4 ms·

Equity just doesn't make sense at the level that most people are backing KS projects. What kind of equity are you expecting if you back a $100K project for $15

Equity just doesn't make sense at the level that most people are backing KS projects. What kind of equity are you expecting if you back a $100K project for $15? Maybe, if the project is wildly successful post Kickstarter, you'll see a couple hundred dollars? There are also projects on Kickstarter that will never be profitable, not because of failure but by design. People use Kickstarter for art experiments and to fund parties and special events that don't generate a product that will be sold after the initial funding. You'd be better off going on AngelList if your goal is to fund projects for high amounts of money and get a return on your investment. That said, I don't think there anything explicitly stopping someone on Kickstarter from giving small amounts of equity to backers, and it might be something that people do for very high tier ($5K-$10K) reward levels.

rpwilcox 15y ago
> What kind of equity are you expecting if you back a $100K project for $15? A very little amount yes. But if I can invest $100 (or $1,000) into a Kickstarter project maybe I "lose" it all, maybe make my investment back + enough money to buy a pizza. Maybe I double my investment, which then I can pour into other kickstarter investments. Where AngelList falls down is don't you have to be a qualified angel? So someone with only hundreds to invest, or a thousand dollars, is locked out because AngelList is looking for investors with tens of thousands of dollars? (Although, again, the JOBS act might change that dynamic...)
- defen 15y ago
  Do you know how much of a nightmare it would be for a small startup to deal with thousands of effectively anonymous investors, each of whom has only invested a few tens or hundreds of dollars? You have to deal with voting rights, transfer of equity, shareholder lawsuits, etc, of people who you have no previous contact with and no way to vet. What's to stop a competitor from "investing" in your company to gain access to your financials? It just doesn't seem like the risks and costs are worth the reward.
  - gus_massa 15y ago
    And another problem is that most of them are not "accredited investors". From: http://paulgraham.com/startupfunding.html http://paulgraham.com/startupfunding.html The SEC defines an "accredited investor" as someone with over a million dollars in liquid assets or an income of over $200,000 a year. The regulatory burden is much lower if a company's shareholders are all accredited investors. Once you take money from the general public you're more restricted in what you can do. [1]
    - rpwilcox 15y ago
      I don't think that matters, in the post JOBS act world (in the US)
tedunangst 15y ago
A $15 share of a $100k company is more than 100,000 times larger than a single share of Apple, proportionally.

rpwilcox 15y ago

> What kind of equity are you expecting if you back a $100K project for $15? A very little amount yes. But if I can invest $100 (or $1,000) into a Kickstarter project maybe I "lose" it all, maybe make my investment back + enough money to buy a pizza. Maybe I double my investment, which then I can pour into other kickstarter investments. Where AngelList falls down is don't you have to be a qualified angel? So someone with only hundreds to invest, or a thousand dollars, is locked out because AngelList is looking for investors with tens of thousands of dollars? (Although, again, the JOBS act might change that dynamic...)

defen 15y ago
Do you know how much of a nightmare it would be for a small startup to deal with thousands of effectively anonymous investors, each of whom has only invested a few tens or hundreds of dollars? You have to deal with voting rights, transfer of equity, shareholder lawsuits, etc, of people who you have no previous contact with and no way to vet. What's to stop a competitor from "investing" in your company to gain access to your financials? It just doesn't seem like the risks and costs are worth the reward.
- gus_massa 15y ago
  And another problem is that most of them are not "accredited investors". From: http://paulgraham.com/startupfunding.html http://paulgraham.com/startupfunding.html The SEC defines an "accredited investor" as someone with over a million dollars in liquid assets or an income of over $200,000 a year. The regulatory burden is much lower if a company's shareholders are all accredited investors. Once you take money from the general public you're more restricted in what you can do. [1]
  - rpwilcox 15y ago
    I don't think that matters, in the post JOBS act world (in the US)

tedunangst 15y ago

A $15 share of a $100k company is more than 100,000 times larger than a single share of Apple, proportionally.