Mittwoch, 13. März 2013

Crowdfunding in droves

Investors beware » Read the fine print, don’t expect big returns, consumer advocate warns.

Just as the interest in crowdfunding has exploded, so has the number of online platforms that enable the activity. The survey showed that there were 452 active crowdfunding platforms worldwide as of April 2012 and that number was expected to balloon to 530 by the end of 2012.

One of those is Utah-based RallyMe, a crowdfunding platform that caters solely to athletes and sports teams. Founder Bill Kerig is also a documentary filmmaker whose latest production is "Ready to Fly" about women’s ski jumping. He got the idea to build a crowdfunding platform after following around athletes and watching them constantly fundraise. He says crowdfunding is more efficient and more effective than sponsoring a dinner.

"Five years down the road, every athlete and team out there is going to use some sort of crowdfunding, for sure," Kerig said. "They’re not going to keep doing yard sales."

Protecting the investor

No doubt, there’s the potential for fraud when it comes to crowdfunding. An enticing pitch could end up just lining someone’s pocket instead of supporting a cause or business venture, warns Cochrane of AAA Fair Credit Foundation. He says many people expect a return on a crowdfunding investment instead of considering the contribution a donation, so consumers need to read the fine print.

"It’s such a new concept. It’s basically peer-to-peer lending and anytime you invest money in something you don’t know a whole lot about, just be careful," Cochrane said.

He said in some ways, the crowdfunding model sounds a lot like affinity fraud, an issue that’s especially plagued trusting Utahns.

But TCO’s Taylor Bench argues there is safety in the crowd.

"If I put up a campaign thinking I’m going to defraud people, it doesn’t work well when I’m asking personal friends to invest. I’m not willing to risk my social capital with the people I know and love," said Bench. "The crowd is a very good policeman."  Full text

Copyright: The Salt Lake Tribune 2013