Equity crowdfunding is still in its infancy. As recently as three years ago, very few people talked about it. It was just a concept, as JOBS Act (Title III, for example, was just passed) and similar regulations elsewhere in the world did not exist yet. We are probably going to see the best of it from 2016 on.
As with every new industry, people take some time to adjust, adapt, and learn the best way to leverage on public attention. This leads to the buildup of many errors, failures, and myths. It’s time to debunk some of them.
Myth 1: equity crowdfunding is always risky
It’s a common belief that equity crowdfunding is a risky business. And we are not just talking about the startup risk. We are talking about adventurous people.
The main reason behind this misconception is the perception that crowdfunding entrepreneurs are normally the types who were turned down by VCs and banks, penniless people who throw an idea to the crowd and see if it catches. Then, they use other people’s money to try something that is not feasible, perhaps even outright defrauding their backers.
While that holds true for some projects, there are several points that do not make it true as a whole: