A fun innovation in financial engineering I saw recently and thought was worth sharing: I am an extremely tiny angel investor, which means I periodically send small checks to startups in return for an equity investment. This has historically been very toilsome for all parties.
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The adverse selection problem, in a nutshell: the companies which have the highest ex-ante likelihood of the best returns generally have oversubscribed rounds from investors who have some non-pecuniary to take their money. Crowdfunding would kick them out to take random money.
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So crowdfunding platforms structurally mostly list deals which sophisticated investors did not crowd into. There's a thesis you can make here that professional investors are so bad at their only job that crowdfunders actually get the good deals. That thesis sounds implausible.
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Thanks for explaining! Why doesn’t the AngelList method require you to be accredited, aren’t you effectively an LP at that point? I guess the devil is in the details if you’re essentially a second order angel
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This, AFAIK, does require investors in the SVP to be accredited.
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Was going to ask the same question. I’ve done a few through Netcaptial. With the goal to join the Anglelist community. Great thread.
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