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
Crowdsourcing.org 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
