LPs investing in startups directly, followed by retail investors (JOBS act).
If you thought we were already in a bubble, hang on to your seats, it's about to get much worse.
If you thought we were already in a bubble, hang on to your seats, it's about to get much worse.
As far as retail investors go, I am a bit concerned there but on the other hand anyone can blow money on lotto tickets or casinos and with those you're statistically guaranteed to lose.
I would like to see some requirement that retail investors are presented with a big fat warning that reminds them that this is a high risk investment and that they could lose all their capital. Granted they should know that, but people are biased and often forget.
Of course lotto tickets don't come with such warnings, so hey maybe it's fair.
My biggest concern isn't so much with the investor side but with what effect this might have on the signal/noise ratio in the startup world. I fully expect to see a ton of scammy shallow "companies" trolling for funds, and it'll make it harder on those with more substance than flash.
Those expectations will have to meet reality sooner or later, and when that happens:
* Life savings will be wiped out
* Liquidity will snap back for startups
* Many otherwise healthy companies will die
I don't think it's wrong to open more investments to more people, but I'm also a bit wary of it being a total free for all shitshow.
"Worse" for whom? It may be worse for investors because valuations may increase, but overall having more money in the startup ecosystem, funding companies that may make the world a better place, isn't the worst possible thing to have.
What is probably more of an issue is that wide-scale bag holding will trigger new regulations that will make it much hard for startups to raise money in the future. Even if people want to invest it might prove impossible to raise money in practice.
The biotech IPO window was almost closed from ~2000 to 2012-2013. Look at it now! Companies with nothing more than a promise raising $150M+ at IPO. I haven't kept track, but it wouldn't surprise me if close to 100 biotechs have IPOed in the last 2-3 years.
At least 121 from Jan 2013, to Feb 2015:
http://www.forbes.com/sites/brucebooth/2015/03/20/biotech-ip...
And the Nasdaq biotech index (NBI) has skyrocketed, from 1,000 four years ago, to a recent peak of 4,000 before the plunge (after having barely moved for a decade previously).
Apparently most people's memories don't even go back as far as 2008.