Should You Crowdfund with Clients?


BY Lauren Barack, Think eTrade revolutionized online financials? Welcome to crowdfunding — the ability to for anyone to invest in nearly any kind of option or entreprise over the Internet at any time. “Crowdfunding is essentially an very old ancient concept,” says Jason Best, co-founder of Crowdfund Capital Advisors, advising investors and entrepreneurs on soliciting funds through crowdfunding. “What new is the ability to publicly solicit via social media. It’s going to a very big change.”  Nearly anyone who spends time on the Internet is familiar with Kickstarter — the online site that offers rewards to crowds of users who kick down (usually) small sums of capital to help launch a new satellite, self-cleaning shirt or an all-natural licorice company. The firm is expected to tip $1 billion in funds raised sometime in 2014.  Crowdfunding however is different. Here’s there’s no promise of a key chain, vintage postcard or a rainbow array of sweets once the project is funded and completed. Here the reward is un-promised — an investment made in a small business or start-up that may pay a return — and more likely will not. After all, 50 percent of small businesses fail in the first five years according to the U.S. Small Business Administration. To date, investors have long had the opportunity to invest in a friend’s new bar, a sister’s catering business or an uncle’s new bike shop, but not through general solicitations.

But Title III of the 2012 Jobs Act, should open the doors to allow companies to solicit investments from literally anyone — accredited or not. It’s now in a 90-day comment period expected to close in January 2014. Online firms are lining up, getting ready for what they believe is bound to turn investing on its ears. There’s even talk of launching an accreditation for reps through the nascent National Crowdfunding Association, says its executive director David Marlett. Yet, even some of crowdfunding’s biggest cheerleaders are asking: Is this the right investment vehicle for everyone?


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