What happens when Joe Investor ("sophisticated" or otherwise) backs too many ventures that go bust that take him down with them? Now that crowdfunding is legal thanks to the JOBS Act passed in 2012, scenarios like this and worse have the potential of becoming much more frequent. But just because it's legal doesn't mean it's free of regulation. In fact, the regulations that are still being hammered out promise to be fierce. How will a crowd sourcing investment site, or an enterprise looking for financing on one of those sites, keep track of it all? Actually, that may not even be possible--unless the funding portal uses a service like the Crowdbouncer API.
As Kent Bernhard Jr. describes in Upstart, it's not only a matter of preventing Ponzi schemes from pseudo-entrepreneurs:
"For instance, the law passed last year, the JOBS Act, allows non-accredited investors to put money into private companies raising money. But it also sets a limit on how much an investor can bet on companies, not just on one crowdfunding portal, but on all such portals. So what [CEO Bob] Carbone and his co-founders, Brian Fending and Michelle Martin, have developed is technology to create a database that tracks investments made across portals."
On top of this there is the need to verify that accredited investors have the net worth they say they do that allows them to make riskier bets than less wealthy investors. Crowdbouncer has developed tracking software for that. Then there is the potential for money-laundering--the regulations go on and on. Crowdbouncer aims to be the one-stop shop to take care of all these issues.
The Crowdbouncer API provides responses in JSON and XML; see the documentation. The company suggests contacting them directly to get into the beta program. The company looks set to go places; it recently signed CrowdIt, an early crowdfunding site, to implement its Title 3 Database solution for JOBS Act compliance.