20 March 2012

Sound the alarm

The Economist | Nazis in space: Crowdfunding and crowdsourcing are becoming more sophisticated

[...] Where “Iron Sky” has broken ground, says Tero Kaukomaa, one of the film’s producers, is not just in getting fans to pitch in with the work, but in its funding model: most of the money raised via the website was in the form of equity investments, which will pay back if the film makes a profit.

That is allowed in Europe, but not yet in America, where any such investment must be filed with the Securities and Exchange Commission. A bill allowing investments of up to $10,000 per person without all the paperwork was passed by the House of Representatives last November but is currently stuck in the Senate.
Alarm bells go off in my head when there are business and investment possibilities that are legal in Europe but illegal in America. Being more anti-market than the EU is a position to be avoided. If I was in congress I would set up a team of LAs just to monitor for these situations and write legislation to rectify them immediately.

There are people (and I'm looking toward TJIC, for instance) whose business I would love to be able to make equity investments in. Unfortunately the government has decided I'm not "sophisticated" (read: "rich") enough to be able to do that. And yet somehow I can make loans to these same people. So I'm allowed, as an unsophisticated poor investor to take a risk on companies and people, as long as my upside is limited.

Thanks, congress. Way to help out the little guy.

2 comments:

  1. > There are people (and I'm looking toward TJIC, for instance) whose business I would love to be able to make equity investments in.

    You are far too kind!

    If I shared with you the long list of horrific business decisions and learned-that-ovens-are-hot-the-hard-way stories from my business endeavors, your hair would turn white.

    ;-)

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  2. Well in that case I'm NEVER investing in TJIC Corp! ; )

    Seriously though my options seem to be:
    [1] buy equity with your firm(s), or those of some other friends, all of whom have made bad decisions, at some point.
    [2] buy equity in strangers firms, all of whom have made bad decisions at some point.
    At least you know you've made bad decisions, which I'm not so sure is something the average manager in a Wilshire 1000 firm realizes or admits.

    For me, it comes down to this -- is the guy I'm investing in going to hustle for the shareholders? I trust you, as well as a couple of friends of mine planning on setting up their own accounting and law practices, and another guy working on a biotech start-up, to hustle. In contrast I expect the average manager will to display about average work ethic.

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