This perspective is... naive. When accredited investors became a thing it may have started as a paternalistic "protect the poor from themselves", but now it merely serves to limit the supply of investors (read:rich) to a relative few who can dictate more favorable terms to those seeking that capital (read:poor).
When the primary determination is whether you already _have_ money, rather than education, professional history, earning potential, or a history of demonstrated ability to make informed investment decisions... it becomes extremely difficult to argue that its anything other than an artificial class barrier.
What I think is naive is the idea that opening investment in something up to the public would somehow harm the financial sector, rather than generating billions in profits for it.
VC funding will probably dry up somewhat during the present recession, like it usually does in bad times. But this time the result may be different. This time the number of new startups may not decrease. And that could be dangerous for VCs.
When VC funding dried up after the Internet Bubble, startups dried up too. There were not a lot of new startups being founded in 2003. But startups aren't tied to VC the way they were 10 years ago. It's now possible for VCs and startups to diverge. And if they do, they may not reconverge once the economy gets better.
This logic works in reverse, too: if funding becomes dramatically easier thanks to ICOs, startups have no reason to court VCs anymore. And that could be dangerous for VCs.
Who cares about the VCs? VCs are an insignificant component of the financial system. I don't agree that ICOs would be harmful to VCs, but even if they were: the larger financial system would profit enormously from retail investment in fly-by-night startups.
This subthread was about class barriers and investors. You expressed ICOs might not be harmful to them, so I mentioned a way they might be. Not sure where the financial sector topic came from.
What exactly would the problem be with letting people crowdfund startups (i.e. equity)? Why not follow Filecoin's lead? I've been reading your arguments and you haven't really articulated your concerns; just persuasive cases that the status quo should be maintained.
The next Google/FB/Netflix might very well start using the model here, if you let it. But only if they have access to capital. And right now, that means VCs.
Again: you're suggesting that when we talk about the interests of rich financiers, we're talking about the VCs. I'm sure not. If there's a financial power center to be concerned about, it's Goldman Sachs, not Sequoia. The fact that ICOs might somehow impact some tiny corner of the finance industry doesn't matter if it's going to juice things for the giant investment banks.
Why would ICOs make startups less reliant on VCs, other than the fact that (for the time being) ICOs let startups skirt investment regulations they'd otherwise have to adhere to?
I agree with tptacek's general thesis here: there's not any inherent difference between ICOs and "normal" early-stage investing that justifies an utter lack of regulation of the former but not the latter.
The accredited investor stuff exists not to keep the rich folk rich, but because the SEC doesn't give a fuck if rich people fall for scams. They care if Grandma living off a fixed income sinks her life savings into the latest ICO fad, loses everything and has to eat cat food for the remainder of her years -- not only does that fuck over Grandma, but it fucks over society. If Joe Millionaire falls for some dumbass ICO scam... too bad, so sad.
If you have "education, professional history, earning potential, or a history of demonstrated ability to make informed investment decisions", then you should easily be able to make enough money to become an accredited investor.
Startups are one of the most risky investments you can make. By arguing for regular folks to invest in startups, you just convey your ignorance in the risks associated with them. Most startups fail which is why full time investors invest in many startups and due extreme diligence because it is such a hosh posh of scams and people overselling their company.
> If you have "education, professional history, earning potential, or a history of demonstrated ability to make informed investment decisions", then you should easily be able to make enough money to become an accredited investor.
This is just not even remotely true. Plenty of people have those things but haven't yet been able to acquire the money to qualify as an accredited investor. This line of reasoning is like the oligarch's dream.
"If you were as smart as me you would have as much money as me and could invest like I do. Also, until you have as much money as me, I won't let you invest like I did to get all this money, because if you don't already have as much money as I already have you must not be as smart as me and clearly can't understand the kind of investing I do. In fact, I will make it illegal for you to invest like I did until you come up with as much money as I already have from doing those things that you are not allowed to do."
> When the primary determination is whether you already _have_ money, rather than education, professional history, earning potential, or a history of demonstrated ability to make informed investment decisions...
This is the case because many regulations (Tax code, laws) favor the wealthy. If we didn't have the SEC regulations, then the clever and wealthy would prey on the poor and uneducated. This is textbook what happened in the 20s.
Honestly, the SEC is probably one of the last decent regulatory bodies of our government.
When the primary determination is whether you already _have_ money, rather than education, professional history, earning potential, or a history of demonstrated ability to make informed investment decisions... it becomes extremely difficult to argue that its anything other than an artificial class barrier.