First, it would be great (for all parties, except perhaps for the few top-tier VCs who today get the lion’s share of attractive deals offered to them first) to see a workable angel / venture capital marketplace with greater liquidity than is achieved today by the available conventional means.

However, there is a fundamental problem with the model as all of the two dozen or so sites I’m aware of that are trying this have so far implemented it. The problem is the one usually called Gresham’s Law — see http://www.britannica.com/ebc/article-9366139 or http://en.wikipedia.org/wiki/Gresham%27s_law.

In other words, the flood of low-quality deals (which AFAIK nobody yet has a workable mechanism for keeping out) will drive away the good deals… and then the lack of good deals will drive away, or fail to attract in the first place, the investors.

As an investor, I will use a facility of this sort ONLY if it presents to me deals of quality sufficient that the expected value of reviewing one exceeds the cost (including opportunity cost) of doing so. So how can the deals presented to investors be filtered for quality? You can’t ask real investors to do it (they have better uses for their time). You can’t use an algorithm — if you really had a deal-quality-picking algorithm you’d use it to go get rich, rather than filtering deals for me. And you can’t use the crowd — as anyone with real deal-picking skills will opt out of the crowd due to Gresham’s Law, and there’s no reason to think what’s left can do better than chance. (That last is an empirical claim, so it’s open to refutation — but only by evidence, not argument).

Cheers,
Richard

First, it would be great (for all parties, except perhaps for the few top-tier VCs who today get the lion’s share of attractive deals offered to them first) to see a workable angel / venture capital marketplace with greater liquidity than is achieved today by the available conventional means.

However, there is a fundamental problem with the model as all of the two dozen or so sites I’m aware of that are trying this have so far implemented it. The problem is the one usually called Gresham’s Law — see http://www.britannica.com/ebc/article-9366139 or http://en.wikipedia.org/wiki/Gresham%27s_law.

In other words, the flood of low-quality deals (which AFAIK nobody yet has a workable mechanism for keeping out) will drive away the good deals… and then the lack of good deals will drive away, or fail to attract in the first place, the investors.

As an investor, I will use a facility of this sort ONLY if it presents to me deals of quality sufficient that the expected value of reviewing one exceeds the cost (including opportunity cost) of doing so. So how can the deals presented to investors be filtered for quality? You can’t ask real investors to do it (they have better uses for their time). You can’t use an algorithm — if you really had a deal-quality-picking algorithm you’d use it to go get rich, rather than filtering deals for me. And you can’t use the crowd — as anyone with real deal-picking skills will opt out of the crowd due to Gresham’s Law, and there’s no reason to think what’s left can do better than chance. (That last is an empirical claim, so it’s open to refutation — but only by evidence, not argument).

Cheers,
Richard