[skrebbel]

Wow, I'm blown away by the negativity in this thread. I know Silicon Valley is conservative but this is killing it.

In Europe (of all places), this sort of stuff has been going on for a number of years now. The first startup I worked for had gathered its €150k preseed funding from over 20 people. Not even with a convertible note, they really all went to the lawyer's office together. It was pretty nuts, but it got the product out (and then tanked miserably but hey, people knew what they were getting into).

Sites like Leapfunder (https://www.leapfunder.com/) have been doing what Republic does for years, but then in Europe. As far as I can see, the only reason the US is behind on this one is the "accredited investor" rule that European countries don't appear to have. I wonder how Republic works around that but I guess it's a good development. I have a hard time understanding how any "you're only allowed to X if you're rich" law can be fair (and I'd assume that especially libertarian HN would be with me on that one).

But still, HN's conclusion is that it's stupid to do this? What? Why is it stupid to invest $5k in a startup but not to invest $500k in a startup? If you ask me, that's irrational to the bone. If you really can't imagine some good reasons why a company wouldn't want to raise from a VC but would prefer to crowdfund, you didn't really try very hard.

I can't find it back but did HN react the same when Kickstarted got launched? Is there really that big a difference between "first to get a Pebble" and "first to get some Pebble shares"?

[twblalock]

> Why is it stupid to invest $5k in a startup but not to invest $500k in a startup?

Because if you invest $500k, you get information rights, and a significant number of votes. If you invest $5k, you get nothing, and you just have to hope the company makes good decisions. It's like buying a $5k lottery ticket -- it's an investment based entirely on trust without any information, accountability, or influence over the outcome.

I suspect that the real reason companies want to crowdfund is to raise money without giving information and voting rights to their investors.

[jomamaxx]

"Because if you invest $500k, you get information rights, and a significant number of votes. If you invest $5k, you get nothing, "

No - not at all.

First, there is no such thing as 'information rights'.

Second - when you 'invest' - you get shares. Those shares have 3 'rights' generally: 'votes', 'dividend rights' and 'liquidity preference'

Those rights differ depending on class of shares and specifics of the deal.

Whether you invest $5 or $5 million - it could very well entail the exact same terms.

For example, most later stage investors do not get enough votes to influence the outcome, they don't get a seat on the board, and they don't get any real liquidity preference.

[twblalock]

> First, there is no such thing as 'information rights'.

Information rights are real, and they are defined in statute law.

But, that's not why you are posting here. I see that you have been attacking my posts because of a vendetta you have in an unrelated thread. How pathetic!

[burrows]

> it's an investment based entirely on trust without any information, accountability, or influence over the outcome

Assumes that an investor's extra-monetary 'influence' on a company is +EV.

[wildmusings]

Even if it's not, they have information about the finances and plans of a company that are highly relevant to the decision to invest.

And it also protects them against the worst case, where management acts in ways that are plainly hostile to shareholder interests.

[twblalock]

They get votes. If they invest enough, they get enough votes to have influence.

[erichocean]

Do people really want information rights and votes on a $5K investment? How little is your time actually worth?

That's a set-and-forget "investment" if there ever was one.

[detaro]

Most comments seem critical of the specific offer and risks of investing badly, not the idea of allowing smaller investments.

[forgetsusername]

>I know Silicon Valley is conservative but this is killing it.

The area that is generally known as the innovation capital of the planet is conservative? Can't say I agree.

[mwfunk]

I don't think anyone is opposed to this for classist reasons like you're suggesting. You're bringing up Kickstarter as an example of a successful crowdfunding service, but in this context Kickstarter seems like more of a cautionary tale.

Kickstarter is definitely a mixed bag, but I don't blame Kickstarter itself for that. Kickstarter is awesome, and many awesome things now exist that wouldn't have existed without it. I love Kickstarter.

The problems with Kickstarter are with some of the people using it. It's all just human nature, I don't think there's anything that Kickstarter (the company) can really do to curtail it.

Problems include people starting projects from scratch via Kickstarter, and making promises about schedules and deliverables when in many cases those things are literally unknowable when they start accepting money from people. Sometimes people get in over their head, and don't realize how deep of a hole they've dug themselves into until it's way too late.

Problems also include people giving money to Kickstarters and assuming that the schedules are real, that the products will turn out as they've been pitched, and that they will receive what's been promised to them. Hopefully everything works out, but realistically you've got to be OK with the worst-case scenario (you get nothing back) when you back a project.

I see Kickstarter as more of an angel investment vehicle, and I think Kickstarter tries to present itself in this way. If something looks promising, I might put some money into it, but beyond that I have no expectation that I will ever get anything out of it. It's a pleasant surprise if I do. However, no matter how many times Kickstarter tells people that Kickstarter is not a store, there's a continuous stream of people who seem surprised when things don't turn out as expected, and will scream for refunds and devote insane amounts of time to ruining the lives of the people who bit off more than they could chew when they started raising money.

Basically, in addition to its merits, Kickstarter can be a brutally productive factory of sadness, for the people with Kickstarters as well as the backers. Given that something like 90-95% of startups fail (I could be wrong, but those are the numbers I usually hear), Republic sounds like it could be an even bigger factory for vastly more sadness, without the success stories that make it all worthwhile. The few people who luck into putting money into a successful startup will surely get very angry and entitled when they see a small business that they gifted money to becoming successful, but they don't see an equivalent return on their investment. The 90-95% of the people who lose their money when the startup folds will surely also be surprised and angry, and demand their money back if they don't think the startup was competently run (not that they have any way to really know this). It just sounds like all downside with very little (if any) upside.

[st3v3r]

"Why is it stupid to invest $5k in a startup but not to invest $500k in a startup?"

In addition to the $500k buying more information and actual shareholder rights, someone who is investing $500k is likely doing so from a fund, or otherwise isn't going to miss the $500k if the investment goes belly up. The $5k investor would probably be hurt a lot more by losing the $5k, AND they don't get the information necessary to make an informed decision.