[vsl2]

I'm all for giving people more liberties to do what they want with their money and I see nothing worse about letting people invest their money in whatever startups they want, though a reputable investment mechanism should be established so as to minimize the risks of scams, etc. There are many other ways for a fool and his money to be parted (casinos, lotteries, booze, overshopping) and those aren't illegal.

Going back to the reputable investment mechanism, I think this is needed not only for investors, but also for startups. No startup company wants to deal with thousands of different ownership voices - its better to have a concentrated voice (e.g. VC fund manager) raising only the largest issues. Rather than encouraging individuals to invest (like Kickstarter), give all individuals the ability to invest in funds created to invest in specific startups (e.g. Turntable fund, Pinterest fund).

[dchmiel]

So creating a fund that has a clear investment strategy of investing in a particular startup. How about creating mutual funds that invest in startups in general. It'd allow for diversification of multiple startups and give founders one concentrated voice. That way retail investors can get exposure to startups as venture funds are beyond this investor class.

[wtvanhest]

Venture Capitalists are basically mutual funds that invest in startups. The y get most of their investment from pension funds who are investing for a large chunk of Americans.

[dchmiel]

I guess I was looking to see if there could be a more direct approach to it. Your pension fund invests in multiple assets classes and in multiple industries because of diversification. With a mutual fund that strictly invests in startups individuals with small amounts of money could gain access to the startup market in a direct way but still with professional money management. It essentially would be a VC fund composed of retail investors where traditional VC funds are composed of institutional (pension funds, etc) and high net worth individuals.

[wtvanhest]

I don't know if you will ever see this response because I took so long to write it but you do have a point. The casual investor cannot invest in venture funds. One problem with funds like this is that they could end up going to zero if they miss everything or could invest in businesses which are not sound to help their friends.

In an effort to prevent this type of mistreatment of investors it is harder for them to raise money from individuals. In my opinion, the returns to VC firms on the average (not just the home runs) are not worth the potential losses.

But, the reverse argument could certainly be made and it will be an issue that I'm sure is discussed long in to the future.

*One area that most people are not aware exists is the area of fund manager vetting and analysis. This is mostly done by institutional investors and is something the average retail investor would have a lot of difficulty with.