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The Crowdfunding Economy Is About to Pop

Crowdfunding has enabled millions of people to donate money to make prototype products a reality and support artistic projects, among other proposals. In exchange, supporters have received free gifts, verbal thanks, even hugs. Now the stakes are about to increase dramatically thanks to a law paving the way for direct investment in startup businesses. The new law, a provision of the 2012 Jumpstart Our Business Startups (JOBS) Act, allows startups to market private share offerings to potential investors via websites, social media, and print and television ads. A pre-Internet version of that practice had been outlawed in the 1930s to protect citizens from Great Depression-era scammers. Today, experts say the ability to pitch to a wide variety of investors will help startups get more early funding faster. “In the past, because you couldn’t publicly advertise the fact that you were seeking investment, your ability to succeed in that was really highly dependent on your personal contacts, your network of investors and your ability to tap into people that way,” explains Gordon Burtch, a professor of information and decision sciences at the University of Minnesota who studies crowdfunding. “This makes life a lot easier from a fundraising standpoint.” For now only accredited […]

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