Crowdbuilding: The Real Story Behind Crowdfunding That No One's Telling

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Crowdbuilding: The Real Story Behind Crowdfunding That No One's Telling

With all the negativity and skepticism swirling around the SEC’s recent proposition to liberalize the laws of equity crowdfunding, it’s time for some contrarian content that sheds some more positive light on the topic.

For those of you who have not been keeping current with recent developments, in 2012, the JOBS Act was signed into law as an attempt to stimulate job growth in the US by encouraging investments in small and medium businesses. The most recent proposal from the SEC was a 585-page document [.pdf], which if signed, will enable investors of all shapes and sizes to invest in startups via equity crowdfunding platforms.

The Crowdfunding Skeptics

The risks of allowing a law like this to come to fruition are clear. Former SEC chief accountant Lynn Turner said in an interview with BloombergNews, “What we are talking about are companies that in all likelihood are not going to be winners, and they are being invested in by people who clearly don’t have the expertise and financial smarts of venture capitalists.”

Wealthfront CEO and Stanford professor, Andy Rachleff is another skeptic of the everyone’s-an-angel-investor phenomenon, comparing crowdfunding successes to the stories fisherman like to tell about “that one time they caught a big fish”.

Barry Schuler, author of “The dark side of equity crowdfunding“, refers to crowdfunded capital as “dumb money”. He makes the point that institutional investors add an invaluable element of professionalism that can help guide a young company towards profitability.

Crowdbuilding: The Real Story Behind Crowdfunding That No One's Telling

The Crowdfunding Skeptics

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