Venture capitalist would welcome more regulations over businesses that raise cash from retail investors via the internet, according to a survey of venture capital firms conducted by the Cambridge Judge Business School and financial data provider qodeo.
Respondents argued small-time investors have limited access to companies using crowdfunding, which don’t always provide a high-level of information on their websites for investors to fully appreciate the risks involved or perform due diligence.
“The real [crowdfunding] opportunity is in debt and project finance because credit risk is easier to price and can be more standardized,” said Arne Morteani, principal, Environmental Technologies Fund.
Some in the venture capital industry believe regulators will eventually take notice, and limit equity crowdfunding. If not, cynics contend that crowdfunding could eventually eliminate established angel networks, which connect small businesses with investors, and which have a better appreciation for the risks involved in early-stage investment. Nonetheless, respondents said crowdfunding was a positive development for the industry, noting it provides entrepreneurs and startup businesses with easier access to liquidity.