We suggested a while ago that crowdfunding would become an important investor in start ups. It hasn’t happened yet. But that may be due to the fact that the long-promised SEC regulations haven’t been finalized yet. The New York Times recently ran a piece on where things stand:
To its advocates, crowdfunding is a way for capital-starved entrepreneurs to receive financing that neither big investors nor lenders are willing or able to provide. To others, it represents a potential minefield that could help bad businesses get off the ground before they eventually fail, and in some cases could even ensnare unsophisticated investors in outright fraud.
Those fears are partly why the Securities and Exchange Commission has delayed rules allowing crowdfunding that were supposed to take effect this month as part of the JOBS Act (Jump-Start Our Business Start-Ups), signed by President Obama last April. The S.E.C. is wary of loosening investor protections that have been in place since the 1930s.
Despite the uncertainty, the outlines of a new industry are emerging as a few crowdfunding start-ups have found ways to raise money within current rules. They include companies like CircleUp and SoMoLend, which lends money to small, Main Street-type businesses that typically wouldn’t interest private investors.
CircleUp provides a brokering service, matching potential investors to small start ups. It one of a few examples of how the crowdsourcing ecosystem is taking shape. You can read all about it here.