There will be several limits to protect investors. People who earn less than a $100,000 a year can invest only up to $5,000 a year, while those who make more face a cap equal to 10 percent of their annual earnings. Companies can raise no more than $1 million in any given year, and must share some financial information with investors. Crowdfunding intermediaries — like the Kickstarter-style websites that hope to help startups raise money from the public — are required to keep an eye out for fraud.

Critics have argued, however, that fraud will be easy. People will mislead would-be investors by misrepresenting the prospects of the target company. Luis Aguilar, a commissioner on the Securities and Exchange Commission (S.E.C.), last week acknowledged the prospect of fraud. "Commenters, including state securities regulators, have noted that small business investments may pose relatively high risks of fraud," he said. He added, "Many of the S.E.C.’s enforcement cases arise from ‘affinity frauds’ that exploit the trust and friendship that often exists among members of any ethnic, religious or other community." Crowdfunding, which could make it easier for people to raise money from their own social networks using online services, could facilitate this sort of fraud, Aguilar said.

This is especially problematic when you consider that the companies most primed for success may be most likely to take a traditional route to raise funds. Traditional investors, like venture capitalists, can be a pain in the neck: they may ask you to change your business plan, overhaul your board of directors, fire your CEO. But they also come with perks, like connections to other influential businesspeople. Why spend weeks or months hustling to convince five thousand people to give you a hundred dollars apiece, if a single one of these wealthy investors is prepared to write you a check for half a million dollars?

It’s likely that companies that can’t get the attention of venture-capital firms or established angel investors will be the ones reaching out to members of the general public — many of whom may not have any significant experience investing in startup companies — to find potential investors.

Over the next three months, the public will be able to submit feedback on the S.E.C.’s proposal. The S.E.C. will have to manage the expectations of both investors and cash-hungry startups as it crafts rules that meet the Obama administration’s goal of facilitating investments for promising young companies, while also mitigating fraud and criminal activity.

But once the rules are settled and brave investors find themselves sifting through potential investments, they will need to bear in mind that they may be looking at opportunities that many others have passed over. They would do well to recall the wisdom of Groucho Marx: he didn’t care to belong to any club, he once said, that would have him as a member.

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