The JOBS Act has opened the door to an exciting new time for venture investors, allowing nearly all Americans to invest in high-growth startup companies via online crowdfunding platforms like Kickstarter. But this new access comes with a downside, that has opened up the equity crowdfunding sector to potential fraud.

That’s what keeps SeedInvest founder Ryan Feit up at night, according to a recent story on equity crowdfunding in The New York Times. In it, Feit explains that his experience founding SeedInvest — which is one of the first websites that was set up to list companies that are trying to raise money from investors — opened his eyes to the risk that is inherent in the crowdfunding model. Since its founding two years ago, SeedInvest has turned away dozens of companies due to what he calls “clear red flags for investors,” only to watch those same companies later show up on other crowdfunding platforms.

“I’m legitimately concerned that a lot of people are going to be losing money,”  Feit said. “Investing in start-ups is really risky, and it’s very different than buying a used couch. We definitely do not think you should treat it like Craigslist.”

Some of the companies involved, he said, have raised hundreds of thousands of dollars from unsophisticated, misinformed investors.

“Even though a lot of people want to come to the party early, they may ruin the market if the market gets a reputation for being one where people don’t comply with the rules,” saud Joan MacLeod Heminway, a law professor at the University of Tennessee. “There are certain issuers who are definitely engaging in practices that I would consider to be dangerous to a vibrant market.”

The iSelect Solution to Crowdfunding

This story exemplifies exactly why we started iSelect and the thought process that goes into the iSelect Fund. In truth, venture investing is risky. The vast majority of startup companies go bankrupt, never returning any capital to their investors. But those that make it often deliver outsized returns, yielding 22% net IRR over the 25-year period ending 2014, according to the Ewing Marion Kauffman Foundation.

That’s why two factors are of extreme importance to venture investors: due diligence and diversification.

Research has found that time spent on due diligence is significantly related to investment outcomes, and investors who spend more than the median of 20 hours on due diligence get better results than those who spend less than 20 hours. Furthermore, those who spend more than 40 hours conducting due diligence, perform even better, reporting investment returns north of 7x. iSelect’s Venture Team spends about 120 hours conducting due diligence on each of our portfolio companies.

Crowdfunding investors, typically, do not do this level of diligence.

What’s more, the iSelect Fund allows investors to easily diversify their venture investment capital across a diversified portfolio of startup investments in industries including agriculture, healthcare, energy and software.

If you are interested in the wealth-generating and innovation-creating aspects of venture investing but don’t have the time or expertise to conduct the appropriate amount of due diligence, please click here. iSelect was founded with people like you in mind.

Read the full story in The New York Times.