SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : The Aristocrats (tm)
NNVC 1.170-4.9%9:30 AM EST

 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
From: sense10/10/2023 9:59:51 PM
1 Recommendation

Recommended By
Zilyunz

  Read Replies (2) of 5427
 
On "control," political economy, and the suppression of innovation and society...

Or, VIPO to StartEngine, via Spring Street, ie., the long way around...

Back in the day... talking a long time ago, now, dating from well before the time SI (the first social media website) had even been conceived. I was an early investor in a (private) company called Virtual Wallstreet and its subsidiary Virtual IPO (VIPO). The idea was... figure out how to use the internet to enable and democratize market access to capital through the magic of the internet. The "rules" were a nightmare, of course... so, we parsed the rules and figured out the right fit to do it and remain compliant... bought a brokerage house to manage that aspect in compliance... and proceeded. In response to the "threat" we posed... "they" rounded up Spring Street Brewing... and convinced them to do none of what we had done in crossing i's and dotting t's... but just "go ahead" and sell shares to the public directly on the internet. So, of course, the SEC stepped in to shut them down, right ? Right ? Well, no... of course not... They let them do it... gave them a waiver of the rules... in order to "study" the result. Naturally... they determined new rules were needed... not to prevent Spring Street's success... but to prevent Virtual IPO from proceeding in doing it legitimately...

It was my first, but not my last experience with how the system defends its own interests by suppressing competition and innovation... and how it uses government (including judicial) "cooperation" to enable and impose that suppression... or look the other way when looking might prove inconvenient.

After Spring Street... under the Bush Administration... things got even worse, as the market became far more hostile to innovation outside of "control". I've discussed that before as "erecting toll booths" in the capital markets... to prevent innovators from succeeding without having first "shared" a controlling interest with "the usual suspects"... imposed as an entering argument in the requirements imposed... designed into the structure of the capital enabled... before allowing innovators past the toll booths preventing, not enabling access to the markets to raise capital. And, in result... the American legacy of risk taking in innovation and investment engaged in driving social and economic progress... largely choked and died... with few paying attention. The results include... "directed" flows... as the lead into and after the dot.com bubble bursting in 2001... the few chosen survivors being far more protected from future risk in competition than prior "innovators". The serial "bubble" creation since then... has capital flow where its directed, not where its needed, and not where "the market" chooses. No boundaries, of course... so, "the same thing" is what you see in the result in "new media companies" usurping power and imposing crazy, corrupted social values... suppressing free speech... because "they can". The "control structure" is the source of the problem... and that structure is created in and maintained within "the markets"... whether the markets are free or not.

After decades of the economy "choking" on the suppression... a new elite emerged... and "control" having been imposed, deemed it timely to remove some of the constraints... and allow the market to foster a bit innovation, again... as, otherwise, it would be migrating elsewhere to find a more welcoming environment.

They've done the bare minimum they could... to resurrect the market function and foster innovation, again... although still under "over-sight" and control (by other means, now) of the new elite... who are increasingly likely to use government power instead of, or in parallel with disruption of (personal) finance, and still including (expanded specific ability in) market manipulation, as weapons used against those perceived as threatening their control. The main difference here versus China is... China is more overt about it.

There is still a huge lagging residual impact of the 30 year long drought imposed in innovation and competition... and an ongoing effort in suppression still exists, obviously... as we still see the increasingly overt effort made in imposing "control" over free speech, threatening and targeting those participating in legitimate dissent... or, basic journalism (Julian Assange). This is no longer a free country... and this is not a free market...

Change, however, has a way of mocking those who pretend to rule us... all the more when, believing their own propaganda, they induce themselves into over-reaching. Change does take time, still... but, once it is begun... it is unlikely its future impacts will be undone... by the belated recognition of the self deluded.

All of that by way of introduction to the reconsideration of the future of change...

Given adequate proofs the economy was dying because innovation was being choked... in 2012 "they" passed the JOBS Act... Jumpstart Our Business Startups... The new law immediately resulted in... essentially no real change... many feet dragged heavily... Capital could still be raised under the old rules... private placements under Reg D and exemptions under Rule 504, 505 and 506... essentially still requiring that only people with lots of money are allowed to participate in the innovation economy. Along about 2015, they finally got around to implementing updated "rules" to comply with the law... So, Reg A was updated to Reg A+, and Rule CF (for crowd funding) was implemented...

It is already apparent as an issue that the proliferation of "new" rules, and new subdivisions created under the old rules, while the old rules remain in place... creates unnecessary complexity... and, for the issuers, creates a poorly defined and inflexible series of wickets to navigate. The inherent regulatory conflict is not resolved... the changes doing little to address the ability of fraudsters to participate... as long as they dot i's and cross t's, and (mostly) avoid felony convictions, as others... and doing little to make "registering and reporting" easier and less expensive... rather than a persistent burden imposed on small companies that is an existential risk in itself.

The rules changes incrementally altered the exclusion of (almost) everyone with less than $1 million net worth from participation in the market. This change was allowed, at first, if an investor had an intermediary who was qualified to (and paid to) provide "protection" in the form of advice...

In 2015, they finally implemented Reg A+ and Reg CF... which allow "almost everyone" direct participation in early stage investment. Recently, (2021) they updated the rules changing the capital that can be raised, from $50 million to $75 million under Reg A+, and from $1.5 to $5 million under Reg CF. That change, for the first time, makes the Reg CF a far more viable pathway to enabling a startup, as it enables raising sufficient first round capital to enable succeeding.

What the changes make clear... is that focus of regulation has shifted from controlling "who can participate" to controlling "how much money companies can raise" depending on who they seek to raise it from. Why that set of limits makes a lick of sense is not a discussion that is made part of the rules... but, it clearly is an obstacle erected to creating new competition when "some" have market and capital restrictions imposed on them, and others do not... more particularly true in the "innovative" end of the market... where vast sums of investors $ may be required to be able to hope to succeed in bringing a new drug, or a new product innovation... to market.

In spite of the "protection" of existing competitors that is enabled, which prevents unfettered competition being enabled by ensuring others have barriers imposing inequal access to capital... the incremental lessening of the broad protections preventing the emergence of competitive risks challenging established competitors has been effective in fostering new business startups... many of which have gone on to larger successes.

The changes enabled do provide a viable alternative to the "usual" in the private placement / VC funding routes that have dominated the markets for decades... because, the funds raised by these methods DO NOT come paired with (or allow) contract limitations that force founders to submit to imposition of inferior valuations, or a surrender of control, before subsequent rounds are allowed...

There are a couple of aspects worth noting: one in how the changes in rules are being addressed by the new class of intermediaries created (like my VIPO concept... only enabled 25 years later)... and another, obviously, in the changes making it worth paying attention to the companies the new intermediaries are enabling.

There are 96 new intermediaries, or "funding portals"... but, only 5 or 6 of them appear they are functional and effective in facilitating the process...

One of the rules changes allows direct to consumer advertising, including through third parties... as long as terms are omitted, but with links you can follow through to "offerings"... while ads including terms, or "offerings" are not allowed to be advertised... a bit a grey zone obvious already in terms of the specificity versus generic in "offerings" and "terms"...

So, you can now find advertisements for participation in "VC like" investments... through more than one vehicle... either directly investing in shares through "funding portals" or... participating in the aggregate through managed funds that focus on providing a curated "VC like" opportunity. Here's one such fund based venture investment, not "a portal" giving you direct ownership: Fundrise appears it is essentially a mutual fund with a particular focus... perhaps not different in intent than Cathy Woods ARK Investment funds... but, perhaps, can avoid some of the obvious in too easily predicted impacts of Wood's excess.

At an early stage in something like AI... the curation and aggregate approach likely has some value... if you can find a fund that is in fact well and narrowly enough focused, and expertly enough curated, to ensure they're not selling you the sizzle... while delivering whatever they want instead of what you ordered. There's been surprisingly little "expert curation" in funds focusing on AI offerings yet... ???

Direct ownership obviates those "bait and switch" risks... but imposes others.

Among the actual portals, the first and still most active... Start Engine...

Benzinga is one of the "service providers" being used now to publicly tout the new Reg CF potentials... as they are doing here, with an advertarticle for Start Engine...

So, 25+ years post-VIPO... I'm now being "allowed" to invest in the concept that I helped create and used to "own" as a holder of founders shares in the market leader ? Gee. Thanks for all that "protection" over all those years.

Sour grapes aside... the idea is obviously still valid... and it still contains all the potential it did back then... and, if anything, the current need for it is significantly enhanced by the past 25+ years of not having it whiled moving in the opposite direction of having it...

There is obviously still the same REAL risk as you would have had, back then... if something like this had allowed you to invest directly in all of the no longer extant dot.com stocks... that in 2001 were trying to sell you socks, dog food, or groceries ordered on line and delivered to your door... and how ridiculous was that. Books made way more sense, of course, because the postage on books is hugely subsidized.

Start Engine has their own pages describing the new rules as Regulation A+: What Entrepreneurs Need to Know and Regulation Crowdfunding 101 For Entrepreneurs which are likely written in more user friendly terms than the links to the SEC brand bureaucratese.

They also just completed an acquisition of another portal "SeedInvest"... are raising capital for themselves with a $500 minimum... and have a list of 76 other current offerings...

I think you could probably do worse than throwing $500 at StartEngine...

I can see it quickly becoming a full time job just sorting through the "Portal Potentials" looking for winners.

Or, $ to be made off selling the analysis done on the new StartEngine funded AI enabled "Portal Picks" and portfolio tracking and management app... ?

Maybe its getting close to time to dust off that collection of IP that's been gathering dust... since they made it not useful to consider participating in the startup market..

Hopefully the trend to a more free market... will be followed by more freedom in the rest, too, as the pea brained dinosaurs stomping us now... are forced to go back to focusing on market competition... instead of full spectrum social domination ?

Is entrepreneurialism going to be valued by society, again ? "Rewarded"... instead of punished ?

Kind of hard to believe when you see what politics is all about these days... But, perhaps that's a lagging indicator... and the morons doing what they are now... might well be the last ones to figure it out... when their "best before" expiration date has past ?
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext