[pmen]

You raise some good points.

The Crowd Safe is essentially a YC Safe (which in turn is a standardized convertible note) that gives companies control over when to convert, rather than conversion necessarily happening in the following financing round. Given the ubiquity of convertible notes in early stage financings, legal treatment shouldn't be a unique concern.

To your point on startups not being able to convince VCs to fund them: much of the value of crowdfunding, from our perspective, is the ability to democratize the fundraising process by putting the decision of which companies get financed into the hands of the average person. While VC investment is surely a signal to take into account, the VC industry as a whole has shown itself to be biased in who it chooses to fund (more here: https://medium.com/equitycrowdfunding/new-impact-new-inclusi...).

For many companies, there are also significant brand loyalty and marketing benefits to doing a crowdfunding campaign and letting their users play a role in their growth as a company.

[akg_67]

The Crowd Safe is not similar to YC Safe or any convertibles issued in pre seed financing that I have seen or received. Crowd Safe seems to cap upside for investor during conversion and defers everything to company's discretion. Even the example in OP's link shows in the event of exit, the investor upside is capped at company's discretion. The whole thing is structured pretty badly. I have stayed away from equity crowdfunding because no corporate governance, no voting and information rights, and lack of influence. There is no way to diversify away the risks that come with early stage investing. And platforms can't be trusted to do due diligence or put investor interest above their own.

[pmen]

The Crowd Safe is designed to give investors the same economic outcome as shareholders, and doesn't cap upside upon conversion. If you're referring to the valuation cap (the only reference to a cap upon exit at OP's link), that's a standard term in convertible notes that sets the maximum price an investor will pay upon conversion. Let me know if I misunderstood.