[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.