Americans lose more than $92.3 billion dollars each year gambling, according to a 2007 study. You know what is a fraction of that? The entire venture capital industry. In 2012, only $26.5 billion was invested in all of venture capital. However, venture-backed companies represent 11% of our private sector workforce and $3.1 trillion in revenue.
While gambling and startup investing are very different, they share many similarities. They both double as entertainment and add a layer of excitement to your life. However, in startups, at least you have a higher return potential on your bet.
Making it easy for Americans to gamble on startups instead of at the blackjack tables can unleash a great wave of venture capital and create measurable value. People should be allowed to invest, make or lose money however they would like, as long as the investment is legal, transparent and regulated.
With that said, if your startup is going to raise money in general and especially raise money from non-accredited investors, the regulation should be very strong and also safeguard investors against fraud.
So how can we accomplish this?
The SEC is proposing a number of initiatives intended to protect investors. I think they should go even further and include measures such as registration, where a startup must register with the SEC and provide quarterly updates, including all key disclosure on insider dealings, and be subject to random audits. Startups should also be required to provide non-accredited an extra level of disclosure on key metrics and documents like financial statements and board minutes.
With that said, I would recommend co-investing alongside of professional investors over replacing them. AngelList is a great example of this as they allow you to invest in syndicates alongside notable investors.
The easiest way to enable everyone to invest is through crowdfunding marketplaces. Crowdfunding can innovate on the investment models we’ve been using for generations, equalizing the playing field for companies and for investors.
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