Don Marti

Sun 25 Mar 2012 12:46:38 PM PDT

Dude, we're winning

(updated same day, tighten up, copy edit.)

Dan Gillmor calls the Jumpstart Our Business Startups Act "a bonanza to the kinds of people who see everyday Americans as sheep to be fleeced."

Apparently, crowdfunding is fine, but you have to watch out for fraudsters who would take advantage of a crowdfunding system to peddle fraudulent "boiler room" investments to the long-suffering US middle class.

Gillmor cites a paper from law professor John C. Coffee, Jr., who writes, "every barroom in America could become a securities market, as some unregistered salesman, vaguely resembling Danny DeVito, could set up shop to market securities under the 'crowdfunding exemption.'"

But how is this sales guy going to beat the socially connected, SEO-enabled network of real crowdfunders?

The same way the encyclopedia salesmen beat the Wikipedia-Google Complex?

The same way that "high-touch interactions with potential customers" work so well for the software business?

If we get a better loophole for crowdfunding in the USA, it's likely to cause fewer opportunities for fraud, since the potential investors would already have sunk their money into bona fide companies—companies that they ran into while doing regular things on the dang ol' Internet, as customers, followers, employers of friends, whatever. Crowdfunding is more likely to displace the shady investment opportunities that people already have than to create more.

Fraud is an evil form of sales, and sales doesn't scale. When fraud tries to scale, it turns into spam, and the Internet has an immune system for that. (Hasn't everyone who would have sent money to bogus crowdfunders already sent their money to a 419 scammer, anyway?)

In conclusion, how about a nice hot cup of good old Internet optimism from JP Rangaswami? Enjoy your future crowdfunded investments just like you enjoy dealing with great small companies.