Wednesday, October 26, 2016

If it Sounds too Good to be True... is.  I've been hearing a lot about crowdfunding and have been asked about it be clients.  To put it mildly, I've been leery.  Basically just going out and asking people for money?  First, how do you honestly distinguish it from panhandling?  Sure, the solicitation says it will give you a return if it succeeds, but given the rate of success with start-ups, what are the odds?  Second, how can you even remotely provide adequate disclosure?  The whole thing sounds like a securities fraud charge waiting to happen, and that's what I've told clients.

Over the summer I had a chance to attend a lecture by Joseph Nowoslawski, who is an angel investor who has really dug into crowdfunding issues and the new SEC regs on the process.  His results?  Crowdfunding can work if you have the right circumstances, but compliance is expensive with a capital E, and as he and I discussed afterward, a good old Reg D offering under 506 still makes more sense for the overwhelming number of start-ups.

After the lecture, I overheard a discussion among a few of the other attendees, all of whom were involved in alternative medical treatments.  One was swearing up and down that his liver cancer was gone.  He had quit chemo, gone on some special diet (palm grass and who knows what all else) and was feeling great.  Of course everyone else in the discussion was affirming him all the way.  Folks, there is a very large difference between relieving symptoms and removing a cause.  He had reduced the load on his liver and so was no longer presenting the symptoms the weakened liver had caused, but that in no way means the tumor is gone or will remain gone.  Another issue I have with Orrin Hatch and his efforts to protect all the local alt-med outfits.

Quick fundraising and quick cancer cures.  They both sound too good to be true.  And they both are.

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