k into several startups a year, for the past 15 years, up to one a month in recent years, if the government would let me. Think about that-- it would have been ILLEGAL for me to invest in these companies (or for them to take my money)... while at the same time I've incurred complete losses of the same size in the public markets, and could blow all of it and more at any casino on the country in a weekend.

joshu 16y ago
http://en.wikipedia.org/wiki/Accredited_investors http://en.wikipedia.org/wiki/Accredited_investors If you could put 15-20k a month into startups, how are you not meeting the accreditation reqs? I think the requirements are to cut off companies from taking investments from little old ladies. It's the startup that would get in trouble, not you. You considered talking to a lawyer?
- lzw 16y ago
  I could put that amount in at the end of the period, not the beginning, and accredation requires either a higher salary than i have, or a net worth over a million, which I don't have. If preventing little old ladies was all that was needed, then it could be accomplished with a wavier.
  - joshu 16y ago
    The other issue that for angel investing is that you really ought to be doing 10+ investments a year to actually even out the risks so that you can get a return. That's a fairly high watermark. I've done approx 45 investments. One has returned (a small amount) of money in five years, so far.
newman314 16y ago