Yesterday was a pretty big day for startups in the US as the general solicitation clause of the JOBS act kicked in which allows startups to publicly say that they are fundraising. Up until now early stage investment was done in relative secrecy but almost overnight this means AngelList will become the biggest equity crowdfunding platform in the world. Investment is still only open to what are called ‘accredited’ investors in the US though.
We’ve had equity crowdfunding in the UK for a year or so and while it’s a bit easier if you’re a certified ‘high net worth individual’ or ‘sophisticated’ investor, actually anybody who understands the risks involved can invest in startups through platforms like Seedrs or Crowdcube.
I’ve noticed that VC firms seem to look down their nose at crowdfunding though. I was at an event a few months ago where one well known London fund said they wouldn’t invest in a startup that had raised crowdfunding. But I think AngelList’s announcements yesterday will change that and if anything the VCs should be worrying about them as competition rather than being snooty. Even the VC firms that have invested in Angellist spin it that they’re complementary models but I think they’ll have to be pretty clever to avoid effectively being in competition in the long run.
- Crowdfunding: With JOBS Act Title II, the web will ‘eat financing and investing’ (venturebeat.com)
- Crowdfunding is Being Oversold (timberry.bplans.com)
- The idiocy of crowds (blogs.reuters.com)
- Fred Wilson’s predictions for AngelList come true | PandoDaily (pandodaily.com)