My worry is that we'll get a race of people who have only seen (or read about) startups that when from a hundred thousand dollar investment into billions, dumping money they cannot afford to lose into these things. That would trigger a bunch of excess capital seeking outlet and result it being used inefficiently, and when these folks learned about the "9 out of 10 start-ups don't make money for their investors" truism, they will be angry and litigious.
Personally, I'd like to see a way for investors to put money into some kind of broad-based startup index fund. I agree that people shouldn't be putting their life savings into a single startup. We don't like taking on that kind of personal risk (that's why we raise money) and they shouldn't have to, either. They should be able to take, say, $10,000 and put it into startups, plural.
Also, given that you're going to have a "power law" distribution of returns where a couple black swans are responsible for a large amount of the return, it's good for most investors to be in the whole spectrum; otherwise you get a St. Petersburg Lottery phenomenon where median returns are much lower than the (presumably quite high) expectancy.
FundersClub offered exactly that, the YCS13 fund that invests in about 10 companies in the YCS13 batch, with a $10k minimum investment. It closed about two months ago.
The best way to do this is probably a VC fund. Unlike public equities, a broad-market benchmark for startups faces low survival rates, limited liquidity, and ambiguous inter-round valuations - the tracking error would probably render the index useless.
Personally, I'd like to see a way for investors to put money into some kind of broad-based startup index fund. I agree that people shouldn't be putting their life savings into a single startup. We don't like taking on that kind of personal risk (that's why we raise money) and they shouldn't have to, either. They should be able to take, say, $10,000 and put it into startups, plural.
Also, given that you're going to have a "power law" distribution of returns where a couple black swans are responsible for a large amount of the return, it's good for most investors to be in the whole spectrum; otherwise you get a St. Petersburg Lottery phenomenon where median returns are much lower than the (presumably quite high) expectancy.