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This is why most angels have to be accredited investors, meaning that they need to have $1MM in assets. Millionaires investing in new ideas aren't exactly naive

This is why most angels have to be accredited investors, meaning that they need to have $1MM in assets. Millionaires investing in new ideas aren't exactly naive widows and orphans (though they could be). With public stocks there is indeed high liquidity, but there was also strikingly high volatility during the tech bubble. It's good to be able to sell your shares, but less so if the price can drop 80% in a day. That's when the common person gets hurt and the effects of a bubble are felt by the general public. Accreditation rules can seem unfair, but this scenario is exactly what they're designed to prevent. Crowdfunding is a whole different issue. Most crowdfunding campaigns trade products for money, not equity for money. Kickstarter campaigns tend to go bust frequently, but people don't invest their life savings in a crowdfunded project hoping to strike it rich. People with disposable income investing hundreds or thousand of dollars in an idea isn't a sign of a bubble. It might turn out to have deleterious long term effects, but, we'll see. Maybe I'm not understanding what Cuban is saying here, but it doesn't seem to make a lot of sense.

edwinespinosa09 12y ago
I think he was just pointing out a fact we might all know, that there is a sort of "investor bubble" that keeps getting feed by the good/big payouts. Then goes into a better model for inexperienced/new investors by "crowdfunding" Maybe he should have used another title :/
imjk 12y ago
Well he explicitly mentions equity crowd funding which allows people to bypass those rules. Also, from personal experience as an angel investor, there isn't really a great authority out there enforcing accredited investor requirements. All the times I've invested in private companies, I simply had to sign a one-page document self-proclaiming myself as an accredited investor.
- itsallthesame 12y ago
  If you were to sign that document but not have the $1 million in assets to qualify as an accredited investor wouldn't you be committing some sort of securities fraud?
- jonnathanson 12y ago
  The way the system works, the burden/penalty is on the company, not you, to verify your accreditation status. If you lie on your self-accreditation form, that's the company's problem for selling private securities to unaccredited individuals (and a huge problem it may well be). This is actually one of the big pain points that platforms like AngelList, with their syndicate deals and their self-reporting requirements, solve for startups. AL standardizes the self-accreditation process, and puts up stringent documentation requirements, that make it very hard for a person to lie his way through. Companies get peace of mind that AL investors have the net worth they say they do. FundersClub also does a pretty good job of this, in my experience. As for the more fast and loose, "crowdfundy" sites? I have no personal experience there, so no idea. I don't see the upside in investing through them.
  - seanflyon 12y ago
    There is no investing through crowd-funding sites. It is all either donations, or pre-purchasing a product.
tosseraccount 12y ago
accredited investors? Who accredits investors? Is there legal status for this?
- adventured 12y ago
  Yes. It varies by country of course. "In the United States, for an individual to be considered an accredited investor, they must have a net worth of at least one million US dollars, not including the value of their primary residence or have income at least $200,000 each year for the last two years (or $300,000 together with their spouse if married) and have the expectation to make the same amount this year."" http://en.wikipedia.org/wiki/Accredited_investor#United_States http://en.wikipedia.org/wiki/Accredited_investor#United_Stat...
- cookingrobot 12y ago
  In the US it's anyone who: -- earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR -- has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence). http://www.investor.gov/news-alerts/investor-bulletins/investor-bulletin-accredited-investors http://www.investor.gov/news-alerts/investor-bulletins/inves...
- deleted 12y ago
  [deleted]

edwinespinosa09 12y ago

I think he was just pointing out a fact we might all know, that there is a sort of "investor bubble" that keeps getting feed by the good/big payouts. Then goes into a better model for inexperienced/new investors by "crowdfunding" Maybe he should have used another title :/

imjk 12y ago

Well he explicitly mentions equity crowd funding which allows people to bypass those rules. Also, from personal experience as an angel investor, there isn't really a great authority out there enforcing accredited investor requirements. All the times I've invested in private companies, I simply had to sign a one-page document self-proclaiming myself as an accredited investor.

itsallthesame 12y ago
If you were to sign that document but not have the $1 million in assets to qualify as an accredited investor wouldn't you be committing some sort of securities fraud?
jonnathanson 12y ago
The way the system works, the burden/penalty is on the company, not you, to verify your accreditation status. If you lie on your self-accreditation form, that's the company's problem for selling private securities to unaccredited individuals (and a huge problem it may well be). This is actually one of the big pain points that platforms like AngelList, with their syndicate deals and their self-reporting requirements, solve for startups. AL standardizes the self-accreditation process, and puts up stringent documentation requirements, that make it very hard for a person to lie his way through. Companies get peace of mind that AL investors have the net worth they say they do. FundersClub also does a pretty good job of this, in my experience. As for the more fast and loose, "crowdfundy" sites? I have no personal experience there, so no idea. I don't see the upside in investing through them.
- seanflyon 12y ago
  There is no investing through crowd-funding sites. It is all either donations, or pre-purchasing a product.

tosseraccount 12y ago

accredited investors? Who accredits investors? Is there legal status for this?

adventured 12y ago
Yes. It varies by country of course. "In the United States, for an individual to be considered an accredited investor, they must have a net worth of at least one million US dollars, not including the value of their primary residence or have income at least $200,000 each year for the last two years (or $300,000 together with their spouse if married) and have the expectation to make the same amount this year."" http://en.wikipedia.org/wiki/Accredited_investor#United_States http://en.wikipedia.org/wiki/Accredited_investor#United_Stat...
cookingrobot 12y ago
In the US it's anyone who: -- earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR -- has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence). http://www.investor.gov/news-alerts/investor-bulletins/investor-bulletin-accredited-investors http://www.investor.gov/news-alerts/investor-bulletins/inves...
deleted 12y ago
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