What are the downsides of allowing anyone to participate in early-stage investing?

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What are the downsides of allowing anyone to participate in early-stage investing?

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Unsophisticated investors can fund a lot of bad quality projects diverting funds from good projects
Unsophisticated investors with limited access to savings and capital can have far more catastrophic outcomes from investments if they fail
Unsophisticated investors can fund a lot of bad quality projects and disturb the market by creating a lot of noise
Unsophisticated investors are more likely to lose money from investing in bad projects
People who aren't proven to be good at capital allocation or growing wealth may not have sound financial judgment

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Financial risk

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Financial risk