Crowdfunding is hot but it can be dangerous -- Boutique sites like help protect consumers

Niche crowdfunding site for women-owned businesses offers a new level of transparency and accountability.

May 15, 2013, 14:54 ET from

AUSTIN, Texas, May 15, 2013 /PRNewswire/ -- Crowdfunding is hot.

Type in the word and Google returns 10.3 million results.  Off-hand, everyone seems to know a friend-of-a-friend who recently published a video on a Crowdfunding site and now has the resources to start create the next iPhone app.

But backers should proceed with caution.

The best advice: Use independent third-party sources like – a boutique Crowdfunding site focused on women - to insure that investments or donations are as safe as possible.

Crowdfunding appeals to backers interested in discovering and new talent and investing in emerging technologies.

The Better Business Bureau serving Southern Nevada reminds backers that there can be dangers with using Crowdfunding. The North American Securities Administration Association (NASAA) recently issued a warning advising backers to approach Crowdfunding investment opportunities with great caution.

"Because the potential for fraud is significant, backers must be extremely cautious about crowdfunding investments," said Jack E. Herstein, NASAA president and assistant director of the Nebraska Department of Banking & Finance Bureau of Securities.

To avoid the potential pitfalls of Crowdfunding all strategists recommend the same solution: backers should use third-party websites like

Bellevate holds payments in escrow until a project has met its funding goal.  It also handles the paperwork and legal side of the transaction for backers.  Bellevate has a thorough initial vetting system, which also helps protects backers from scams.

At projects are required to share business related information and proof of reliability.  Businesses seeking funding are asked to be as transparent as possible. And, the email and phone number of a representative of the business is always given so backers can do their own research.

Backers should ask the following questions:

Do the proposal details check out?
Can the given information be verified?
If projects do not reach proposed goals will the money be returned?
When can backers expect returns?
Are entrepreneurs candidly discussing the potential roadblocks for the project?
Are there contingency plans for failing projects?

Asking these types of questions helps however, the best ways to ensure the safety of investments is to use a trusted third party source for financial transactions.