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I get that they exist to protect people from getting scammed, but it also locks people out of some of the best ways to create wealth unless they’re already rich

I get that they exist to protect people from getting scammed, but it also locks people out of some of the best ways to create wealth unless they’re already rich. Crypto is an example of both. More people get scammed, more regular people accumulated wealth. Outside of that look at startups, regular people are locked out of early stage investment (including many of us in the industry). I understand the trade off but find it frustrating I’m constrained for my own good. It feels like being held down to the level of the (uncharitably stated) dumbest person.

kryogen1c 5y ago
> locks people out of some of the best ways to create wealth unless they’re already rich im sorry what? investing in startups is one of the best way to create wealth? you have a source that talks about average and median returns on investments across all startups?
- gonehome 5y ago
  I don't care about the average or median case and 'some of the best' is suitably subjective, I just want the freedom to make my own choices. The entire bet with startups if you're not rich enough to fund via an incubator is picking a team or company you think is good and kicking in some smallish amount of cash (~10k), angel list basically. If you're in the industry you may be better positioned to do this than a random person. We can do this by going and working for a startup and dumping money in to exercise options (arguably even riskier since now your job is also tied to its success), but not by just kicking in some cash unless you hit the accredited investor threshold. I should be able to choose to do this if I want to. Instead I can only put money in after the company is public and a lot of the early return has already been taken by people rich enough to be allowed to buy in earlier. Meanwhile I could go and gamble at a casino on slots without any proof that I'm rich enough to waste money that way.
  - jonas21 5y ago
    If you've been in the industry for a while, you may already qualify as an accredited investor. The income threshold is $200K/year, which according to levels.fyi would easily be met by someone with a few years experience at a FAANG, for example. If not, you can also qualify by passing the Series 65 exam, which is a 3-hour multiple-choice test that anyone can take. You'll probably find that the biggest barrier is finding good startups who will take your money. The ones interested in taking a small amount of cash from some random person are also the least likely to succeed.
    - gonehome 5y ago
      > The ones interested in taking a small amount of cash from some random person are also the least likely to succeed. Part of this is the result of the existing regulations making it a pain to do so.
      - Daishiman 5y ago
        I live in a place with no requirements to be an investor and it's still all the same. It's just in general a very, very bad idea.
NikolaNovak 5y ago
Hmmm; According to which metrics and stats is investment in early startups / random new companies and schemes, the best way to accumulate wealth? How do we define "best" - safest? Highest top possibility? Lowest risk? Over which period of time? Our experiences may vary. I have far more visibility into people scammed left right and centre where I'm at. Those who did make money on sketchy schemes are lucky outliers (who of course believe themselves to be savvy risk takers fair enough ; I see most of them as incorrigible Russian roulette players who got lucky but not wiser).
eezurr 5y ago
The relatively little money (and little experience with startups) that most retail investors have would not be enough to diversify their risk and thus be equivalent to gambling. I think the figure is 5% of startups are successful? Anyone who has become wealthy through crypto became so because they gambled. And, bitcoin has a history of being manipulated. I had a friend who was part of a network that communicated to him when to buy and sell bitcoin. He mentioned "the whales" a few times when talking about it.
- fleddr 5y ago
  Interesting statement, since "certified" investors invest money into startups which have a failure rate of 95%. But these people are of course not "gambling", because they bet at 50 horses at once. And for all their experience, they continuously fail. It all seems very arbitrary. Personally, I think "gambling" is the wrong word. It's high risk investing. When I put all my chips on "red", that's gambling. When I read about a startup, believe in their idea and see potential, yet am proven wrong, I made an investment mistake. It's not gambling unless one blindly invests without any research.
  - brewdad 5y ago
    I've heard exactly this argument from every gambler who walked into a casino with a "system". You might come out better than someone blindly laying bets, but you are still very much gambling.
sgustard 5y ago
The accredited investor rule is not the main barrier to investing in quality startups. The barrier is being part of an insiders' club. A16z will call its network of rich entrepreneurs when an investment opportunity arises. Nobody except the already-rich and connected even know it's happening.

kryogen1c 5y ago

> locks people out of some of the best ways to create wealth unless they’re already rich im sorry what? investing in startups is one of the best way to create wealth? you have a source that talks about average and median returns on investments across all startups?

gonehome 5y ago
I don't care about the average or median case and 'some of the best' is suitably subjective, I just want the freedom to make my own choices. The entire bet with startups if you're not rich enough to fund via an incubator is picking a team or company you think is good and kicking in some smallish amount of cash (~10k), angel list basically. If you're in the industry you may be better positioned to do this than a random person. We can do this by going and working for a startup and dumping money in to exercise options (arguably even riskier since now your job is also tied to its success), but not by just kicking in some cash unless you hit the accredited investor threshold. I should be able to choose to do this if I want to. Instead I can only put money in after the company is public and a lot of the early return has already been taken by people rich enough to be allowed to buy in earlier. Meanwhile I could go and gamble at a casino on slots without any proof that I'm rich enough to waste money that way.
- jonas21 5y ago
  If you've been in the industry for a while, you may already qualify as an accredited investor. The income threshold is $200K/year, which according to levels.fyi would easily be met by someone with a few years experience at a FAANG, for example. If not, you can also qualify by passing the Series 65 exam, which is a 3-hour multiple-choice test that anyone can take. You'll probably find that the biggest barrier is finding good startups who will take your money. The ones interested in taking a small amount of cash from some random person are also the least likely to succeed.
  - gonehome 5y ago
    > The ones interested in taking a small amount of cash from some random person are also the least likely to succeed. Part of this is the result of the existing regulations making it a pain to do so.
    - Daishiman 5y ago
      I live in a place with no requirements to be an investor and it's still all the same. It's just in general a very, very bad idea.

NikolaNovak 5y ago

Hmmm; According to which metrics and stats is investment in early startups / random new companies and schemes, the best way to accumulate wealth? How do we define "best" - safest? Highest top possibility? Lowest risk? Over which period of time? Our experiences may vary. I have far more visibility into people scammed left right and centre where I'm at. Those who did make money on sketchy schemes are lucky outliers (who of course believe themselves to be savvy risk takers fair enough ; I see most of them as incorrigible Russian roulette players who got lucky but not wiser).

eezurr 5y ago

The relatively little money (and little experience with startups) that most retail investors have would not be enough to diversify their risk and thus be equivalent to gambling. I think the figure is 5% of startups are successful? Anyone who has become wealthy through crypto became so because they gambled. And, bitcoin has a history of being manipulated. I had a friend who was part of a network that communicated to him when to buy and sell bitcoin. He mentioned "the whales" a few times when talking about it.

fleddr 5y ago
Interesting statement, since "certified" investors invest money into startups which have a failure rate of 95%. But these people are of course not "gambling", because they bet at 50 horses at once. And for all their experience, they continuously fail. It all seems very arbitrary. Personally, I think "gambling" is the wrong word. It's high risk investing. When I put all my chips on "red", that's gambling. When I read about a startup, believe in their idea and see potential, yet am proven wrong, I made an investment mistake. It's not gambling unless one blindly invests without any research.
- brewdad 5y ago
  I've heard exactly this argument from every gambler who walked into a casino with a "system". You might come out better than someone blindly laying bets, but you are still very much gambling.

sgustard 5y ago

The accredited investor rule is not the main barrier to investing in quality startups. The barrier is being part of an insiders' club. A16z will call its network of rich entrepreneurs when an investment opportunity arises. Nobody except the already-rich and connected even know it's happening.