Last week I talked about the new JOBS Act making “equity-based crowd funding” legal; and how I believe it is a good thing for startup funding. So this week I thought I would talk about a potential pitfall for the entrepreneur from this “easy money”. I’m ignoring any pitfalls that may be introduced by the act itself – until we see a draft of the regulations I think it is too soon to comment.
While I don’t have any “real data”, based on my own experience I would say that when you talk to people starting a business at least 80% of them come out with some statement along the lines of “if I can raise [insert number here], then all of our problems will be solved”. Unfortunately for many of them, raising the amount of money they are targeting – or even twice as much – won’t help them succeed.