Photo: Kai Hendry (Flickr)
A new law Congress passed allows people to sell shares in their businesses on the web beginning next year. The state’s securities division says making sure online investments are legitimate is key to the success of new startups.
More entrepreneurs have been turning to the web in the past few years to find investors. Colin Cudmore is one of those people. He invented what’s called a garden tower—a four foot plant pot that’s designed to recycle nutrients while composting kitchen scraps. Cudmore says he put his idea on a fundraising site called Kickstarter because he needs more money to start a full production line.
“I stumbled upon Kickstarter a couple years ago and I liked it because it’s a way to avoid using banks,” Cudmore says. “We read the paper every day we see the situations with the banks it’s and it’s very difficult to get a loan these days and Kickstarter is a situation where creative ideas can get publicly funded.”
But as online investing becomes more popular, some entrepreneurs are going even further. They’re selling securities, or shares, in their business online, promising investors a part of their profits. That’s where it can get tricky, says Indiana Securities Commissioner Chris Naylor.
“The information about the company and about the investment opportunity will really be limited to the information provided by the startups,” Naylor says. “So that won’t really be a problem for legitimate business owners, but fraudsters could see that as an opportunity to steal money.”
But Naylor says companies use the new outlet properly, people could actually become more comfortable investing online, whether they’re seeking a return on their investment or just donating money to local businessman.