This is where we talk about the "accredited investor rule".
Startups do not usually require the people brought in to put in actual money. They put in time, for which they are paid with a mixture of cash, and equity which is basically a lottery ticket. But they do not flow money back to the founders. Generally the only people putting in actual money are those who can afford to lose it. Occasionally on HN I've seen people complaining that they can't sell shares to friends and family - or buy a startup they "know" is going to take off. But this is why: it's too easy to be fraudulent.
Now, what field has no such protections? ICOs and cryptocurrency. What field is rife with fraud that's been called "MLM for men"? ICOs and cryptocurrency.
Startups do not usually require the people brought in to put in actual money. They put in time, for which they are paid with a mixture of cash, and equity which is basically a lottery ticket. But they do not flow money back to the founders. Generally the only people putting in actual money are those who can afford to lose it. Occasionally on HN I've seen people complaining that they can't sell shares to friends and family - or buy a startup they "know" is going to take off. But this is why: it's too easy to be fraudulent.
Now, what field has no such protections? ICOs and cryptocurrency. What field is rife with fraud that's been called "MLM for men"? ICOs and cryptocurrency.