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Sounds like a Michael Lewis passage. I'm familiar with those points, your conclusion is a false dichotomy. > anyone who understands the space understands that

Sounds like a Michael Lewis passage. I'm familiar with those points, your conclusion is a false dichotomy. > anyone who understands the space understands that while the regulation we have is bad, the alternative is so, so much worse. The current regulations around capital formation, and secondary markets are completely classist and need much greater reform. The regulators passionately believe in their paternal approach, there isn't a shady cabal plotting to keep not-rich people out of the markets, they should still be stopped nonetheless.

tptacek 6y ago
The markets themselves are completely classist. Even if there were no accredited investment standard, no VC would want your money, and VC funds formed to capitalize on small investments from retail investors would underperform classic large-LP VC firms --- probably dramatically, possibly even comically. A basic thing to understand about the investment markets is that VC firms compete with each other for dealflow; simply having the right number of dollars isn't enough to get in on the real remunerative deals.
- vmception 6y ago
  VCs would just retain their higher minimum investments and it doesn't need the state’s involvement. VCs compete for dealflow because dealflow is limited due to many currently unnecessary and expensive regulations. Trillion dollar companies got their “growth capital” in an IPO one year after their $8mm Series A. This doesn't happen anymore and generations of people have extremely limited exposure to “deal flow” and liquidity. Thats changing and if VCs want to keeping playing hot potato with Stanford dropout shares they are completely free to keep doing that.
  - tptacek 6y ago
    It would be interesting to see evidence to support your claim that eliminating the accredited investor standard would so expand available opportunities that there would cease to be competition for the best of them. If you can't support that argument, you're stuck with the same adverse selection problem you have now. Have at it! :)
  - JumpCrisscross 6y ago
    > VCs compete for dealflow because dealflow is limited due to many currently unnecessary and expensive regulations This is way off. At the growth capital level, terms for QPs ($5+ million) and QIBs ($100+ million) are night and day. (Accredited investors aren’t on the field. To say nothing of smaller fish.) This partly stems from liability. Small investors have an easier time convincing regulators, judges and juries they got screwed and deserve compensation. It also deals with sophistication. A complex win-win structure might not market well, but they regularly happen with hedge funds. But it is mostly about efficiency. A single institutional investor setting deal terms will fill the rest of the deal on their brand. That lets you negotiate once and be certain of closing. You get a tight list of LPs or investors and know no cheques will bounce. If someone misbehaves, you can complain to the lead who will tell them to knock it off or risk losing future deal flow. Capital markets have economies of scale. Just looking at venture secondary markets, pricing on SharesPost and EquityZen is regularly 20% to 50% worse than what even a moderate cheque writer could get. And that’s before considering the preferences on better classes of stock.
    - deleted 6y ago
      [deleted]

tptacek 6y ago

The markets themselves are completely classist. Even if there were no accredited investment standard, no VC would want your money, and VC funds formed to capitalize on small investments from retail investors would underperform classic large-LP VC firms --- probably dramatically, possibly even comically. A basic thing to understand about the investment markets is that VC firms compete with each other for dealflow; simply having the right number of dollars isn't enough to get in on the real remunerative deals.

vmception 6y ago
VCs would just retain their higher minimum investments and it doesn't need the state’s involvement. VCs compete for dealflow because dealflow is limited due to many currently unnecessary and expensive regulations. Trillion dollar companies got their “growth capital” in an IPO one year after their $8mm Series A. This doesn't happen anymore and generations of people have extremely limited exposure to “deal flow” and liquidity. Thats changing and if VCs want to keeping playing hot potato with Stanford dropout shares they are completely free to keep doing that.
- tptacek 6y ago
  It would be interesting to see evidence to support your claim that eliminating the accredited investor standard would so expand available opportunities that there would cease to be competition for the best of them. If you can't support that argument, you're stuck with the same adverse selection problem you have now. Have at it! :)
- JumpCrisscross 6y ago
  > VCs compete for dealflow because dealflow is limited due to many currently unnecessary and expensive regulations This is way off. At the growth capital level, terms for QPs ($5+ million) and QIBs ($100+ million) are night and day. (Accredited investors aren’t on the field. To say nothing of smaller fish.) This partly stems from liability. Small investors have an easier time convincing regulators, judges and juries they got screwed and deserve compensation. It also deals with sophistication. A complex win-win structure might not market well, but they regularly happen with hedge funds. But it is mostly about efficiency. A single institutional investor setting deal terms will fill the rest of the deal on their brand. That lets you negotiate once and be certain of closing. You get a tight list of LPs or investors and know no cheques will bounce. If someone misbehaves, you can complain to the lead who will tell them to knock it off or risk losing future deal flow. Capital markets have economies of scale. Just looking at venture secondary markets, pricing on SharesPost and EquityZen is regularly 20% to 50% worse than what even a moderate cheque writer could get. And that’s before considering the preferences on better classes of stock.
  - deleted 6y ago
    [deleted]