Investors of crowdfunded projects often have varying motivations, such as early-access products, philanthropy, etc. That said, financial returns are advertised for many crowdfunded projects (essentially, the investors are offered some kind of piece of equity). I tried to find some studies or data on the historical returns for crowdfunded projects, but I wasn't able to find any. Is the expected value for typical crowdfunding investments negative?
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I'm struggling to frame this question as a good, on topic question in my head, but I'm not sure it's clearly not on topic so I won't vtc. But I think part of this is that I don't see "Crowdfunding" and "investment" as in any way congruent; perhaps some explicit examples would help. But even so, I'm not sure this is exactly a fit - "Is the expected value for [investment] negative" is probably not a good question here, is it? Or is it?– JoeDec 2, 2016 at 20:31
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There are "peer to peer lending" sites. I don't care to name brand names, but their aggregate returns over time are easily googled.– user662852Dec 2, 2016 at 20:39
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Here is an example where crowdfunding is pitched as an investment with potential returns: invesdor.com/en/pitches/745– Atte JuvonenDec 2, 2016 at 20:40
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1There are plenty of questions about historical/expected stock market returns and there are plenty of questions regarding scams. There are also questions regarding crowdfunding. I fail to see how asking about investor returns from crowdfunding is unacceptable?– Atte JuvonenDec 2, 2016 at 20:45
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1 Answer
Crowdfunding can be a legitimate means of funding very small startups. It is an innovative, but obviously risky, method of raising small amounts of money. As such it is now regulated by the SEC under "Regulation Crowdfunding" They have published guides for these types of business startups to help them with required disclosures and reporting requirements:
https://www.sec.gov/info/smallbus/secg/rccomplianceguide-051316.htm
Here's the introduction to the relevant regulatory authority of the SEC:
Under the Securities Act of 1933, the offer and sale of securities must be registered unless an exemption from registration is available. Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012 added Securities Act Section 4(a)(6) that provides an exemption from registration for certain crowdfunding transactions.[2] In 2015, the Commission adopted Regulation Crowdfunding to implement the requirements of Title III.[3] Under the rules, eligible companies will be allowed to raise capital using Regulation Crowdfunding starting May 16, 2016.
It is obviously a new form of investment but you should be able to get historical data on the SEC's real time Edgar reporting system once there is some history.
