Once upon a time, mom and pop would have gone to uncles and aunts, friends and neighbors to get their shop funded. Today, their entrepreneurial drive takes them down a digital path, a highway often populated with strangers, albeit seemingly generous ones.
In the age of the internet, we seek money to support our projects at on-line sites, like Kickstarter or Indiegogo, just two of myriad crowdfunding destinations.The campaign might target friends and family, just as an appeal for financing might have in the good old days. A funding campaign since it is on-line can also attract money from people mom and pop don’t know, just as if they had gone public. The digital funding marketplace is a sort of alt-stock exchange– without the investor participation. As long as those putting in money are not promised any financial return, there are no SEC rules to control it.
The FinTech Forum: Crowdfunding & Data Standards program as presented by XBRL US, The CFA Institute and Baruch College’s Robert Zicklin Center for Corporate Integrity:
So, with no return on investment, who invests this way? How deep are the grassroots of this kind of funding? Are there weeds in the patch, and how is the funder protected?
There are many things I do not understand about crowdfunding. The knowledge gap is so wide as to be considered a chasm. Hoping to fill in the gaps, I attended the FinTech Forum at Baruch. My discoveries included but were not limited to hearing about regulated sources of funding, and the existence of “accredited investors.” Check out the FINRA site for guidelines for on-line investing that yields returns.
My focus would have been on the unregulated sources for capital that could help a small company or a visionary realize the financial security that could help launch their projects. The regulated platforms are much more the engines of entrepreneurship, however. They aim to provide funding for companies that will potentially add to the employee rolls and fuel our economy. Being on-line enforces transparency and trust.
If you’re playing at this level, either as fundee or fundant, you’ll do the research, work out the due diligence, and check with lawyers and accountants before proceeding.
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