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The Securities and Exchange Commission of USA

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The Securities and Exchange Commission of USA

Post Mon Jan 08, 2018 5:25 pm
The Securities and Exchange Commission of USA on Friday approved rules that pave the way for Main Street investors to take equity stakes in startup businesses raising capital via crowdfunding. The risks for inexperienced investors grows in backing small businesses and startups, said Boris Wertz, founder of Version One Ventures. He said that crowdfunding initiatives that fall under the new classification could attract the wrong type of investors from “people who compare investing in startups to investing in a mutual fund, which would have relatively guaranteed outcomes, when that is not the reality of startup investing.”

Which of the following if true supports the argument made by Boris the most?

(1) Between 2000 and 2015, 75% of the investors who invested in startups made more money than the best performing mutual fund
(2) In Europe small investors prefer a large payout after a 5 years gestation period than small guaranteed incomes every year
(3) Crowdfunding companies never audit the startups for their legitimacy
(4) Following the SEC ruling, a lot of people closed their 401K retirement accounts because of the prospect of investing in startups
(5) In last 5 years at least 35% of the startups were profitable with predictable revenue estimates

What's the best way to determine the best Option?

OA D

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Post Fri Jan 12, 2018 10:01 am
lheiannie07 wrote:
The Securities and Exchange Commission of USA on Friday approved rules that pave the way for Main Street investors to take equity stakes in startup businesses raising capital via crowdfunding. The risks for inexperienced investors grows in backing small businesses and startups, said Boris Wertz, founder of Version One Ventures. He said that crowdfunding initiatives that fall under the new classification could attract the wrong type of investors from “people who compare investing in startups to investing in a mutual fund, which would have relatively guaranteed outcomes, when that is not the reality of startup investing.”

Which of the following if true supports the argument made by Boris the most?

(A) Between 2000 and 2015, 75% of the investors who invested in startups made more money than the best performing mutual fund
(B) In Europe small investors prefer a large payout after a 5 years gestation period than small guaranteed incomes every year
(C) Crowdfunding companies never audit the startups for their legitimacy
(D) Following the SEC ruling, a lot of people closed their 401K retirement accounts because of the prospect of investing in startups
(E) In last 5 years at least 35% of the startups were profitable with predictable revenue estimates

What's the best way to determine the best Option?

OA D
Boris Wertz's conclusion: startups attract the wrong kind of investors - people who think putting money into a startup is comparable to putting money into a mutual fund.

We're looking for evidence that there is, in fact, a shift among risk-averse investors from traditional investment vehicles to start-ups. Well, there's no more traditional investment vehicle than a 401k account. If many people are shifting their investments from retirement accounts to start-ups, that would surely substantiate the argument's claim that start-ups are attracting the wrong type of investor. Captured in D.

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