News Column

Is Crowdfunding a Winning Investment?

May 16, 2013

Is crowdfunding likely to pay off? A: Crowdfunding is supposed to be a boon for entrepreneurs looking to get their products to market quickly. But will this way of raising money be a boon for investors, too?

Crowdfunding is a relatively new phenomenon in which entrepreneurs can promote their plans online and solicit donations from the general public.

So far, most crowdfunding projects have been a way to get consumers a chance to back products not for financial gain but to support a cause or to get first dibs on the product if it's created. One of the most popular forums for these donations is Kickstarter.

But due to a provision in the Jobs Act, there's growing interest in using the concept of crowdfunding for entrepreneurs to lure in investors and raise financing.

Regulators are currently considering proposals to make sure there are adequate safeguards in place. So far, though, there's no approved venue for so-called stock-based crowdfunding.

That means the current type of crowdfunding isn't really a way to make money. It's just a new way to pre-order an interesting product, with the understanding that the product or service may or may not ever come to fruition.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Copyright USA TODAY 2013

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