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From Tim Carney's column in The Washington Examiner:
Crowdfunding is a way of financing a business venture without a financial intermediary or a stock exchange. Currently, if a small-businessman is seeking investors but is not ready to go public and comply with the Security and Exchange Commission's burdensome regulations, he likely sells portions of his company to large investors, partly because a few large investors are easier to round up than hundreds of small investors.
Small investors, meanwhile, currently turn to financial planners or investment firms to help them place their money.
But the Internet and social networks can change these relationships. "It's the natural evolution of Internet commerce," finance expert John Berlau of the Competitive Enterprise Institute argues. Ask travel agents, auctioneers or the classified-ad departments of newspapers about what the Internet has meant for them.