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Inside FundersClub (YC S12) The Equity Crowdfunding Platform

75 points by dsugarman 14y ago

srehnborg 14y ago
Any idea on when non-accredited investors can join?
- shashashasha 14y ago
  Seems dependent on the JOBS Act: "FundersClub doesn’t rely on the JOBS Act that would let non-accredited investors crowdfund startups. But if the bill is finalized without being sterilized, the JOBS Act could make FundersClub even more of a game-changer by letting literally anyone invest."
  - pash 14y ago
    The JOBS Act did get signed into law with the crowdfunding provisions intact, but the SEC has not yet implemented the rules needed to finalize the regulatory exemption. That's supposed to happen by the end of the year. [0] When that happens, some of the investments FundersClub is offering should qualify for the crowdfunding exemption. 0. http://www.sec.gov/spotlight/jobsact/crowdfundingexemption.htm http://www.sec.gov/spotlight/jobsact/crowdfundingexemption.h...
- GFischer 14y ago
  I'm on the other side, I wonder how could we raise money through there. It's not for seed stage startups, though: "FundersClub currently features early, mid, and late stage private U.S. tech companies from Silicon Valley and beyond. The typical FundersClub company is a startup with high user growth, increasing revenues, reputable investor backing, and/or other signals of traction and growth." https://thefundersclub.com/site/howitworks/ https://thefundersclub.com/site/howitworks/
nchuhoai 14y ago
I wonder whether you'd actually want many small investors versus few big investors? While I love the efficiency, convenience and transparency of FundersClub, I think the big value of investors comes from the personal relationships you can build with them, as well as the domain expertise they can provide to you. Plus, doesn't it make you hit the 500-shareholder limit pretty quick?
- benmathes 14y ago
  They probably group all the investments into one vehicle, with a single shareholder entity. I don't know all the details, though.
kurtvarner 14y ago
Wow, I'm surprised they allow me to sign up and make an investment without verifying that I'm an accredited investor. I simply checked one box, and full access was granted. Screenshots: http://pix.am/ui9z/ http://pix.am/ui9z/ and http://pix.am/cdQU/ http://pix.am/cdQU/. I realize that following through on the investment would undoubtedly get me into legal trouble, but you'd think they would prevent this from happening.
- johnrob 14y ago
  As an investor, you aren't susceptible to anything - the company that takes your money bears risk of lawsuit. In this case, given how it's structured, fundersclub would be at risk.
  - zio99 14y ago
    What are the rules regarding Canadian investors?
    - prostoalex 14y ago
      Since sale of securities is done in the US, local laws apply.
- deleted 14y ago
  [deleted]
- nostromo 14y ago
  I'm not a lawyer, but I bet you signed away most of your protections by lying in the signup form. Those protections are for you, the smalltime investor, not for the company. If you later decide to sue the company or FoundersClub because you're unhappy with how the company used your money, they could reduce their liability by pointing to the fact that you misrepresented yourself during registration.
- jcampbell1 14y ago
  Did you actually wire the money? After entering your bank account details, you have to manually e-sign a bunch of documents, including providing all your tax ids, and signing that you are accredited.
HorizonXP 14y ago
I love this idea, but my issue with it is that it turns investors into merely a vehicle for money. If all you need is money, then it's awesome. But presumably, there are plenty of startups out there that could benefit from the advice, contacts, and expertise of the investors as well as their money. The role of the strategic investor is reduced. I understand you can still secure investment outside of FundersClub, but there can be issues with dilution. It'll be interesting to see how this all turns out. (Yes, I copy-pasta'd my own comment from the article.)
dublinclontarf 14y ago
If you use Bitcoin, there is a bitcoin denominated stock market used for funding already. glbse.com Sites a bit slow but it's been up for over a year.
steve8918 14y ago
Are there any protections for the initial investors for subsequent funding rounds, when their share could potentially be diluted to 0? I'm still a bit leery of this idea of fundsourcing, because it sounds like a way for retail investors to fund the most dangerous and riskiest round, and then once a startup has traction, VCs can come in with a lot of money and dilute the initial investors with impunity. Is this a possibility, or are there ways for these initial investors to protect themselves?

75 points by dsugarman 14y ago

srehnborg 14y ago

Any idea on when non-accredited investors can join?

shashashasha 14y ago
Seems dependent on the JOBS Act: "FundersClub doesn’t rely on the JOBS Act that would let non-accredited investors crowdfund startups. But if the bill is finalized without being sterilized, the JOBS Act could make FundersClub even more of a game-changer by letting literally anyone invest."
- pash 14y ago
  The JOBS Act did get signed into law with the crowdfunding provisions intact, but the SEC has not yet implemented the rules needed to finalize the regulatory exemption. That's supposed to happen by the end of the year. [0] When that happens, some of the investments FundersClub is offering should qualify for the crowdfunding exemption. 0. http://www.sec.gov/spotlight/jobsact/crowdfundingexemption.htm http://www.sec.gov/spotlight/jobsact/crowdfundingexemption.h...
GFischer 14y ago
I'm on the other side, I wonder how could we raise money through there. It's not for seed stage startups, though: "FundersClub currently features early, mid, and late stage private U.S. tech companies from Silicon Valley and beyond. The typical FundersClub company is a startup with high user growth, increasing revenues, reputable investor backing, and/or other signals of traction and growth." https://thefundersclub.com/site/howitworks/ https://thefundersclub.com/site/howitworks/

nchuhoai 14y ago

I wonder whether you'd actually want many small investors versus few big investors? While I love the efficiency, convenience and transparency of FundersClub, I think the big value of investors comes from the personal relationships you can build with them, as well as the domain expertise they can provide to you. Plus, doesn't it make you hit the 500-shareholder limit pretty quick?

benmathes 14y ago
They probably group all the investments into one vehicle, with a single shareholder entity. I don't know all the details, though.

kurtvarner 14y ago

Wow, I'm surprised they allow me to sign up and make an investment without verifying that I'm an accredited investor. I simply checked one box, and full access was granted. Screenshots: http://pix.am/ui9z/ http://pix.am/ui9z/ and http://pix.am/cdQU/ http://pix.am/cdQU/. I realize that following through on the investment would undoubtedly get me into legal trouble, but you'd think they would prevent this from happening.

johnrob 14y ago
As an investor, you aren't susceptible to anything - the company that takes your money bears risk of lawsuit. In this case, given how it's structured, fundersclub would be at risk.
- zio99 14y ago
  What are the rules regarding Canadian investors?
  - prostoalex 14y ago
    Since sale of securities is done in the US, local laws apply.
deleted 14y ago
[deleted]
nostromo 14y ago
I'm not a lawyer, but I bet you signed away most of your protections by lying in the signup form. Those protections are for you, the smalltime investor, not for the company. If you later decide to sue the company or FoundersClub because you're unhappy with how the company used your money, they could reduce their liability by pointing to the fact that you misrepresented yourself during registration.
jcampbell1 14y ago
Did you actually wire the money? After entering your bank account details, you have to manually e-sign a bunch of documents, including providing all your tax ids, and signing that you are accredited.

HorizonXP 14y ago

I love this idea, but my issue with it is that it turns investors into merely a vehicle for money. If all you need is money, then it's awesome. But presumably, there are plenty of startups out there that could benefit from the advice, contacts, and expertise of the investors as well as their money. The role of the strategic investor is reduced. I understand you can still secure investment outside of FundersClub, but there can be issues with dilution. It'll be interesting to see how this all turns out. (Yes, I copy-pasta'd my own comment from the article.)

dublinclontarf 14y ago

If you use Bitcoin, there is a bitcoin denominated stock market used for funding already. glbse.com Sites a bit slow but it's been up for over a year.

steve8918 14y ago

Are there any protections for the initial investors for subsequent funding rounds, when their share could potentially be diluted to 0? I'm still a bit leery of this idea of fundsourcing, because it sounds like a way for retail investors to fund the most dangerous and riskiest round, and then once a startup has traction, VCs can come in with a lot of money and dilute the initial investors with impunity. Is this a possibility, or are there ways for these initial investors to protect themselves?