[wmf]

Why do you think crowdfunding is more efficient than VC? The liquidation preference might be lower but you're also not getting any advice or connections and there could be a significant investor relations time sink. If I had a choice between VC and crowdfunding I would take the VC in a second. I would look at crowdfunding if every VC passed, but that essentially makes it a sucker's market.

[dawernik]

There should be other ways to leverage connections/network other than having to dilute ownership. That may be the most imbalanced transaction around.

I also reject that things like electronic trading for the masses are bad because the general public has bad investors. That's like saying online fraud should determine my access to ecommerce.

In many ways, platforms will help validate concepts through user participation... And the community can validate credibility. I don't just think this is a dumb money thing, I think investors will have advantages they've also never had. The bottom line is both sides of the market will get a clear benefit.

[PakG1]

Efficient here may simply mean efficient in the economic sense. As in, there may be a lot of pent up money to invest in this stuff, but not enough deals. At least, that's what investors keep telling me. Efficient would mean that supply equals demand, and this would be a mechanism to make that happen.

edit: Also, on top of not enough deals, investors don't normally easily get access. In the past, this was for the investor's protection, of course. Theoretically, this would also solve that inefficiency. Again, in the past, this inefficiency existed for the investor's protection, not a bad thing.

[argonaut]

Firstly, that is not what "efficient" means in the economic sense. Efficiency deals with prices (lowest costs, price = marginal cost). Yes, supply and demand affects prices. But supply and demand in of itself does not deal with efficiency.

I would also say it's a stretch to call this "pent up money." Equity crowdfunding is merely an alternative outlet for your money (the usual outlets being currency, bonds, public equities, etc.). You can think of in terms of substitute goods.

Not to mention that most people have absolutely no business investing in startups. All the best deals are going to go to the established, connected VCs and angel investors who can add value in addition to the money invested.

[dllthomas]

Hm. Advice and connections can undoubtedly be valuable, and VCs presently provide them (and/or try and/or pretend to), but does that in any way represent efficiency in the market for capital?

[josdewolk]

Crowdfunding might be more or less efficient than VC. But more competition/options in the funding space should help make the space more efficient overall.