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
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.
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