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Do Retail Investors Need More Protections or More Opportunity?
(And what the heck are investor protections anyway?)
Delivered February 28, 2025 @ 5:00pm ET
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Happy Friday!
My name is Gerry Hays, and for lack of a better description, I’m the custodian and convener of Doriot, a movement to break open the gates of venture and expand opportunity beyond an elite few.
I’ve been in the game of venture as a founder, investor, researcher, inventor, author, game designer, and professor. I’ve built companies and developed a global venture portfolio entirely from the great state of Indiana, all while teaching over 6,000 undergraduates and MBAs at Indiana University, as well as in Croatia, Hong Kong, Slovenia, and Singapore.
This Week’s Highlights in the Democratize Venture Space
Robinhood is pushing to open private markets to retail investors through tokenization, calling for regulatory clarity in a new memo. Tokenization turns real-world assets into fractional, tradeable digital tokens on the blockchain. Robinhood is betting big on crypto’s future — proof that they see a massive growth opportunity once the SEC finally clarifies the rules.
The Libra Meme Coin on Solana collapsed, wiping out $251M in investor wealth — 86% of traders lost, while two winners pocketed $180M. Argentina’s president, Javier Milei, is under investigation for promoting the coin. This is just the latest (and certainly not the last) example of how meme coins offerings are engineered to rug-pull everyday investors. With meme coin trading outside the SEC’s jurisdiction, there's little to no oversight — leaving retail investors exposed. Don’t play a game that’s stacked against you!
And speaking to investor protections, on Wednesday, the House Financial Services Committee held a hearing on "The Future of American Capital" —focusing on expanding investor access and improving capital formation in public and private markets. Watch the hearing here, and my breakdown is below.
Do Retail Investors Need More Protections or More Opportunity?
SEC Headquarters
The numbers don’t lie — new business startups are the engines of job creation. Nearly every governor and mayor wants more entrepreneurs in their backyard. Government-backed funds help, but ultimately, private capital drives innovation.
The obvious answer? More venture funds. But launching new funds is increasingly difficult, especially for first-time managers. And in smaller markets? Nearly impossible. Another answer is more angel investors—high-net-worth individuals (HNWIs) writing $5,000–$50,000 checks into startups. But like venture funds, these investors are concentrated in major metros. Outside of these hubs, there’s simply no density — which is why angel syndicates have become critical. Even then, less than 5% of HNWIs participate in venture. Most stick to what they know and understand (i.e., real estate).
But here’s what isn’t in short supply: retail investors. The JOBS Act of 2012 and subsequent SEC rules in 2017 cracked open the door. Today, any startup can raise up to $5 million annually via Regulation Crowdfunding (Reg CF) and up to $75 million via Regulation A+ (Reg A+) — no VCs or angel investors required.
Yet despite $3.7 billion raised through these rules since 2017, raising from retail investors presents an entirely different set of challenges. The House Financial Services Committee has debated these issues extensively, but the market remains wildly inefficient.
Through Doriot University, we’ve found that less than 1% of retail investors are motivated to learn how venture investing works. From what we’ve observed, the majority of retail venture rounds on the regulated portals come from friends, family, and customers — not repeat investors building diversified portfolios. Without a commitment to invest in multiple deals, there’s little incentive to get educated.
Which brings us to the question of investor protection. Right now, Reg CF and Reg A+ cap most retail investors at $2,500 per year. Some policymakers want to apply similar limits to Regulation D (Reg D) offerings, which have historically been reserved for accredited investors ($200K income or $1M net worth, excluding primary residence).
But since its inception, the SEC has operated on one guiding principle: disclosure. Public companies file S-1s, ensuring all material information is disclosed before retail investors put in a single dollar. Reg D? Virtually no disclosure, which is why it’s restricted to accredited investors. Reg CF and Reg A+? More disclosure (financials, annual reports, etc.), but still far from transparent.
And yet, the argument persists: “People can take $10,000 to Vegas or bet on sports, but they can’t invest in startups?” I used to agree. But after seven years studying retail venture markets and investing in 50+ startups, I’ve seen firsthand that even Reg CF and Reg A+ offerings are opaque. Retail investors don’t get the level of detail that VCs or lead angels demand. Key data — unit economics, fully diluted cap tables, true financial health — is often missing. It’s nearly impossible to make an informed decision without a full picture. And then there’s the marketing — startups spending $50,000–$150,000 to push their offerings, some of which, in my opinion, are outright fraudulent.
At the core, the biggest friction point isn’t more investor protections — it’s the lack of a viable model for small investors.
For better or for worse, we’ve tried to graft the traditional venture model onto retail investors, and it hasn’t worked. VCs get paid to analyze deals full-time — it’s their job. Retail investors? They might give an opportunity five minutes, if that.
And here’s the real kicker: retail investors can’t win in venture without the power law. One bet won’t cut it. To have any real shot, they need to make 25–50 bets. Under today’s system, it’s simply too expensive and time-consuming for most investors.
I’ve said this before: VCs play the equivalent of tennis. Retail investors don’t want to play tennis — they want pickleball, a game that’s easy, fun, affordable, and winnable.
And, most importantly, a game where the deck isn’t stacked against them. That won’t come from government protections — it has to come from private market innovation.
Which is why, on 4/15/25, we’re introducing VentureStaking™ — an unheard-of approach to startup investing, the equivalent of pickleball for venture.
Updates on Doriot Invested Companies
Overplay (Deal #67), a startup revolutionizing the $574 billion digital media landscape with the first frictionless platform for user-generated games has announced that they’ve added "feel" to their app—enhancing interactivity and immersion in ways never seen before. Learn More.
RAD Intel (Deal #9), company that uses AI to help brands craft perfectly tailored messaging for their target audience, announced their Reg A+ round. They’re raising at a $100MM Valuation, a 5x markup from where the Doriot Venture Pool invested.
TimePlast (Deal #46), a company focus on creating a water-soluble plastic material, announced that they’ve surpassed 465 filament sales in a matter of a few weeks after debuting their 3D printing materials platform. The company is raising another RegCF round at a $98MM Valuation, a 2.5x markup from where the Doriot Venture Pool invested.
Qnetic (Deal #39), a battery storage technology company, recently won the Kingscrowd January Pitch Competition. They’re raising a round on Wefunder at a $20MM Valuation, .25x markup from where the Doriot Venture Pool invested.
Kingscrowd dropped this week!
KingsCrowd, an online private market rating and analytics platform for equity crowdfunding research, is currently raising on StartEngine.
We broke down their latest offering and released our analysis. You can review for free below:
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Have a great weekend! -gerry ([email protected])
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