Reportedly there are at least 400 Crowdfunding Platforms ready to take advantage of The JOBS Bill.
You may wonder what a jobs bill has to do with Crowdfunding platforms. But that's because you probably didn't realize that "JOBS" is an acronym for: Jumpstart Our Business Startups.
The premise is fair - that jobs will be created by more small business startup's.
It's the assumption that's flawed: the way to start more small businesses is by making it easier to raise capital from inexperienced investors.
The Crowdfunding business model is based on the idea that customer/investors will desire a proposed product or service so much they are willing to invest in the company before it has hired anyone to build its offering. They believe customers will "invest" in advance of being able to see or experience a product or service because, in return, the customer has the potential to profit from the success by being an equity holder.
But the odds of jobs and profits are not great. If the company survives the start-up phase and hires people, more investors will be needed. That's when the early stockholders are crammed down, making the premium paid by that early stage customer/investor infinitely higher than the $900 I paid for my first VCR.
Wouldn't it be a fairer deal for the early stage customer to pledge to pay a premium for the product after the start- up hires people to make it? At least the customer gets something for their money - a product or service they think is worth paying for - and jobs are created.
Investors would have a reliable validation of the product or service before risking capital. By the time the company goes public, the risks and rewards are much more transparent.
Hope we don't have to go through another bubble and bust to get there.
