NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, January 24, 2014

Looking to put your life savings into an unproven start-up, and hopefully cash out when it hits big?

Rules under consideration by the Securities and Exchange Commission would allow start-ups to “crowdfund” their businesses, raising capital from people who have traditionally been barred from making such risky investments.

But while the crowdfunding phenomenon (essentially raising small amounts of money from a large pool of investors) has worked for companies like Kickstarter and Indiegogo—which fund specific projects like films and music, trying to fund start-ups this way could prove disastrous for many people, experts say.