Ask PG: What made you change your mind about crowdfunding?

There are two different business scenarios and I doubt PG has changed his views radically (and if he has, it's secret sauce anyway).<p>The question to which PG responded [<a href="http://news.ycombinator.com/item?id=3893783" rel="nofollow">http://news.ycombinator.com/item?id=3893783</a>] was along the lines of "Why not open up YC to crowd funding?" The answer was that there nothing for YC to gain by encouraging a rabble of investors jump into YC's pudding. In other words, PG believed that accepting crowd funding would be a distraction to YC companies (and implicitly therefore lower the value of YC's investment).<p>On the other hand, funding a startup through YC which makes money by providing services to people who think crowdfunding is a great idea (and perhaps solving some of the problems along the way), may be a profitable investment for YC.<p>In other words, PG didn't advocate crowdfunding as a better source of capital than the sources of capital YC has been using for YC companies . However, this does not mean that crowdfunding services are not a potentially sound investment for YC's partners.

Not trying to answer for PG, but the reason I think FundersClub is different from other crowdfunding options is that it does NOT result in the company having a large number of inexperienced shareholders. Rather, the company has just one shareholder -- the FundersClub fund. That way the entrepreneurs don't get distracted by having to deal with a ton of individual shareholders -- no updates, no chasing them down for signatures/approvals. The company gets the benefit of a much larger base of capital but only has to deal with one experienced shareholder.

Sillicon Valley investors are interested in funding markets being non-efficient. They are not interested in making themselves a commodity.<p>Commoditize your complements: make startups commodities but preserve early stage funding a non-commodity.<p>I wrote about this years ago when pg gave a talk about opportunities to make markets efficient:<p><a href="http://news.ycombinator.com/item?id=1655800" rel="nofollow">http://news.ycombinator.com/item?id=1655800</a><p>I guess FundersClub makes some kind of 'secondary investors' a commodity while preserving Sillicon Valley investors 'primary investors'. Also funding at FundersClub seems to be not in the very-early-stage, so the funders are already not competitors to Y-Combinator.

FC aggregates the investors the same way a mutual fund does.

I'm not sure what the proper etiquette (lot of upvotes but no one including pg has responded here) but I'd certainly be interested in a discussion around crowdfunding.<p>My take on this: Crowdfunding will be hard to execute -- novice investors, multiple sources of bad advice, selection biases (the worse companies will attract the 'worser' investors).. the list goes on.<p>With that said there is a lot of genuine interest in the model and there are bound to be atleast a couple of platforms that get traction . If you were YC with access to pick the best possible team to make this happen -- why wouldn't you invest ?? Its such a small portion of your investments and you get that diversification.<p>Second does not matter what your personal convictions are, the only way to know for sure is by trial and error -- who knows crowdfunding maybe the model of the future.<p>Finally you are supporting a good cause -- there is a lot of populist rage against the investor class (not VC's in particular but more wall st types),, allowing companies to go around 'wall st' and giving the lay person a chance to be a part of the next facebook is a great story.<p>My 2 cents. Thanks

FundersClub has 2 important elements, I believe, (PG correct me if I'm wrong) that probably made it click:<p>1. It's not dependent on the JOBS Act. It's like Angellist, in that they vet to see if you're a legitimate investor, except you can actually invest right there on the platform. With the proliferation of standard seed docs, this makes a ton of sense.<p>2. It's curated. It's not a free-for-all, it's going to make impactive differences in targeted companies. That's dope.<p>3 would be their secret sauce and their plans, which I'm sure are awesome.

My guess is FundersClub gives equity as a perk - but not necessarily voting control or a board seat?

To me, I see things like kickstarter have uncovered a massive market of 'investors' that don't want a monetary return. The extra benefits are more than enough for most people on kickstarter. I guess we'll see some back lash in a couple of years when some of those companies start selling for millions. But for now, if I fund a game...all I really want is the game. The APP.net 'investors' seem to be happy with access to the system.