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Crowd-funded investing for the average Joe?

Regulators also worry that many crowd-funded companies may be the weakest of startups, since they couldn't get funding elsewhere. They may have shopped around for funding venues, such as venture capitalists, angel investors or banks, and were turned down, Webster says.

Brian Lebrecht, a securities attorney in South Jordan, Utah, says better companies will go with a venture capitalist, and the leftovers may be crowd-funded.

Need for complex research

What is an expert's advice for investors who want to reap riches by riding the next great startup? "Many investors should just say no to these investments," the Consumer Federation's Roper says. She compares investing in infant companies to gambling in a casino.

"The average investor isn't doing enough safe and sound investing to even fund retirement," she says.

To protect yourself, follow these tips when considering a crowd-funded investment.

Invest through a broker dealer. Crowd-funded startups are highly complex investments to understand, Abshure says. To make informed decisions, you'll need to do a lot of research to learn about a company's competitors, management, business strategy and capital plans.

Some of that information can be gleaned from the company's offering document or prospectus. Annual reporting requirements depend on the size of the company, but it must at least file a report annually with the Securities and Exchange Commission.

Funding portals, which help issuers raise money online, may have only limited information or unproven track records, the NASAA says. And portals aren't allowed to offer investing advice.

"It takes very sophisticated training," he says, so you may need investment guidance that a broker might offer.

Spread out investment risk. These are high-risk investments, so investors need to spread their risk across more than one company, Lebrecht says. And don't invest money that you're counting on for later. You could lose it all.

Remember that these are long-term investments. You may have to wait several years before a startup company goes public and you can sell your shares on a stock exchange. For example, Google was founded in 1998 and didn't go public until 2004.

"Following the Jobs Act, crowd-funded startups may stay private even longer," Webster says. "Most people will also (have to) hold onto their securities longer. How will investors cash out if they need to?"

Stick with local companies. Unlike with public stocks, stock market analysts usually don't follow crowd-funded investments, so you're on your own. Communicating with a company in which you own shares could be difficult, Lebrecht says. There may be 500 to 1,000 investors, and companies won't have time to talk to each one.

"You're at the mercy of the company for information," he says. "Ultimately, companies that aren't transparent are a bad risk."

As a result, crowd-funding industry experts advise sticking with local companies of which you may already have some knowledge. "Consider investments where you can have private information, such as knowing the neighbor's son," says Freeman White, a member of the executive committee of the Crowdfund Intermediary Regulatory Advocates, or CFIRA, a crowd-funding advocacy group. "Large numbers of companies that are local success stories will need lending."

But even White concedes that only a small percentage of crowd-funded companies will achieve high growth.

The Jobs Act isn't written in stone. Lebrecht says confusion about the act and how it affects investors will continue for years. "More regulations will be coming down the pike," he says.

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