The Real Deal By Ocean Capital: Boston entrepreneur starts crowdfunding petition
2/13/2012
Crowdfunding is essentially defined as raising small amounts of money from a large number of sources, according to BostInno. It's an alternative startups can turn to if they can't secure a small business loan or SBA loan.
Currently, only large, accredited investors or close family friends can invest in private startups. The reason for this, according to Bill Sahlman, a professor of entrepreneurial finance at Harvard Business School, is because the government is attempting to protect investors from making rash decisions, especially since many of them aren't wealthy enough to sustain a loss following a risky investment.
"It's a long tradition between trying to allow commerce to take place but also put in place regulations that would protect people from doing stupid things," Sahlman told the media outlet.
However, the Boston Herald reports that entrepreneur Nicholas Tommarello is attempting to change what he believes to be outdated rules, forming a crowdfunding platform called WeFunder. He's been using the site to collect signatures to petition to Congress to allow individuals and smaller companies to invest, and has already eclipsed $5 million in pledges.
The only downside of pushing a bill through would be that sometimes, having a lot of small investors may make it difficult for a startup to attract larger venture capitalists.
Ocean Capital, a small business lender, publishes The Real Deal on their website to keep small businesses up-to-date with the latest news and events that affect them. Read more of the latest news here.
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