Securities crowd funding mayhem soon to begin

Posted on: September 20th, 2012 by Steve Larson

To get an idea what we may expect when securities crowd funding begins, USA Today related a story about a gentleman, Mr. Stark, who “invested” $150 to essentially pre-order a pair of super-cool eye-glasses that would actually record live video (not really “invested,” because he did not receive an ownership interest in the company). Thousands of others did the same, and the company that was to design and make the product, called Eyez, raised over $300,000 of start-up capital in this way.

The story from the company sounded great. Their goal was to start production in 2011, but the individual “backers” would receive their Eyez ahead of time. The tech press “gushed.”  But then nothing happened. “Crowd-funding dark side: Sometimes investments go down the drain,” by Matt Krantz, USA Today.

Mr. Krantz writes: “Yet even today, Eyez glasses still aren’t being produced and individual backers including Stark haven’t received a pair. Meanwhile, the entrepreneurs have curtailed providing online updates on the project and won’t answer questions from backers, Stark says. Stark figures he is out his money: $150 plus $15 for shipping to Switzerland. ‘It’s hard to find a real address and even harder to find a legit phone number,’ Stark wrote in an e-mail to USA Today. Carlos Becerra, who is listed as the company’s CEO, declined to comment.”

The lesson for would-be crowd-funding investors is: do not invest unless you are prepared to lose every penny you invest.