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Comment by jonnathanson | Hacker News Reader

Are you an accredited investor? Legally, FundersClub can't accept you if you're not. This isn't a "rich get richer" kind of thing; it's a federal regulation. It's not FundersClub being snooty; it's FundersClub complying with the SEC.

The JOBS Act intends to break down some of these barriers, though its most important provisions are still pending.

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"Rich get richer" is literally institutionalized in the United States through the SEC and tax law. Certain people are fighting to raise the limit to $2 million cash liquidity because there are too many millionaires now.

People who aren't rich partake in all kind of risky investments, from gambling to personal lines of credit. But when it comes to the ability to investment in new companies before they are sold to the public, the investment is deemed "too risky" for those with under a million dollars in cash liquidity. That is, the only investment opportunities that are deemed too risky for those who aren't rich are the investment opportunities that have a high expected value.

This isn't a "rich get richer" kind of thing; it's a federal regulation.

Well, it may be a "rich get richer" kind of thing, but it isn't something for FundersClub to decide, it's something the government has decided.

Edit: Your edits mooted my point

Sounds like a rich-get-richer thing to me.

Well the accredited investor rules really are there to protect people from getting scammed. That rule just accepts that a material number of the people asking for investment are going to be unscrupulous bastards who are just out to take their "investors" money. This way they take it away from people who can afford to lose it, rather than people who cannot. There are avenues for non-accredited investors to invest in the market in which the SEC has put a lot of constraints on the people trying to you pitch you such that if they are really crooks you can sue them and try to get your money back. Sometimes even that fails, as in the Madoff case, but they try.

> Well the accredited investor rules really are there to protect people from getting scammed.

This is a line of bullshit. If the law allowed it, you could easily set up a site like LendingClub.com which distributed the risk over many many things, mitigating it quite a bit, and allowing "smaller" players to take advantage of it.

One could do the same thing with real estate... If the law allowed it.

The laws against capital investment by anyone who is not a millionaire IS what is making the rich richer.

Perhaps we are talking about different things. There are no "laws against capital investment by anyone", if you want to invest go down to pretty much any bank or financial institution and open an investment account. Go out and buy shares or bonds and have fun. Back in the dot.com days people did this all day long and got the notion of a 'day trader' was born.

The laws that are in place are around liability and more importantly personal liability in the event that the investment goes south. If you are soliciting investment from accredited investors you can put in place some limits on your liability with respect to that investment, I do not believe that is the case if they are not accredited.

We have this already - it's called the stock market and bond market. If you want to distribute the risk of investing in real estate, I suggest taking a look at REITs, real-estate investment trusts. They are companies investing in real estate required to pay out a certain % of profit in dividends.

True, but what if 10 people wanted to co-own a real physical house? I believe there are laws against that

To clarify: I wasn't trying to make a point, one way or the other, about income inequality. The rich are getting richer, and that's a topic for a different discussion. I was simply pointing out that FundersClub accepts rich people because those are the only people they can accept. It's pointless to blame them for a policy they didn't create, but have to abide by.

In all fairness, venture investing is incredibly risky. One should not be doing it unless they are investing no more than 5-10% of their net worth. Someone who is making < 200K a year, would end up investing much more than that and it's probably not a good idea

I don't agree. According to their site[1] they advertise a low minimum 2.5-5K, so you don't need to make 200K a year (or have 1M net worth) to invest 10% or even 5%. You just need to have 100K available for investment and, in your diversification, put 5% on this. I know it's the law in the US, but I don't get it. Yes, it could be incredible risky as you said, but nobody is stopping you (at least here in UE) from buying a leverage certificate that is incredible risky as well (I've seen 7X, 15, even 21X Long and Short on the German or Italian stock market, for example). You just express that "you know what you're doing" and you're good to go. Or you can go to your bank, get 10K in cash and go to the nearest casino...

[1] https://fundersclub.com/how-it-works/

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