Lost in the euphoria of the passage of the JOBS act, is the question of who will actually be raising crowdfunded capital. Between VCs, angels, super-angels, a glut of incubators, bank loans, friends/family, and credit card debt, it seems that only the least investment worthy startups would resort to crowdfunding.

Like a desperate and overconfident gambler taking money from a loan shark after the bank and casino have cut him off, those raising money by crowdfunding will likely be the bottom feeders of the venture world. And unlike the Mob who can send leg-breakers to collect, the poor suckers who invested money, thinking that they’re playing the same game as Sand Hill Road, are going to be left holding the bag.

While the capitalist in me welcomes the opening of the venture market, and I agree that people should be free to invest wherever they see fit, the belief that crowdfunding is going to unleash a wave of innovation and fuel a resurgent economy is as ridiculous as suggesting that payday loans are the key to national economic health.

This argument is based on the presumption that the current capital market (VCs, angels, etc.) for tech startups is overlooking a significant number of high potential companies. Aside from Dave McClure, most investors would probably tell you the current market is healthy to the point of being frothy. Unless you think VCs are idiots and missing all the good startups, how many quality companies do you think will be left for the “crowd” investor? There will undoubtedly be an occasional diamond in the rough, but the batting average of this set will be so low they may as well be playing the lottery.

One of the biggest complaints about the public stock market is that it drives executives to cater to the perception of investors over the performance of the actual company. Volumes have been written about the freedom of being private and even the benefits of having a small number of investors.

Raising capital by crowdfunding puts the entrepreneur in a position similar to that of a public company CEO, where managing the perception of the company to a large pool of dilettante investors becomes at least as important as real world performance — and this is assuming the entrepreneur is honest. The creation of a marginally regulated investment market opens the door to all manner of snake oil salesmen who specialize in polished presentations over ROI. Caveat emptor.

Despite my pessimism, there is one group that will definitely be making money in this new wild west — lawyers. They will be there to structure the rush of deals and you can certainly be sure they’ll be there when the deals go bad. With investors scoring significantly lower than the average VC, you can bet the accusations of fraud and breach of fiduciary duty will be flying fast and furious.

Pity the honest entrepreneur who thought crowdfunding was his ticket to internet riches only to get caught up in years of expensive litigation. The JOBS act will be wildly successful at creating jobs at law firms. Startups, not so much.

Like someone who borrows money from the mob without considering the consequences, those who choose to raise capital by crowdfunding are most likely fooling themselves with a mix of desperation and overconfidence.

For investors, it’s little more than a lottery play. And unlike the mafia, don’t expect your collectors to recover your money. For local businesses that don’t require a second round, I expect crowdfunding to be a great boon.

But in the tech world, where investing is almost purely based on speculation and intellectual property that isn’t commonly understood by the public, it is a situation ripe for abuse. Add in the aura of innovation and the validation and allure of celebrity investors such as Ashton Kutcher and Lady Gaga and you can count on fools rushing in where angels fear to tread.

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