Crowdfunding energy and agriculture initiatives is nothing new. Yet new federal legislation has opened the gates to allow crowdfunding for for-profit companies — and the oil industry is jumping at the opportunity.
Two Texas companies, EnergyFunders and CrudeFunders, are reaching out to investors to fund smaller projects big banks would toss back. While crowdfunding efforts could open up the oil and gas industry to new investors, some experts warn those inexperienced with the industry to proceed with caution.
“I don’t want to pour cold water on what might be a valid new source of funding, but from the investor’s point of view I would say a very strong caveat emptor (buyer beware),” cautioned Christopher Ross, a former BP Plc executive and current finance professor at the University of Houston.
For those without an understanding of drilling technology, mineral leases and royalties, and geology, directly investing in the oil and gas industry could get tricky, he warns.
So far, EnergyFunders is doing its part to remain transparent by posting data on all of its projects, including lease information and seismic data, on its website for investors.
With prices expected to continue at record lows, now could be a great time to get in on the ground floor of an oil project. Potential investors should do their homework before jumping into any project they don’t fully understand.