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University of Toronto Professor: Preparing for the chaos of equity crowdfunding

Equity crowdfunding is not yet legal, but when it is, expect a period of “chaos” before those involved learn how to make the most of its benefits and minimize its risks, say University of Toronto researchers. “There’s no question that there will be fraud and that some investors will lose money, but that’s true in every market. This is a new market and we suspect there will be a steep learning curve for all participants – entrepreneurs, investors, crowdfunding platforms, and regulators,” says Ajay Agrawal, an associate professor of strategic management at the University of Toronto’s Rotman School of Management who has written a paper on the topic with two other Rotman researchers. The paper, to be included as a chapter in an upcoming volume published by the Boston-based National Bureau of Economic Research, is aimed at U.S. policy-makers as they continue to consider regulations that will govern equity crowdfunding. While mainstream media news stories have often painted equity crowdfunding as either a panacea for struggling business start-ups, or a dangerous financial threat, the paper seeks to lay out a reasoned framework to assess its potential risks and benefits. “Our objective was to put some structure around this innovation in financial […]

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