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My application for membership just got rejected for not making enough money. Rich get richer, I guess. If I was in a different mood I would write a blog post i

by robertk 13y ago

My application for membership just got rejected for not making enough money. Rich get richer, I guess. If I was in a different mood I would write a blog post in outrage.

abat 13y ago
This is the SEC trying to protect the "little guy". This is why they can only let "accredited" investors invest that have over a certain amount of money/income. If you're outraged, make sure to point your outrage at the government.
- m52go 13y ago
  Outrage pointed at the government: I don't agree with the supposed intentions of the government. If the government really was trying to 'protect the little guy', it wouldn't allow all those short-term credit schemes that charge exorbitantly high interest rates. Those things are toxic, screwing up peoples' lives all the time, but the government lets it keep on going. What kind of person who can barely put food on the table invest in a startup? It's stupid. Even if you can put food on the table, you should be able to do whatever the hell you want with your money. False advertising and misrepresentation is the issue that needs attention here, not "protecting the little guy."
  - nknighthb 13y ago
    Um, it's already all about "false advertising and misrepresentation"! It's all about disclosure. Any company can choose to comply with the reporting requirements and thus "go public", whereupon anyone who wants to buy shares in the company is free to do so at any time, even with their last penny. Even without complying with those requirements, companies can still, to a limited degree, receive investment from a certain number of non-accredited investors. What is it, exactly, that you think the SEC regs say?
- exelius 13y ago
  Well, the idea is that there are tons of incredibly risky investments out there where you really do need to be a professional investor to properly understand the risk (or at least wealthy enough to absorb a large loss). The idea is to prevent predatory bankers from selling these really risky investments to individuals as if they weren't as risky. Taking on a lot of risk as part of a portfolio strategy is fine, but you need to understand what you're getting into when you're buying leveraged securities, complex debt-equity instruments, etc. I'm glad the average investor can't buy into hedge funds, because you only hear about the successful ones. You don't hear about all the ones that lost 50% of their value in the first year and closed down (and there are plenty of them.)
  - m52go 13y ago
    I agree that you have to understand what you're getting into, but I argue it's not limited to products of high finance. What about payday loans, borrowing on credit cards, etc.? Let's not forget about buying houses...we all know how that turned out. Student loans? Like successful hedge funds, you only hear about the flashy side of consumer finance. Thousands get screwed every day from crooked (and non-crooked) schemes aimed at the non-affluent. There's no simply no reason to block access to (potentially) the most lucrative instruments known to man in the name of risk. It's already everywhere.
    - deleted 13y ago
      [deleted]
jonnathanson 13y ago
Are you an accredited investor? Legally, FundersClub can't accept you if you're not. This isn't a "rich get richer" kind of thing; it's a federal regulation. It's not FundersClub being snooty; it's FundersClub complying with the SEC. The JOBS Act intends to break down some of these barriers, though its most important provisions are still pending.
- awwstn 13y ago
  This isn't a "rich get richer" kind of thing; it's a federal regulation. Well, it may be a "rich get richer" kind of thing, but it isn't something for FundersClub to decide, it's something the government has decided. Edit: Your edits mooted my point
- pbreit 13y ago
  Sounds like a rich-get-richer thing to me.
  - ChuckMcM 13y ago
    Well the accredited investor rules really are there to protect people from getting scammed. That rule just accepts that a material number of the people asking for investment are going to be unscrupulous bastards who are just out to take their "investors" money. This way they take it away from people who can afford to lose it, rather than people who cannot. There are avenues for non-accredited investors to invest in the market in which the SEC has put a lot of constraints on the people trying to you pitch you such that if they are really crooks you can sue them and try to get your money back. Sometimes even that fails, as in the Madoff case, but they try.
    - lectrick 13y ago
      > Well the accredited investor rules really are there to protect people from getting scammed. This is a line of bullshit. If the law allowed it, you could easily set up a site like LendingClub.com which distributed the risk over many many things, mitigating it quite a bit, and allowing "smaller" players to take advantage of it. One could do the same thing with real estate... If the law allowed it. The laws against capital investment by anyone who is not a millionaire IS what is making the rich richer.
MadManE 13y ago
If you were running a business that was solely based off of how well people made money, wouldn't you want to include only those who had proven that they can make lots of money? Sounds like risk mitigation to me.
klochner 13y ago
Venture as an asset class has underperformed the S&P over the last 10 years[1], so you probably aren't missing out on much. It's only the top firms that have been making good money. [edit] - added source [1] http://www.nvca.org/index.php?option=com_docman&task=doc_download&gid=1042 http://www.nvca.org/index.php?option=com_docman&task=doc_dow...
- lectrick 13y ago
  Can you provide a link to this data, please?
  - exelius 13y ago
    I recall from my venture class in B-school that most venture funds basically match inflation. Sorry, I don't have a link to cite, but our prof had been a venture capitalist for 15 years. For every $100M return KPCB sees off of a Facebook or similar, they pump $90M into companies that either fail outright or exit in a break-even acquihire. $10M over the average 10 year life of a venture fund isn't a great return. Most good VCs aren't in it for the money; they want to see people succeed. The money is obviously important, but they generally have enough of it before they start investing.
- tanzam75 13y ago
  > Venture as an asset class has underperformed the S&P over the last 10 years[1], so you probably aren't missing out on much. And that's actually biasing the comparison in VC's favor. The S&P 500 is a large-cap index. Venture capital is supposed to invest in early-stage companies with high growth prospects. A fairer comparison would be to a small-cap index, or to private equity, or to private equity that only takes on small-caps. Also note that venture capital is risky and illiquid. It should earn a risk and liquidity premium vs. the public stock market. If it can't earn at least this premium, then it would be producing negative alpha.

by robertk 13y ago

My application for membership just got rejected for not making enough money. Rich get richer, I guess. If I was in a different mood I would write a blog post in outrage.

abat 13y ago

This is the SEC trying to protect the "little guy". This is why they can only let "accredited" investors invest that have over a certain amount of money/income. If you're outraged, make sure to point your outrage at the government.

m52go 13y ago
Outrage pointed at the government: I don't agree with the supposed intentions of the government. If the government really was trying to 'protect the little guy', it wouldn't allow all those short-term credit schemes that charge exorbitantly high interest rates. Those things are toxic, screwing up peoples' lives all the time, but the government lets it keep on going. What kind of person who can barely put food on the table invest in a startup? It's stupid. Even if you can put food on the table, you should be able to do whatever the hell you want with your money. False advertising and misrepresentation is the issue that needs attention here, not "protecting the little guy."
- nknighthb 13y ago
  Um, it's already all about "false advertising and misrepresentation"! It's all about disclosure. Any company can choose to comply with the reporting requirements and thus "go public", whereupon anyone who wants to buy shares in the company is free to do so at any time, even with their last penny. Even without complying with those requirements, companies can still, to a limited degree, receive investment from a certain number of non-accredited investors. What is it, exactly, that you think the SEC regs say?
exelius 13y ago
Well, the idea is that there are tons of incredibly risky investments out there where you really do need to be a professional investor to properly understand the risk (or at least wealthy enough to absorb a large loss). The idea is to prevent predatory bankers from selling these really risky investments to individuals as if they weren't as risky. Taking on a lot of risk as part of a portfolio strategy is fine, but you need to understand what you're getting into when you're buying leveraged securities, complex debt-equity instruments, etc. I'm glad the average investor can't buy into hedge funds, because you only hear about the successful ones. You don't hear about all the ones that lost 50% of their value in the first year and closed down (and there are plenty of them.)
- m52go 13y ago
  I agree that you have to understand what you're getting into, but I argue it's not limited to products of high finance. What about payday loans, borrowing on credit cards, etc.? Let's not forget about buying houses...we all know how that turned out. Student loans? Like successful hedge funds, you only hear about the flashy side of consumer finance. Thousands get screwed every day from crooked (and non-crooked) schemes aimed at the non-affluent. There's no simply no reason to block access to (potentially) the most lucrative instruments known to man in the name of risk. It's already everywhere.
  - deleted 13y ago
    [deleted]

jonnathanson 13y ago

Are you an accredited investor? Legally, FundersClub can't accept you if you're not. This isn't a "rich get richer" kind of thing; it's a federal regulation. It's not FundersClub being snooty; it's FundersClub complying with the SEC. The JOBS Act intends to break down some of these barriers, though its most important provisions are still pending.

awwstn 13y ago
This isn't a "rich get richer" kind of thing; it's a federal regulation. Well, it may be a "rich get richer" kind of thing, but it isn't something for FundersClub to decide, it's something the government has decided. Edit: Your edits mooted my point
pbreit 13y ago
Sounds like a rich-get-richer thing to me.
- ChuckMcM 13y ago
  Well the accredited investor rules really are there to protect people from getting scammed. That rule just accepts that a material number of the people asking for investment are going to be unscrupulous bastards who are just out to take their "investors" money. This way they take it away from people who can afford to lose it, rather than people who cannot. There are avenues for non-accredited investors to invest in the market in which the SEC has put a lot of constraints on the people trying to you pitch you such that if they are really crooks you can sue them and try to get your money back. Sometimes even that fails, as in the Madoff case, but they try.
  - lectrick 13y ago
    > Well the accredited investor rules really are there to protect people from getting scammed. This is a line of bullshit. If the law allowed it, you could easily set up a site like LendingClub.com which distributed the risk over many many things, mitigating it quite a bit, and allowing "smaller" players to take advantage of it. One could do the same thing with real estate... If the law allowed it. The laws against capital investment by anyone who is not a millionaire IS what is making the rich richer.

MadManE 13y ago

If you were running a business that was solely based off of how well people made money, wouldn't you want to include only those who had proven that they can make lots of money? Sounds like risk mitigation to me.

klochner 13y ago

Venture as an asset class has underperformed the S&P over the last 10 years[1], so you probably aren't missing out on much. It's only the top firms that have been making good money. [edit] - added source [1] http://www.nvca.org/index.php?option=com_docman&task=doc_download&gid=1042 http://www.nvca.org/index.php?option=com_docman&task=doc_dow...

lectrick 13y ago
Can you provide a link to this data, please?
- exelius 13y ago
  I recall from my venture class in B-school that most venture funds basically match inflation. Sorry, I don't have a link to cite, but our prof had been a venture capitalist for 15 years. For every $100M return KPCB sees off of a Facebook or similar, they pump $90M into companies that either fail outright or exit in a break-even acquihire. $10M over the average 10 year life of a venture fund isn't a great return. Most good VCs aren't in it for the money; they want to see people succeed. The money is obviously important, but they generally have enough of it before they start investing.
tanzam75 13y ago
> Venture as an asset class has underperformed the S&P over the last 10 years[1], so you probably aren't missing out on much. And that's actually biasing the comparison in VC's favor. The S&P 500 is a large-cap index. Venture capital is supposed to invest in early-stage companies with high growth prospects. A fairer comparison would be to a small-cap index, or to private equity, or to private equity that only takes on small-caps. Also note that venture capital is risky and illiquid. It should earn a risk and liquidity premium vs. the public stock market. If it can't earn at least this premium, then it would be producing negative alpha.