Ever since the JOBS Act passed earlier this month, I've been inundated with PR pitches about new crowd-funding platforms. So many, in fact, that I'm surprised a crowd-funding platform hasn't been formed to help seed all the other ones.
To me, there are two big questions for this burgeoning boom:
1. How on earth are these platforms going to police fraud, as the JOBS Act requires them to do? Considering that we've seen fraud at start-ups backed by sophisticated venture capitalists (see: Canopy Financial, Terralliance), do we really expect crowd-funding platforms to have the capacity to dig into their clients' potential problems?
Moreover, what happens to trust in the broader movement if isolated frauds do occur? Will crowd-funding prove popular enough to withstand news stories about little old ladies who lost thousands of dollars to an unscrupulous "entrepreneur?" The per-deal investment limits may help mitigate the damage -- no accredited investors will lose their nest egg on a single company -- but each of these platforms should pay very close attention to the due diligence that their rivals are, and aren't, conducting.
To read the full, original article click on this link: Two big crowd-funding questions - The Term Sheet: Fortune's deals blog Term Sheet
