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Abstract
Financialization proceeds, in part, through increasing popular participation. Does this process ever encounter internal limits? This paper considers a project to popularize angel investing in the United States by deregulating it and bringing it online. Scholars have detailed the devices and processes by which non-professionals have come to participate in public stock markets. In comparison, angel investments in high-risk startups are unusual securities: they are local, illiquid and resist calculation and modelling. As such, this form of investing has classically depended on embodied relationships and was legally restricted to the wealthy. In the recent attempt to ‘democratize’ angel investing, however, equity crowdfunding platforms could not sustain the social attachments and ways of knowing which previously subtended the practice. Through interviews and analysis of platforms’ interfaces, I show that this project to popularize angel investment ultimately reproduced and reinscribed exclusive off-line investment networks without substantially incorporating new participants.
Acknowledgements
The author would like to thank Juan Pablo Pardo-Guerra, Paul Langley and three anonymous reviewers for their constructive comments in refining the argument and contribution of the paper.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 As of 2016, 52 per cent of Americans own stock, more than two-thirds via retirement accounts (Ghilarducci, Citation2020). The growth of popular investment via pensions and mutual funds therefore has actually undermined individual participation in stock markets as it has empowered a small handful of large asset management firms (Braun, Citation2015).
2 Versions of that distinction have identified technical and regulatory changes which produced uncertainty that lead to speculation (Strange, Citation1986); they have noted how traders justify strategies based on rational calculation while distancing themselves from ‘speculative’ ones based on ‘guts’ (Miyazaki, Citation2007); and they have examined the contested histories of national accounting which categorize finance as ‘productive’ (Christophers, Citation2011).
3 In ‘rewards’ crowdfunding, people contribute to consumer product development on sites like Kickstarter, without the guarantee of receiving anything. In ‘donation crowdfunding’ — or, more trenchantly, ‘crisis crowdfunding’ — people gift money to precarious strangers who, facing e.g. ruinous healthcare bills, perform moral worthiness on sites like GoFundMe (Wade, Citation2018).
4 Two additional factors in equity crowdfunding’s rise are beyond the scope of this paper. First is the proliferation on the demand side. Around 2010, commentators noted a ‘Cambrian explosion’ of startups, invoking the prehistoric period of proliferating animal life (Schonfeld, Citation2011). A common narrative attributed this to the falling cost of launching a technology startup — from $5 million in the 1990s to $50,000 in the 2010s — enabled by open-source software and cheap cloud hosting. Second is the rise of the 1 per cent, with disposable capital for speculative ventures.
5 Crowdfunding thus exemplifies the 30-year trend of neoliberalism to ‘manage crises by turning them into opportunities for private entrepreneurial risk-taking, deepening the reorganization of society as a market’ (Tyfield, Citation2017, p. 36).
6 Legal scholar Heminway (Citation2012) playfully labels this ‘unequity’, because Regulation CF investors get different terms from others.
7 The fine print under it reads ‘this investment is speculative, illiquid, and involves a high degree of risk including the possible loss of your entire investment’.
8 Citing Tom Wolff, ‘Tinkerings of Robert Noyce’, Esquire (December 1983):
A number [of early Silicon Valley figures] had grown up in small towns in the Midwest and shared a distrust for established East Coast institutions and attitudes. They repeatedly expressed opposition to ‘established’ or ‘old-line’ industry and the ‘Eastern Establishment’.
9 Both Title II and Regulation CF platforms accrue additional moral authority by foregoing the management fees charged by VC firms (between 2 per cent and 5 per cent, even if they lose money). Platforms take a modest 5 per cent of profits compared to VC’s standard 20 per cent.
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Notes on contributors
Jacob Hellman
Jacob Hellman is a PhD candidate in the Department of Communication at the University of California, San Diego. His research investigates the sociotechnical practices through which market and business communities are produced, maintained and contested. A recent article in Science as Culture argues that big tech’s apparently concentrated monopoly power is in fact culturally distributed across multiple scales and entities.