Some have estimated that Americans will ultimately invest 1% of their invest-able assets through crowd funding. Like any form of investing, there are risks.
But because crowd funding investors might be less savoy about the risks of online investment, it may also be difficult for busy start up entrepreneurs to manage investors’ expectations. Some of these issues might be:
- Crowd funding information is highly asymmetric with respect to what can and will be obtained during due diligence.
- Investors are susceptible to fraud or just plain incompetence.
- Investors find it difficult to obtain the necessary data to make smart decisions, since they are further removed
- Some investors won’t understand many of the risks associated with crowd funding.