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YC self-venture fund

10 points by electromagnetic ↗ HN
Given the recent post (http://news.ycombinator.com/item?id=1714377) about possible collusion and price fixing between Angel Investors, I was wondering if YC startups could begin providing their own alternatives.

P2P Loans are getting much more popular, which makes me wonder if we even need Angel Investors anymore. Are they still helping the process? I know that almost every YC start up, I would have been willing to invest in. I have like $10,000 sitting in my bank account, because I have no clue what to do with it. I'm sure I'm not the only one on HN with money who could invest in one of these great companies that comes through YC.

I'm suggesting a P2P Investment fund specifically for YC start ups. Sort of a DIY invest-in-us for the YC start ups as an alternate means of funding. I'm sure it could make a great YC project itself.

8 comments

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vyrotek
Its an interesting idea. I'm curious how the legal side of things would actually work. If I find a company I want to invest in and only want to do $1k, do I get stock? Does everything pool together under a single person and some legal agreements split any profit made in the future or something?

If no stock/ownership is involved then isnt it more of a donation? There are plenty of sites for that.

electromagnetic
One way to do it would be as a straight loan service to startups. I know here in Canada you have to register as an accredited investor to loan money legally (as far as I've always been told at least), which has quite ludicrous requirements for small P2P loans.

Another way would probably be for the start up to offer to sell X-percent of their company to the investment fund for a certain price. This is then broken down into shares, and individuals can buy these shares for an equivalent fraction of the offered price.

There is a third way, but I'm unsure if the start up would want it. A continual investment (IE I could put in $1,000 every month into the company for 3 years and end up with $36,000 invested) option, where people invest however much they want when they want. However, I'm unsure what this would mean for ownership of the company. I know many judges would view this as "the founders invested $50,000 into the company, but the investors put in $100,000, so the investors own 2/3 of the company", because this is how ownership is decided in most small businesses. I don't know enough about how stock options work in small business for the investments this way; I'd love to hear from someone much more knowledgeable than myself on all this, which is why I posted the suggestion.

cperciva
I know here in Canada you have to register as an accredited investor to loan money legally (as far as I've always been told at least), which has quite ludicrous requirements for small P2P loans.

You only need to be an accredited investor if you don't qualify under other rules. Lending money to a relative? No problem. Lending money to a friend you've known since high school? No problem. Lending money to a company you're working for? No problem. Lending money to a company which provides you with a detailed prospectus? Go right ahead.

Lending money to a complete stranger who hasn't provided you with full disclosure of his financial status and you don't have enough money to qualify as an accredited investor? That's when the rules stop you... and that's exactly the sort of situation which should be disallowed, because there's no way for you to not be the victim of a scam.

10ren
It's a great idea - grass-roots investment is very appealing - but unfortunately I think the main thing that angels bring is not money but contacts and experience.

This might work with YC-alumni, though they probably they probably don't have enough contacts/experience yet... but they definitely have quite a bit already, and it's growing, and will only continue to grow.

In fact, far from being a result of this meeting, this growing power is one of the causes of it (as noted in the article.)

electromagnetic
YC is an experience mill as of itself. It's only going to be so long before it hits a sort of critical mass that the angels won't be bringing in more contacts or experience than YC is already self-networking to its start ups through the virtue of being YC.
jacquesm
I don't think the money is the bigger issue here, that could be found. The components that you'd need on top of that would be a screening process that would bring out the kind of companies that YC does invest in and people like Paul and others to help the start-ups go from 0 to 100.

The latter will be your real bottle-neck, likely there are plenty of people that would be willing to pony up a similar amount of dough, but hardly any of them could dedicate the time (and might not have the expertise) required to really make a go of it.

lachyg
I've always been interested in the thought of a Kickstarter, but for commercial projects. In exchange for $, you get back %. Always thought the legals would be much too difficult though, as it's basically a stock market.
chrisduesing
You are correct.

As soon as you offer equity (in any form, disguised or otherwise), on a website, you have just made a public offering. The SEC has some strong opinions on how this should and should not be done, it tends to involve large legal and accounting fees.