Problems with Crowdfunding
Crowdfunding occurs when people network through the internet to raise money to support other people’s ideas or interests. Crowdfunding became popular when Obama signed the JOBS Act bill in April. Since then, sites like Fundable and Kickstarter have garnered media attention. Not all information about crowdfunding has been positive. The Harvard Business Review’s article The Road to Crowdfunding Hell explained some of the problems associated with the process.
The Wall Street Journal’s article Crowdfunding Efforts Draw Suspicion contains some of the latest problems. The SEC was supposed to review the rules for crowdfunding by January 1. They missed this deadline. In the meantime there may be some people who have taken advantage of the situatoin. “State regulators already have taken or considered enforcement action against a handful of companies for allegedly exploiting online fundraising to commit fraud—or simply jumping the gun on the planned rules changes.”
There have been a large number of websites dedicated to crowdfunding. Over 9000 sites include the word in their website name. “Crowdfunding enthusiasts say the number of websites being registered reflects the pent-up demand for the financing targeted by the JOBS Act.”
The concern is that there is a lot of interest without a lot of control. “The association of securities regulators says the JOBS Act doesn’t do enough to protect investors.” Crowdfunding Insider claims Education is the Best Weapon Against Crowdfunding Posers.
The following video explains: The JOBS Act and its impact on crowdfunding.