venture capital

Brave new world in investing

It’s the Wild Wild West out there

Investor beware. With startup scene hotter than ever, retail investors have been clamoring to invest in the space. So far crowdfunding has been limited to accredited investors - generally high net worth individuals and instiutitions. So if you're not worth north of $1 million(no, your house doesn't count) or earning >$200K per annum, tough luck. Drool over angel investor success stories or laugh at those who got burned. No more.


The adoption of new SEC rules allowing non-accredited investors to invest in return for equity represents a major breakthrough.  Previously, crowdfunding sites like Kickstarter allowed donations, for no equity in return or Wefunder which only permitted accredited investors to access equity stakes. With the new rules, retail investors can now jump in, albeit with some limitations as summarized here.

What could go wrong? 

Venture investing remains a risky business; none of this has changed with the recent announcements. The long term returns to capital across the venture capital space remain positively pedestrian, the recent tech boom notwithstanding. For every Facebook and Airbnb, we have countless other startups muddling through or worse, going belly up.

A deeper problem lies within the ability of these retail investors to perform appropriate due diligence on prospects. The recent Theranos debacle exemplifies the difficulty this presents even for storied, well-resourced venture firms.

TL;DR: New SEC rules allow non-accredited investors to fund startups. Venture investing remains risky and may leave many burned, due to difficulty in due diligence 

Reminder that Kickstarter has a few problems of its own: