My startup needed to raise $500K to expand our marketing efforts and get the word out. Raising the money was quite easy: I issued some new shares and listed them on StartupIPOs.com. It’s a marketplace for accredited investors. Startups that need funding list their offerings, and people buy their shares. The price is set by the market, which is fine with me.
It works because they force you to use YCombinator’s standard terms, just as if this was Ron Conway investing. So the investors know they are dealing with professional startups and receive all their usual protections: a board seat, preferred shares and so on. But since everything is codified and standardized, we avoid the exhorbitant legal fees (often north of $25K), which really hurt when raising small chunks of money.
Being able to use this service allowed us to continuously raise money. In effect, it’s as if we could IPO for free every time we needed more cash for operations. The need to go through VCs as gatekeeper pretty much disappeared.
It’s pretty cool!
And it’s also a fantasy. Such a site doesn’t exist yet. Partly because it would be illegal in the US of course (you can’t offer equity for sale to the public, and reporting requirements when you have a large number of shareholders are prohibitive). Partly because building a healthy market, where both sellers (the startups) and buyers (the angels) behave properly, free of scams, is not so easy.
Do you know a way to make StartupIPOs.com? If so, please do it, for all startups’ sakes!
