There's room for money to be made in accredited investor platforms, both in facilitating relationships and facilitating transactions. But I don't think there's a lot of room. Several players over the past few years are making decent cash, though I wouldn't say any are truly disruptive nor are they home runs. And ideas like FundersClub have come and gone, tried by bootstrapped startups all the way up to Goldman Sachs. Like most aspects of the investment banking industry, if you can market your services well, gain a reputation, AND actually facilitate stock deals for good companies, you'll pull in some dough.
The possibility of some dough may be enough for FundersClub to be funded itself. But truly disruptive businesses on the equity offering platform side of things are up against massive hurdles. I don't see anything here that seems revolutionary -- just a play to eventually make something off the crowdfunding revolution.
There's probably going to be a flurry of startup activity trying to capitalize on the securities aspects of the JOBS Act. The SEC rules may simplify some things so much that the technical (legal) barrier to being in the stock offering game will be incredibly low, at least compared with what it is now. But what happens if the barrier does get lowered? Lots of bad deals, lots of public noise, and for successful VCs and angels it's either going to not change their process at all or make it even harder to find quality. It still doesn't change my position that equity investment should be allowed by anyone, with limitations, but a sustainable system for offering stock in early stage companies is going to take a lot more complex work than just finding a way to structure the investments technically.
As a side note, outside these kind of "pie in the sky" offering platform dreams, which I myself threw personal money and time into, there is still obvious room for innovation, albeit unsexy, in automating various aspects of securities compliance. During Q&A Tim O'Reilly rightly encouraged us to pursue that piece of our efforts (definitely trying to bite off more than we could chew). We had NYC bankers telling us the same thing.
BTW, I recommend anyone thinking about or already involved in a securities-related startup to make friends with bankers and M&A folk in NYC. Our clearest, sanest advice came from Wall Street connections we made.
There's room for money to be made in accredited investor platforms, both in facilitating relationships and facilitating transactions. But I don't think there's a lot of room. Several players over the past few years are making decent cash, though I wouldn't say any are truly disruptive nor are they home runs. And ideas like FundersClub have come and gone, tried by bootstrapped startups all the way up to Goldman Sachs. Like most aspects of the investment banking industry, if you can market your services well, gain a reputation, AND actually facilitate stock deals for good companies, you'll pull in some dough.
The possibility of some dough may be enough for FundersClub to be funded itself. But truly disruptive businesses on the equity offering platform side of things are up against massive hurdles. I don't see anything here that seems revolutionary -- just a play to eventually make something off the crowdfunding revolution.
There's probably going to be a flurry of startup activity trying to capitalize on the securities aspects of the JOBS Act. The SEC rules may simplify some things so much that the technical (legal) barrier to being in the stock offering game will be incredibly low, at least compared with what it is now. But what happens if the barrier does get lowered? Lots of bad deals, lots of public noise, and for successful VCs and angels it's either going to not change their process at all or make it even harder to find quality. It still doesn't change my position that equity investment should be allowed by anyone, with limitations, but a sustainable system for offering stock in early stage companies is going to take a lot more complex work than just finding a way to structure the investments technically.
As a side note, outside these kind of "pie in the sky" offering platform dreams, which I myself threw personal money and time into, there is still obvious room for innovation, albeit unsexy, in automating various aspects of securities compliance. During Q&A Tim O'Reilly rightly encouraged us to pursue that piece of our efforts (definitely trying to bite off more than we could chew). We had NYC bankers telling us the same thing.
BTW, I recommend anyone thinking about or already involved in a securities-related startup to make friends with bankers and M&A folk in NYC. Our clearest, sanest advice came from Wall Street connections we made.