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Great writeup. Been thinking of doing the same thing. > the unspoken secret is that accreditation — at least when investing in individual startups, and especia

Great writeup. Been thinking of doing the same thing. > the unspoken secret is that accreditation — at least when investing in individual startups, and especially if the founder is a good friend of yours — is just a box you can check that nobody verifies I've heard this as well, and it's a very sad thing, because it is one of those 'secrets' that if you knew, it'd open up a lot more opportunities for you. There are few 'secrets' separating the rich and poor, but this is unfortunately one of them.

1cvmask 5y ago
There are so many examples of investors passing over friends as investments. In fact from anecdotal observation people do not invest in friends in general. It is people one or two removed who take the plunge.
- cortesoft 5y ago
  This is probably smart. Running a startup is stressful enough without worrying that you are risking your friends and family's life savings.
  - sanderjd 5y ago
    On the other hand, this is how Warren Buffett got his start, and (from his biography Snowball) it seems to have been a strong motivator for him.
    - cortesoft 5y ago
      Yes, someone wins the lottery. I don't think we should use that as evidence that playing the lottery is a smart financial decision.
      - sanderjd 5y ago
        I agree. Just pointing out an alternative viewpoint, but I kept thinking while reading the biography that his path to the top was risky and stressful.
- robocat 5y ago
  Accepting money from friends is highly risky in my opinion. A friend might say they are willing to lose 100% of their investment, but if you fail and the money is gone, there is likely to be negative effects on your friendship from both parties. Also if the financial state of your friend changes, like getting a mortgage or losing their job, they can get buyers remorse. If you do make it big, then your friends might be annoyed they couldn’t invest (although if they are really twisted about it then perhaps they are not a great friend anyway).
ttul 5y ago
Well, maybe. But if your net worth is < $2M and you want to build a portfolio of 20 or so startups and then let that play out for a decade until one or two have popped and the rest failed or languished, you are going to need steel balls.
- deleted 5y ago
  [deleted]
- vmception 5y ago
  But you can also invest in a fund that gets better deal flow, and your exposure can be more easily spread around.
  - cortesoft 5y ago
    You don't need to be an accredited investor to invest in a fund that invests in startups.
    - sanderjd 5y ago
      Is this true? Wouldn't it have to be publicly traded? What publicly traded seed / venture funds are there?
      - iammisc 5y ago
        The commenter you replied to above is half true. Accredited just means you can invest in securities not registered with the SEC, like your friend's bakery. Some funds are registered with the SEC, some are not. Some funds only accept accredited investors, some do not. Anyone can sell stock to non-accredited investors... it's just that it costs much more to do so, so most don't. Instead, they go to the already rich upper-class and make them richer when the investments pan out. One aspect that goes completely unmentioned in all this is the racial aspect. Many people want equality today, but the fact is that for many minorities, they are dependent on an upper class that is mostly white to raise their money. Instead of being able to issue stock directly to members of their own community (and people they likely have closer relationships with), they have to make a case to people they've never met and are not daddy's best friend. If we really want equality, it's time to end these restrictions.
vmception 5y ago
The legal consequence isnt on you, its on the company selling shares. So just like the Texas law, it deputizes everyone else to shut out poor people instead of being a prohibition from the state directly on the poor person. In practice that means just never talking to poorer people about opportunities, and letting them figure out that they cant even raise capital because none of their friends are accredited. Just American things. Its Super effective!
- czbond 5y ago
  You act like startups are some "keep poor people down scheme". It is because startups are incredibly high risk, and they will most likely lose their money. "Poorer" people can't stand to lose 8/10 bets they place in most cases. Only in the past 10 years with bubble money, and bubble VC exits are Silicon Valley startups seems as 2/10 gold mines. Before that, they were few/far between with a lot of failures. Startups are a failure game.... because their default mode is "fail". Also note, outside of SV - the rate is nowhere near 2/10 billion valuations. Making sure an investor has financial acumen helps founders focus because it is hard enough raising money from angels/VC's in $10k+ amounts - imagine if you only raised $100-$1k per person. Egad! Crowdfunding might be an exception to this - but it is fairly new.
  - deleted 5y ago
    [deleted]
  - gahays68 5y ago
    It doesn't require financial acumen to follow a lead that has qualified a deal. It is technically possible to form syndicates that corral millions of small checks (Blockchain) to follow leads. And while startups are risky, the investing discipline is simple: spread your bets among several "qualified deals", like poker. Anyone skeptical of this should download Fantasy Startup at Doriot.com which is working to qualify non-millionaires as SEC Accredited....you'll quickly discover that everyone can (and should) be investing in startups. All that needs to happen is, first, education, and second, scaled access. Scaled access will follow once there is a large and growing educated population of Mainstreet investors. The average age of the Accredited investor is close to 60 years old....while 98% of GenZ's and Millennials don't qualify. Does it really make sense to cockblock the generations that should be investing (given they have time and ability to take on risk) and they have to live with the investing decisions of today?
slowhand09 5y ago
I've been looking at Kinesis Money as a potential investment and hedge. They have a KVT - Kinesis Velocity Token, which cannot be sold to investors in the US, unless they are accredited investors. There are other avenues to obtain one, but apparently they require verification if getting it directly from Kinesis.

1cvmask 5y ago

There are so many examples of investors passing over friends as investments. In fact from anecdotal observation people do not invest in friends in general. It is people one or two removed who take the plunge.

cortesoft 5y ago
This is probably smart. Running a startup is stressful enough without worrying that you are risking your friends and family's life savings.
- sanderjd 5y ago
  On the other hand, this is how Warren Buffett got his start, and (from his biography Snowball) it seems to have been a strong motivator for him.
  - cortesoft 5y ago
    Yes, someone wins the lottery. I don't think we should use that as evidence that playing the lottery is a smart financial decision.
    - sanderjd 5y ago
      I agree. Just pointing out an alternative viewpoint, but I kept thinking while reading the biography that his path to the top was risky and stressful.
robocat 5y ago
Accepting money from friends is highly risky in my opinion. A friend might say they are willing to lose 100% of their investment, but if you fail and the money is gone, there is likely to be negative effects on your friendship from both parties. Also if the financial state of your friend changes, like getting a mortgage or losing their job, they can get buyers remorse. If you do make it big, then your friends might be annoyed they couldn’t invest (although if they are really twisted about it then perhaps they are not a great friend anyway).

ttul 5y ago

Well, maybe. But if your net worth is < $2M and you want to build a portfolio of 20 or so startups and then let that play out for a decade until one or two have popped and the rest failed or languished, you are going to need steel balls.

deleted 5y ago
[deleted]
vmception 5y ago
But you can also invest in a fund that gets better deal flow, and your exposure can be more easily spread around.
- cortesoft 5y ago
  You don't need to be an accredited investor to invest in a fund that invests in startups.
  - sanderjd 5y ago
    Is this true? Wouldn't it have to be publicly traded? What publicly traded seed / venture funds are there?
    - iammisc 5y ago
      The commenter you replied to above is half true. Accredited just means you can invest in securities not registered with the SEC, like your friend's bakery. Some funds are registered with the SEC, some are not. Some funds only accept accredited investors, some do not. Anyone can sell stock to non-accredited investors... it's just that it costs much more to do so, so most don't. Instead, they go to the already rich upper-class and make them richer when the investments pan out. One aspect that goes completely unmentioned in all this is the racial aspect. Many people want equality today, but the fact is that for many minorities, they are dependent on an upper class that is mostly white to raise their money. Instead of being able to issue stock directly to members of their own community (and people they likely have closer relationships with), they have to make a case to people they've never met and are not daddy's best friend. If we really want equality, it's time to end these restrictions.

vmception 5y ago

The legal consequence isnt on you, its on the company selling shares. So just like the Texas law, it deputizes everyone else to shut out poor people instead of being a prohibition from the state directly on the poor person. In practice that means just never talking to poorer people about opportunities, and letting them figure out that they cant even raise capital because none of their friends are accredited. Just American things. Its Super effective!

czbond 5y ago
You act like startups are some "keep poor people down scheme". It is because startups are incredibly high risk, and they will most likely lose their money. "Poorer" people can't stand to lose 8/10 bets they place in most cases. Only in the past 10 years with bubble money, and bubble VC exits are Silicon Valley startups seems as 2/10 gold mines. Before that, they were few/far between with a lot of failures. Startups are a failure game.... because their default mode is "fail". Also note, outside of SV - the rate is nowhere near 2/10 billion valuations. Making sure an investor has financial acumen helps founders focus because it is hard enough raising money from angels/VC's in $10k+ amounts - imagine if you only raised $100-$1k per person. Egad! Crowdfunding might be an exception to this - but it is fairly new.
- deleted 5y ago
  [deleted]
- gahays68 5y ago
  It doesn't require financial acumen to follow a lead that has qualified a deal. It is technically possible to form syndicates that corral millions of small checks (Blockchain) to follow leads. And while startups are risky, the investing discipline is simple: spread your bets among several "qualified deals", like poker. Anyone skeptical of this should download Fantasy Startup at Doriot.com which is working to qualify non-millionaires as SEC Accredited....you'll quickly discover that everyone can (and should) be investing in startups. All that needs to happen is, first, education, and second, scaled access. Scaled access will follow once there is a large and growing educated population of Mainstreet investors. The average age of the Accredited investor is close to 60 years old....while 98% of GenZ's and Millennials don't qualify. Does it really make sense to cockblock the generations that should be investing (given they have time and ability to take on risk) and they have to live with the investing decisions of today?

slowhand09 5y ago

I've been looking at Kinesis Money as a potential investment and hedge. They have a KVT - Kinesis Velocity Token, which cannot be sold to investors in the US, unless they are accredited investors. There are other avenues to obtain one, but apparently they require verification if getting it directly from Kinesis.