It’s a little off my usual trading topic but I believe in diversifying across all types of asset classes so I wanted to share this with you.

Investing in start-ups has historically been limited to high income and net worth individuals due to regulations designed to protect unsophisticated investors from being scammed.

This meant only very wealthy, accredited investors, or professional venture capital firms could buy into new companies before they went public.

When a company is available for public trading, most of the dynamic appreciation has already occurred and the founders and private placement investors are cashing out at the public’s expense.

 Of course, for every Facebook gazillionaire there are scores of start-ups that went bust or sold-out for a fraction of the gain before hitting the public markets.

Now, the JOBS act on the president’s desk has authorized crowdfunding (also called crowdsourcing) as a way for start-up companies to raise capital from individual investors –  sometimes in amounts as small as $50 or $100.

www.kickstarter.com/ is the leader in the crowdfunding space. They’ve focused primarily on artistic projects.

A number of authors have been successful getting funding for books using their own websites but have run into problems complying with PayPal’s TOS when collecting money for an unfinished project.

As you can imagine, the list of sites offering to help entrepreneurs raise money and help investors give them money, is exploding.

Big but: Before you invest, do your due diligence on both the entrepreneur and the site that’s hosting the fundraising.

Here’s an index of sites and a basic video explaining the process: http://www.crowdsourcing.org/directory

And a list of some of the top sites: http://plantostart.com/10-crowdfunding-websites-entrepreneurs/

Do realize that there is a very real (and statistically high) risk that you could lose all your investment.

But, maybe one of your small investments takes off, and you end up a founder in something as big as the next Google.

Helping You Retire On Time,

BigA