The future of equity based crowdfunding and it’s possible growing pains

Despite regulators’ best efforts, equity crowdfunding will experience inevitable growing pains, says the Rotman paper, and many of these may be solved by the market itself, through innovation. – University of Toronto

I have been following Kendall Almerico, CEO of popular crowdfunding website ClickStartMe, for sometime now.  ClickStartMe, is a crowdfunding site that provides individuals and businesses with an easy-to-use website to raise funds through online crowdfunding. In an online article he discussed the future of equity based crowdfunding and it’s possible growing pains, as reported in a recent news story. What drew my attention, to the article was the fact that University of Toronto researchers said “expect a period of “chaos” before those involved learn how to make the most of its benefits and minimize its risks”, refering to when equity crowdfunding is made legal.

“The SEC is expected to approve equity based crowdfunding in 2014, in accordance with the JOBS Act,” said JOBS Act expert Kendall Almerico. “Once this happens, crowdfunding will be an entirely new ball game. Soon almost anyone will be able to purchase equity in a company online. Imagine the possibilities.” 

The recent news story on claims that equity-based crowdfunding will experience significant growing pains once the JOBS Act regulations are released by the SEC. The news story said that these growing pains would include fraudulent use of crowdfunding and the creation of unrealistic expectations.

“Sure, growing pains are to be expected,” explained crowd funding guru Almerico. “However, I don’t think that the problems will be as serious as is being reported. I can assure you the SEC is working diligently to prepare regulations that will safeguard investors.”

Experts from the University of Toronto’s Rotman School of Management are schedule to publish a paper on the the possible growing pains that equity-based crowdfunding may face in the future. It has been reported that this paper is expected to outline the financial risks which may be involved with equity based crowdfunding.

“Even if there are some bumps in road on the way there,” commented Almerico, “being able to crowd fund by offering equity to investors over the internet will change the business world. The benefits of incasing these new crowdfunding concepts far outweigh the costs.”

Research firm massolution has said, crowdfunding has picked up momentum in 2012 with some $2.7 billion invested.