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Will Crowdfunding Crowd Out Venture Capital?

Venture capitalists have been getting a black eye to go with their blue shirts. A recent report from the Kauffman Foundation slammed VCs for “shortchanging” investors, pointing out that public markets deliver better returns. The next day, Fred Wilson, general partner at Union Square Ventures and prominent VC blogger, suggested that a flood of crowdfunding money unleashed by the JOBS Act could sweep away venture capitalists altogether.
Crowdfunding has yet to hit the mainstream, but it’s getting there. There are vehicles on the way that will help casual investors allocate a piece of their paycheck to startup ventures the same way they deduct now for a 401(k). “Then,” Kedrosky says, “this becomes a tsunami.”

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