| > The main problem I have with the "old rules" of investing is that wealth is used as a proxy for sophistication. I think there are strong arguments for revisiting the accredited investor criteria, but you're missing an important fact: wealthy individuals have access to resources, like attorneys, accountants and financial advisers, that the less well-heeled frequently don't have access to. So even if accredited investors themselves aren't sophisticated, they usually aren't without the ability to protect themselves. > With companies staying private longer, most of the growth in high growth startups is only available to the wealthy. A lot of proponents of Title III offerings use the "average Americans are being denied access to the opportunities the wealthy have" argument but it's not as convincing as it might seem. First, most Americans are currently not investing in the public markets[1], many because they don't have the money to. They have therefore missed out on one of the greatest bull markets in history, central bank-inflated or not. Providing greater access to private markets doesn't do anything for those who can't even afford to participate in the public markets. Second, there are plenty of publicly-traded vehicles that provide access to private market investments. For example, for those interested in tech, GSV Capital (ticker: GSVC) owns stakes in pre-IPO darlings like Dropbox and Palantir[2]. > A similar thing happened three years ago with "rich person" crowdfunding – many critics speculated only bad companies would use it, not-bad companies started using it, and now it's generally accepted. Are you referring to 506(c)? Adoption of this has been tepid at best. [1] http://www.cnbc.com/2015/04/09/half-of-americans-avoid-the-s... [2] http://gsvcap.com/investment-portfolio/ |
This is less of a concern when non-accredited investors are investing alongside accredited investors under the same terms. I also think it's the duty of a platform to make sure unaccredited investors don't get unfair treatment.
> First, most Americans are currently not investing in the public markets[1], many because they don't have the money to.
True, but I'm not advocating that every American should invest in super-risky companies. Plenty of Americans (actually, folks from all over the world) definitely want to invest small amounts of money in companies they believe in and want to support. They try, but can't. If the investor limits magically went away tomorrow we'd see an order magnitude more money invested in startups on our platform.
Even though startup investing may not be right for everyone doesn't mean that most people should be legally prohibited from doing it. There are plenty of products I use in my life (personally and for business) that I would love to invest $100 in. I understand the risks, what's inherently wrong with me investing with 10k other people? There's a lot of potential issues with the _implementation_ of a platform (e.g. do investors get enough information? is there adverse selection?), but I don't think there's _inherent_ issue with all possible implementations.
> Second, there are plenty of publicly-traded vehicles that provide access to private market investments.
I didn't realize CSV Capital was publicly traded, that's great - thanks for pointing it out! Maybe I'll buy some shares.
> Are you referring to 506(c)?
No, I meant 506(b) earlier in 2013. The argument was that only companies desperate for money would resort to listing on a crowdfunding platform.
506(c) has a few problems that makes it a pretty weak and ineffective regulation. There isn't much upside in generally soliciting to accredited investors only to counteract the legal uncertainty with the way accredited verification was implemented.