More than 97% of Americans cannot invest in the latest startups, nor profit from their meteoric rises. For example, Kickstarter and other crowdfunding platforms like Indiegogo and Rockethub do not allow “supporters” to own part of the organizations featured on the site, even though their donations are financial investments in those advertising funds or projects. That’s why most crowd funding platforms reward their supporters with goodies (a first run of a manufactured product, say, or thank you cards.). Under US law, only “accredited investors” are legally allowed to invest and own a stake in a start-up.
So who are accredited investors? An investor is accredited if he or she has a net worth of at least 1$ million. That doesn’t count the value of their primary residence. Another way to become accredited is to have income of at least $200,000 each year for the last two years (or $300,000 together with a spouse) and expect to make the same amount in the current year.
So few Americans can meet these two ways of being accredited that, both legally and literally, any US crowdfunding investor must be part of an elite 3% of the population. And of that small group, only 300,000 individuals and 500 firms actually invest.These select few determine what is new and innovative, and thus what the remaining 97 percent want, need and will use. With such an elitist system, it goes without saying that Americans are missing out on the discovery and implementation of thousands of effective solutions. But not for lack of ambition.
Is this democratization of capital? Or making the rich richer?
The whole article can be found here.
