How Safe Is A CrowdFunding Investment?

CrowdFundBeat news. By Saeed Maleki, Crowdfunding is marching on as an alternative funding option for entrepreneurs as funding for new businesses has dried up from the banks.

Regulators and tax authorities in Britain and the United States have voiced some concerns over protection crowdfunding platforms and entrepreneurs seeking money offer investors.

To help investors with their decision whether to get involved with a project, here are some answers to the most frequently asked questions about crowdfunding:

What is crowdfunding?

Crowdfunding generally takes place online by companies, individuals and charities pitching for cash contributions to finance specific projects. The aim is to pool small amounts of cash from a large number of investors to fund a deal

What are the returns on a crowdfunding investment?

This depends on the entrepreneur making the pitch. Some just say thanks for the cash and list donors on their web site or offer a small gift, like a discount on the product or a T-shirt.

Bigger projects often exchange equity in the business for cash, so the return depends on whether the business takes off and if the value of the shares increases.

What’s the benefit to a crowdfunded business?

Money raised by crowdfunding is equity rather than debt to a bank. That means the company can spend money as the directors see fit without repaying a loan plus interest to a bank.

The downside for an investor is the success of the business rests with how well the project is managed and they lack control over how and when their money is spent.

What do the regulators say about crowdfunding?

The Financial Conduct Authority (FCA) ion the UK warns investors that crowdfunding projects are outside of the scope of the Financial Services Compensation Scheme. As a result, if something goes wrong with the deal, investors have no redress through the Financial Ombudsman and are unlikely to see their money back.

The FCA has published a number of rules aimed at regulating crowdfunding in the UK and advises inexperienced investors should avoid crowdfunding projects. These come into effect from April 2014.

The main thrust for the rules is crowdfunding platforms should have a process in place to protect investment cash if the crowdfunded project fails.

Where can investors find out more about the crowdfunding rules?



BloombergCouples Desperate For Children Turn to Crowdfunding FertilityBloombergCrowdfunding has become a popular mechanism for many couples who can't afford the high costs of IVF, or adoption and surrogacy. “It's not an easy thing to share publicly,” says Crystal Barrett, 33 [...]

BBC NewsNHS trust 'relies' on crowdfunding to equip wardBBC NewsAn NHS trust has launched a crowdfunding appeal to buy equipment for a new hospital unit because "it cannot get started without donations". The Royal National Orthopaedic Hospital (RNOH) in Stanmore, n [...]

MarketWatchWhy a crowdfunding site is giving out $10000 scholarshipsMarketWatchCrowdfunding site GoFundMe announced Thursday that it will award $10,000 to 10 students with pages on their site that fundraise for education. The award is part of a contest the site held throughout Septemb [...]

MottoIVF: More Couples Crowdfunding to Pay for Procedure - MottoMottoMore and more couples are turning to crowdfunding to fund costly in vitro fertilization (IVF) treatments, Bloomberg reports.More Couples Who Can't Afford IVF Are Turning To Crowdfunding ...RomperCouples desperat [...]

Huffington PostReal Estate Crowdfunding's Pathway of ChangeHuffington Post“Crowdfunding is just the Internet,” stated Attorney Mark Roderick as he opened last month's RealCap Chicago. RealCap is an annual conference that joins crowdfunding leaders and innovators to propel th [...]

WestwordProgressive-Rock Band Marillion Pioneered CrowdfundingWestwordThat was the beginning of crowdfunding for us — and for every band, really.” When it came time for the recording and release of the followup to the 1999 record, Kelly and the band realized that one of [...]

CoinTelegraphCrowdfunding vs. ICO: Experts Question Legitimacy and Guarantees ...CoinTelegraphThe simplistic idea behind crowdfunding a non-existent software or system has become a trend in the cryptocurrency industry, but most Bitcoin experts are highly ...and more » [...]

ForbesVenture Crowdfunding Revisited: An Update with NIN VenturesForbesI am about to head off to attend the Global Crowfunding Convention (GCC) 6 in Las Vegas. It will be my fourth time attending. The crowdfunding industry has grown from $16 billion in 2014 to $34 billion in 2015, and [...]

EntrepreneurIs Crowdfunding Right for You? Answer These 7 Questions to Find Out.EntrepreneurCrowdfunding is a popular and increasingly accessible way to put your prospective product or business in front of millions of people. And, thanks to the visibility of massive success stories, t [...]

Crowdfund InsiderOn Investment Crowdfunding, Diversification & the Wisdom of the CrowdCrowdfund InsiderOne of the cardinal rules of investing is diversification – a critical ingredient for long-term portfolio growth. This rule applies with equal, if not greater, force when investi [...]

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