Hopes are high that crowd funding could be one answer to help fix the USA’s economic rut, where job and business growth has been anemic in part because of tighter lending. Crowd funding is supposed to give entrepreneurs a direct line to individuals willing to bankroll relatively unproven companies. Some think crowd funding could be an alternative to a stock market that has turned hostile to new companies as investors demand higher returns and companies face higher costs to comply with securities regulations.
Despite the theoretical allure of allowing consumers to fund such early-stage companies, though, lessons from crowdfunding’s very early days shows the risks, including a large chance of delays, higher risks than initial public offerings and the risk of entrepreneurs misrepresenting themselves.
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