Liveblogging the accredited crowdfunding panel at the ACA Summit

Note: this post consists of notes liveblogged during a 45 minute panel at the 2013 ACA Summit in San Francisco. Scroll to the bottom for additional context and a key for the initials used to identify speakers.


It is a couple minutes past noon and I am going to have to scoot for a lunch meeting of the advisory council to the ACA public policy committee. This has been fun! Oh, NR just predicted Title III will be for non-tech businesses. DR says the one that are successful will be doing things other than common stock, such as revenue backed notes. Nobody here is going to put a penny into that kind of Title III thing. Hard enough to make money doing what we do.


The internet takes offline middlemen and kills them, NR says. Startups should not be paying to meet someone. Future is more tools and more transparency. But he says AL is on the thin front end of the activity, not getting into running the companies.


11:57 PM: JP asks, will all this make angel groups more virtual? NR says, I don't see why not. The Sand Hill Road firms may not come on to the platform, but they always have an associate that uses it heavily, watches. The trend is this way.


I like NR's reminder: what some angels saying now about crowd-like funding preceding them and making messes, that is what VCs used to say about angels.


Another question about too many unsophisticates getting into the market. NR says he can imagine that general solicitation will lead to a backlash, it is a concern. It may also be the case that compensation for advice will diverge from equity for investing. DR says, let's take a long view, ultimately these rules will have to change. Everyone loses money all the time. Fraud in angel investing is not a big issue now. Fraudsters of the future, there may be easier ways for them to scam people than $500 at a time through a Title III platform.


Another question from audience, for RE, how does CircleUp curate the companies? RE says, they have private equity professionals doing that.


Question from audience, sorry, didn't get the name. He says, this free-wheeling, market driven buzz, how does that mesh with actually rolling up sleeves and helping the company get going. NR answers says the rise of the accelerators has not helped here. A lot of advisors think they have done their job and now just want to be paid. Give a break to people who come in early and provide signal (price break). RE says CircleUp encourages investors to take board seats and angel groups to do diligence off the platform.


It is now about 11:40 AM. NR: our model relies on dligence and follow up and work happening offline. It can't all be online. AngelList model is not like CircleUp's, AL not a broker-dealer, it does a light vetting of the companies.


AcapanelJP: General solicitation is a rule waiting to be affirmed, but general solicitation is today a common practice. What happens when 10,000 accredited investors are generally solicited? What does that portend for portals? DR says it will be a big deal - if the regulations go out with a safe harbor. But once regs are passed, there are portals out there already, the law will catch up to that, and it will fundamentally change the way startups get funding. RE says CircleUp operates on a broker-dealer model and does not do general solicitation. NR says it will bring the online and offline world into synch. The interesting thing will be how the SEC implements. If they could, the SEC would restrict it to groups like this one.

JP asks NR, what about diligence on companies? NR says, if you're investing $10k or more, you should meet the company. But if you go lower, where you are essentially doing crowdfunding for accredited investors, and meeting the company is not as critical. But larger investment, you take the deal offline. RE agrees with that. He sees the function CircleUp provides, in vetting what company gets onto the platform, that is valuable to many investors. NR says, in terms of diligence, everyone has their own workflow, and that is okay. DR says there is no such thing a standard. Golden Seeds does diligence like a venture fund, DR says (that is JP's group). Others will write a $200k check based on a PPT deck.


DR: Venture funding is bifurcated. But the early stage fund world is working well with angel groups. NR agrees, but warns, funds often have other incentives. They may be buying an option. Better to invest alongside a seed fund than other kinds of funds. RE has a different perspective, as he has PE funds working with CircleUp. A different relationship than in the VC space.


Individual angels can't sign up on Gust, DR says. Have to be a member of an angel group.


RE says CircleUp works with angel groups to supplement and close angel rounds.

Update 11:20. Session has started. JP asks the central question, do the online portals change the nature of angel investing?


Update 10:11 AM. I'll plan to use the following key:

  • JP = Jean Peters, Golden Seeds
  • NR = Naval Ravikant, of AngelList
  • RE = Rory Eakin, of CircleUp
  • DR = David Rose, of Gust

Bay Bridge 041813 morningAn illustrious panel at the Angel Capital Association Summit in San Francisco will this morning discuss angel investing through online portals.

The panelists include angel investor and ACA board member Jean Peters, Naval Ravikant of AngelList, Rory Eakin of CircleUp and David Rose of Gust.

I will plan to attend and to live blog my notes. The session is scheduled to start at 11:15 AM.


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