Sharing the wealth
Sharing the wealth
AI will create vast wealth over the next decade. More people should benefit from it.
AI is a thing y’all
Crypto was the last VC hype cycle. But AI feels different. Nobody could really articulate enough use cases for crypto. As Zach Weinberg and Logan Bartlett gleefully and repeatedly pointed out. But even I can figure out a myriad of huge applications of AI…
The point: AI startups are going to create unbelievable wealth over the coming decade.
Private Party
Uber’s value at IPO in 2019 was $75 billion. It’s market cap today is $65 billion. I am sure it will grow in the coming years, but to-date, all the wealth created by Uber was pre-IPO. Airbnb? Same story.
Companies used to go public a lot earlier. Microsoft, Amazon, Google. But over the last 20 years, the vast sums of money that have poured into late stage VC have meant that IPOs have been pushed later and later, and the explosive wealth created by startups has overwhelmingly accrued to private investors.
And until recently, those private investors had to be “accredited” (i.e. basically millionaires). So over the last couple of decades, all the wealth created by pre-IPO startups accrued to millionaires.
From Q3 1989 to Q2 2020, the share of wealth held by the top 1% of households increased from 24% to 31%. While the share of wealth held by the 50th to 90th percentile declined from 36% to 29%.
There were many, complex drivers of this exacerbation in wealth inequality. But one of them was that only rich people got to invest in Uber’s Seed Round.
Change up
It would be really cool if the fabulous wealth that will be created by the next impending wave of AI startups — was shared among a broader swathe of the population.
And now, thanks to the JOBS Act passed by Congress in 2012, and rolled out by the SEC in May 2016 (and significantly improved in March 2021), this is legally possible. Today, unaccredited investors can invest in private startups, alongside accredited investors — through a community round.
Big hairy caveat
Investing in startups is super risky. Many / most AI startups will go to zero. Letting retail (unaccredited) investors invest in them will result in many people losing their hard-earned money. But they should be allowed to do so. Just as they are allowed to go to Vegas and drop $10,000 on the spin of a roulette wheel. On the Wefunder homepage, we describe investing in startups as like buying “socially good lottery tickets”. I like that analogy.
To help mitigate this risk, the SEC has put limits in place on how much unaccredited investors can invest each year in startups (anyone can invest up to $2,500 per year, and your investment limit increases from there based on your income and wealth). And requires additional financial disclosures from startups raising capital from unaccredited investors.
At Wefunder, we love it when institutional investors lead the round, and price the round. For example, Mercury raised a Series B from Coatue, Andreessen Horowitz and other VCs, and then opened up $5M to let their customers invest on the same terms. Replit did the same thing. VCs don’t always get it right. But Peter Thiel is really good at chess.
The Fable of the Bees
Founders shouldn’t open up an allocation of each round to their customers and community to help ameliorate wealth inequality. They’ve got enough fires to fight without worrying about this one.
But happily, running a community round is a surefire way to delight your customers and build stronger community ties — two things that most successful founders should be pretty keen to do. Letting thousands of your customers invest in you means more loyalty, higher NPS, higher LTV, lower churn. It’s the best marketing campaign you’ll ever run.
Let’s say there are two startups in a competitive market. And one of them lets thousands of their customers invest in their Series A, B, C, D? My money’s on that one.
“Open” AI
Dear Sam Altman,
Please let thousands of AI enthusiasts invest in Open AI, so they can benefit from the wealth that you create over the next decade.
Love from The World.
ChatGPT: "Write a thoughtful response to an article written about AI"
As an AI language model, I find myself particularly interested in articles that discuss the potential and limitations of artificial intelligence. While AI has been hailed as a game-changer in many fields, including healthcare, finance, and transportation, it is still a relatively new technology that requires careful consideration and evaluation.
One of the key issues discussed in many AI articles is the impact of automation on employment. While AI has the potential to create new job opportunities, it may also replace human workers in some industries. It is important to acknowledge this potential impact and work towards a future where AI is used to enhance human abilities, rather than replace them.
Another crucial consideration is the ethical implications of AI. As AI becomes more sophisticated, there is a risk that it could be used to perpetuate existing biases or even harm individuals. Therefore, it is essential to develop ethical guidelines and standards for the use of AI, and ensure that AI is used in a responsible and transparent manner.
One particularly interesting development in AI is the rise of explainable AI, which is designed to provide transparent and understandable explanations for how decisions are made. This could help to mitigate some of the ethical concerns around AI, as it would enable individuals to understand and challenge decisions made by AI systems.
Ultimately, the success of AI will depend on our ability to use it in a way that benefits society as a whole. As we continue to develop and refine this technology, it is important to remain vigilant and ensure that it is used ethically and responsibly. By doing so, we can harness the full potential of AI to improve our lives and create a better future for all.