When “Friending” Becomes a Source of Start-Up Funds

Published on November 1, 2011
by Sarah E. Needleman and Angus Loten

Social networking is pretty good for keeping abreast of far-flung friends. Could it work for entrepreneurs looking for investors?

Critics say the idea is dangerous for investors, and even dicey for the entrepreneurs. Yet, it is gaining traction with small-business owners from the Bay Area to New York, who say they eagerly await an opportunity to sell stakes in their businesses through social networking — a process known as crowd funding.

The House Financial Services committee last week backed legislation that would make it possible for small businesses to use crowd funding to raise money from investors in exchange for equity stakes.

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