4 ms·

Funding seed-stage startups is broken. The ratio of accredited investors to startup is so skewed that most startups don't stand a chance of getting funding. A

Funding seed-stage startups is broken. The ratio of accredited investors to startup is so skewed that most startups don't stand a chance of getting funding. As the LinkedIn IPO shows, average people are extremely excited about getting involved, but they are locked out in the US due to strong regulatory laws. Disruptive startups can't get funding and there are many people who would like to fund them with small investments of, say, $50. Here's a solution. Part One: Companies register as public companies on Malta, which is EU, on the cheap (relatively). They aren't listed on any exchange but can privately accept bids for shares from anyone. E.g. 10 shares for $50. Part Two: A site which offers any company/group/idea the possibility to list (ala Crunchbase) but then for those companies that incorporate publicly in Malta, there's a pre-built mechanism for them to field and accepts bids for equity. There's a very small transaction fee for this. I've registered the domain OpenStarts.com but it's yours along with the business plan if you want it. Just email me. A quick deck is here: http://c25571.r71.cf1.rackcdn.com/OpenStarts.ppsx http://c25571.r71.cf1.rackcdn.com/OpenStarts.ppsx

patrickod 15y ago
am I right in saying that this is really kickstarter with equity in place of product ?
- lachyg 15y ago
  I've always thought a Kickstarter for startups / websites would be such a brilliant idea, but not feasible. This guys idea sounds fantastic, but I think the whole registering in Malta wouldn't be too appealing.
  - milkshakes 15y ago
    check out profounder.com they do just that
    - david927 15y ago
      Not really. You must have a substantial, pre-existing relationship with the investor and you may only have a few investors. Even then, because these are non-accredited investors, you may have trouble raising financing in later rounds. The idea of OpenStarts is that you can be funded by thousands of people you've never met and there's no penalty later.
      - milkshakes 15y ago
        while i can't speak to the 'penalty later' part, profounder does make it possible for kickstarter type fundraising from strangers. however, those people can't make more than their original investment back (sort of like kiva, which is not surprising, because Jessica Jackley, the pro-founder CEO, was one of kiva's co-founders)
        davidthomaslang 15y ago
        Hi all, My name is David Lang, I'm the Community Manager at ProFounder. I wanted to weigh in on the great discussion above. ProFounder does, in fact, allow for equity investments and is legally compliant. As mentioned above, it's SEC compliant due to the fact that investors have prior, substantial relationships with the entrepreneurs.
  - david927 15y ago
    You simply can't do it in the U.S. There are very, very strict regulations against it. Many have tried different angles but it's amazingly airtight. Malta isn't appealing, I'm sure, to those outside of the EU. But the way I mentioned makes at least possible what otherwise is impossible.
    - pitchups 15y ago
      We originally wanted to do something similar to what you are proposing. Since crowd-sourced investment was out in the US, we decided to just set up the site pitchups.com to allow people to get feedback/comments on their startup idea and connect with others, and just develop it as a community. There may be some value and synergies in combining what we are doing at pitchups with your site - maybe it can serve as a funnel for great ideas to get to the crowd-sourced funding stage. Let me know if this is something that would be of interest to you, by emailing admin@pitchups.com
- snippyhollow 15y ago
  Your "just" is just gigantic. But yes :)
prodigal_erik 15y ago
Does the SEC really not assert jurisdiction over US residents selling equities (possibly even to other US residents) when they are shares of a primarily US-held foreign corporation, or being offered through a foreign market? Somehow that surprises me.
- david927 15y ago
  US citizens can own shares in a foreign public company. That company can sell shares. There's nothing the SEC can really get mad about here.
  - prodigal_erik 15y ago
    The SEC can bring felony charges against individuals offering unregistered securities, not just penalize a corporate entity that created the shares. As I understand it, it doesn't even matter whether the securities actually are shares of a corporation, or just some similar enough instrument. Before doing this, I would make very sure either the foreign corporation or the foreign market meet exemptions well defended in case law.
    - david927 15y ago
      individuals offering unregistered securities These are fully registered securities. It's legal.
open 15y ago
Thanks David, I appreciate the offer. I think I'll stick with US base companies for now, it's something I understand more. I don't have any understanding of Malta or the EU and doesn't sound like something I'd want to get into but I genuinely thank you for the offer.

patrickod 15y ago

am I right in saying that this is really kickstarter with equity in place of product ?

lachyg 15y ago
I've always thought a Kickstarter for startups / websites would be such a brilliant idea, but not feasible. This guys idea sounds fantastic, but I think the whole registering in Malta wouldn't be too appealing.
- milkshakes 15y ago
  check out profounder.com they do just that
  - david927 15y ago
    Not really. You must have a substantial, pre-existing relationship with the investor and you may only have a few investors. Even then, because these are non-accredited investors, you may have trouble raising financing in later rounds. The idea of OpenStarts is that you can be funded by thousands of people you've never met and there's no penalty later.
    - milkshakes 15y ago
      while i can't speak to the 'penalty later' part, profounder does make it possible for kickstarter type fundraising from strangers. however, those people can't make more than their original investment back (sort of like kiva, which is not surprising, because Jessica Jackley, the pro-founder CEO, was one of kiva's co-founders)
      - davidthomaslang 15y ago
        Hi all, My name is David Lang, I'm the Community Manager at ProFounder. I wanted to weigh in on the great discussion above. ProFounder does, in fact, allow for equity investments and is legally compliant. As mentioned above, it's SEC compliant due to the fact that investors have prior, substantial relationships with the entrepreneurs.
- david927 15y ago
  You simply can't do it in the U.S. There are very, very strict regulations against it. Many have tried different angles but it's amazingly airtight. Malta isn't appealing, I'm sure, to those outside of the EU. But the way I mentioned makes at least possible what otherwise is impossible.
  - pitchups 15y ago
    We originally wanted to do something similar to what you are proposing. Since crowd-sourced investment was out in the US, we decided to just set up the site pitchups.com to allow people to get feedback/comments on their startup idea and connect with others, and just develop it as a community. There may be some value and synergies in combining what we are doing at pitchups with your site - maybe it can serve as a funnel for great ideas to get to the crowd-sourced funding stage. Let me know if this is something that would be of interest to you, by emailing admin@pitchups.com
snippyhollow 15y ago
Your "just" is just gigantic. But yes :)

prodigal_erik 15y ago

Does the SEC really not assert jurisdiction over US residents selling equities (possibly even to other US residents) when they are shares of a primarily US-held foreign corporation, or being offered through a foreign market? Somehow that surprises me.

david927 15y ago
US citizens can own shares in a foreign public company. That company can sell shares. There's nothing the SEC can really get mad about here.
- prodigal_erik 15y ago
  The SEC can bring felony charges against individuals offering unregistered securities, not just penalize a corporate entity that created the shares. As I understand it, it doesn't even matter whether the securities actually are shares of a corporation, or just some similar enough instrument. Before doing this, I would make very sure either the foreign corporation or the foreign market meet exemptions well defended in case law.
  - david927 15y ago
    individuals offering unregistered securities These are fully registered securities. It's legal.

open 15y ago

Thanks David, I appreciate the offer. I think I'll stick with US base companies for now, it's something I understand more. I don't have any understanding of Malta or the EU and doesn't sound like something I'd want to get into but I genuinely thank you for the offer.