Evaluating the risks and rewards of small business crowdfunding

I’m now loosely tracking 17 activity different US-based small business crowdfunding portals. This excludes all the portals intended for personal or charitable crowdfunding that would bring the total to 31. The number of investment options continues to grow and the field continues to grow more complicated. The risk to investors is high and grows in step with the expansion of choices.

The current issue of US News and World Report had this good advice:

“Ask yourself if the deal structure and company are transparent, with no smoke and mirrors,” he says. “It’s critical to thoroughly understand the structure of the deal you’re considering. If the investment team can’t explain the deal or the company’s operations in a way that you can’t understand, don’t invest.” Robert Kantor, co-founder and CEO of Headwater Capital was specifically speaking about real estate crowdfunding but the concept applies equally to all other types of deals.

This warning echos what I’ve been saying and writing about here on my blog. The starting point in any successful crowdfunding deal is always solid strategy, communication and financial accounting. Check out all three before investing.

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  1. Pingback: Tony Novak CPA | Crowdfunding article bibliography

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