pmen

The Crowd Safe is designed to give investors the same economic outcome as shareholders, and doesn't cap upside upon conversion. If you're referring to the valuation cap (the only reference to a cap upon exit at OP's link), that's a standard term in convertible notes that sets the maximum price an investor will pay upon conversion. Let me know if I misunderstood.

You're right -- a company with $25M in assets and 500 unaccredited shareholders is essentially forced to go public. That's why traditional security instruments are poorly suited for investment crowdfunding. We created and open-sourced a derivative of the YC Safe called the Crowd Safe to solve for this (more at https://republic.co/crowdsafe).

Companies raising under Title III file annual reports with the SEC. That said, public companies in which you own stock and private, early-stage startups have vastly different capacities to deal with these issues. The basis for investment in each is also quite different. Apples and oranges.

It sounds like you might be thinking of Title IV of the JOBS Act (Reg A fundraises, more details here: https://www.sec.gov/oiea/investor-alerts-bulletins/ib_regula...), which are akin to "mini IPOs" and are intended for later-stage companies.

Republic operates exclusively under Title III of the JOBS Act, which was enacted in May of this year and is intended for early-stage companies.

On deal terms, generally speaking it would be impractical for a startup to fundraise via equity crowdfunding if the hundreds or thousands of investors, each putting in as little as $10, were to have voting and information rights. The non-transferability component is actually a legal restriction put in place by the SEC, not a term that any companies raising on Republic have put in place.

Each deal page has a discussion section, if you have questions for the founding team of each company, please do ask :)

You raise some good points.

The Crowd Safe is essentially a YC Safe (which in turn is a standardized convertible note) that gives companies control over when to convert, rather than conversion necessarily happening in the following financing round. Given the ubiquity of convertible notes in early stage financings, legal treatment shouldn't be a unique concern.

To your point on startups not being able to convince VCs to fund them: much of the value of crowdfunding, from our perspective, is the ability to democratize the fundraising process by putting the decision of which companies get financed into the hands of the average person. While VC investment is surely a signal to take into account, the VC industry as a whole has shown itself to be biased in who it chooses to fund (more here: https://medium.com/equitycrowdfunding/new-impact-new-inclusi...).

For many companies, there are also significant brand loyalty and marketing benefits to doing a crowdfunding campaign and letting their users play a role in their growth as a company.