Invest in Start-Ups? It's Buyer Beware

Equity crowdfunding will soon be open to all investors, but this brave new world has its pitfalls.

Hands holding money - United States dollar (USD) bills
(Image credit: Getty Images/iStockphoto)

What if you learned you could get in on the ground floor of the next hot start-up -- investing right alongside the company's founders with as little as a few hundred dollars? And you'd be potentially multiplying your initial investment several hundred times over?

Sounds great. But what if instead of the next Twitter, you might actually be investing in a beer-brewing venture run out of your neighbor's garage? And even if the business took off, you would likely have to wait seven years or more to get your money back. Oh, and the Web site you're investing through? It has a history of raising money for fraudulent ventures.

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Elizabeth Leary
Contributing Editor, Kiplinger's Personal Finance
Elizabeth Leary (née Ody) first joined Kiplinger in 2006 as a reporter, and has held various positions on staff and as a contributor in the years since. Her writing has also appeared in Barron's, BloombergBusinessweek, The Washington Post and other outlets.