Crowdfunding for Small Business Is Still an Unclear Path

Joshua Bright for The New York Times

Candace Klein, chief of SoMoLend, in Midtown Manhattan. In starting her crowdfunding site, she sought out institutional investors that don’t face the same limits that individual investors do.

RYAN CALDBECK was stumped. A director at a private equity firm, he was taking part in a panel discussion at a consumer goods conference last summer in New York when an entrepreneur raised his hand with a question: Where could a young company with just a few million dollars in sales go for money to grow?

Librado Romero/The New York Times

Zak Normandin expanded his Little Duck Organics food company with financing found through CircleUp.

Mr. Caldbeck and his peers on the panel fumbled for a response. The fact is, most private equity investors and venture capitalists won’t touch a consumer products company until it has surpassed $10 million in sales — anything else is too small to bother with.

The best advice the panel could offer was for the entrepreneur to tap his credit cards.

“The purpose of the panel was to help entrepreneurs raise money, but we had no answers,” Mr. Caldbeck remembers. “That’s when I knew that there is a big issue here.”

That big issue caused Mr. Caldbeck to leave his job to start CircleUp, a company that aims to connect up-and-coming consumer products companies with investors.

Right now, the people allowed to invest through CircleUp must be accredited, meaning they have a high net worth. CircleUp hopes that soon not just the wealthy few, but the general public — whether friends, family members, customers, Facebook friends, or even total strangers — will be able to invest in deserving companies through a hot new area of finance known as crowdfunding.

To its advocates, crowdfunding is a way for capital-starved entrepreneurs to receive financing that neither big investors nor lenders are willing or able to provide. To others, it represents a potential minefield that could help bad businesses get off the ground before they eventually fail, and in some cases could even ensnare unsophisticated investors in outright fraud.

Those fears are partly why the Securities and Exchange Commission has delayed rules allowing crowdfunding that were supposed to take effect this month as part of the JOBS Act (Jump-Start Our Business Start-Ups), signed by President Obama last April. The S.E.C. is wary of loosening investor protections that have been in place since the 1930s.

Despite the uncertainty, the outlines of a new industry are emerging as a few crowdfunding start-ups have found ways to raise money within current rules. They include companies like CircleUp and SoMoLend, which lends money to small, Main Street-type businesses that typically wouldn’t interest private investors.

By themselves, of course, a few start-ups can’t completely democratize finance. But they begin to illuminate what the future of crowdfunding could look like, as the debate continues over a vast widening of the private investor pool.

Mr. Caldbeck formed CircleUp last fall along with Rory Eakin, a former business school classmate who was working for a philanthropic foundation. Through their start-up, the two men seek to finance food, personal care, apparel and pet-related companies, often with an environmental or social bent.

CircleUp considers applications from companies with $1 million to $10 million in revenue. Companies whose applications are accepted make their pitches to investors behind a firewall on the CircleUp Web site, offering equity stakes in return for capital. CircleUp, which helps companies raise up to $3 million, takes a small cut of the money.

Under current federal regulations, CircleUp wouldn’t be able to arrange such deals on its own. But it struck a partnership with W. R. Hambrecht, a registered broker-dealer that can handle investments from accredited, or high-net-worth, individuals whom the S.E.C. considers sophisticated enough to invest in private companies.

“Living here in Silicon Valley, a lot of people don’t understand the need,” Mr. Caldbeck says. “If you’re a tech company with a good idea, you can raise money. But it’s a different story for food, agriculture, retail and other consumer-oriented businesses.”

Mr. Caldbeck sees a big opportunity. Consumer goods companies account for a sizable portion of the nation’s businesses, yet very little capital — from private equity funds or from accredited investors — flows to them, he says.

What’s more, only a tiny percentage of those who qualify as accredited investors actually invest in private companies, he says. (These are people with a net worth of at least $1 million, not including their primary residence, or who have earned more than $200,000 — $300,000 for couples — in each of the last two years.)

Amy Cortese is the author of “Locavesting: The Revolution in Local Investing and How to Profit From It.”

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Report: Lance Armstrong weighing doping confession

Lance Armstrong reportedly is weighing confessing to using performance-enhancing drugs. (Thao Nguyen / Associated Press / February 15, 2011)

By Lance Pugmire

January 5, 2013, 7:11 a.m.

Lance Armstrong reportedly is weighing confessing to using banned performance-enhancing drugs and blood transfusions during his run of seven Tour de France titles.

Armstrong, who was stripped in October of his Tour titles and banned for life from competition by the U.S. Anti-Doping Agency, is pursuing the admission as a route to regain his eligibility to compete, the New York Times first reported Friday.

Armstrong’s attorney, Tim Herman, told the newspaper, “I suppose anything is possible. Right now, that’s not really on the table.”

Citing pressure from the cancer-fighting charity he helped create, Livestrong, Armstrong, 41, reportedly has held discussions with his longtime nemesis, USADA Chief Executive Travis Tygart, in an attempt to negotiate a lifting of the ban, one person told the New York Times.

Armstrong has competed in triathlons and running events since his lifetime ban took effect.

Efforts to reach Tygart and Armstrong’s representatives Friday night were not immediately successful.

The World Anti-Doping Code allows for lightened punishment for those who fully detail their doping protocol in a confession.

Armstrong lost a slew of endorsement deals after he was banned, and any confession would probably leave him in jeopardy of perjury accusations since he has given sworn statements denying he used banned substances in prior legal cases.

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Wired Science Space Photo of the Day: Colorful Lunar Mare

Galileo false-color image of the Mare Tranquillitatis and Mare Serenitatis areas of the Moon. The picture was made from four exposures taken during Galileo's second Earth/Moon flyby.

The colors are enhanced to highlight compositional differences.

Mare Tranquillitatis at left appears blue due to titanium enrichment. Orange soil in Mare Sarenitatis at lower right indicates lower titanium. Dark purple areas at left center mark the Apollo 17 landing site, composed of explosive volcanic deposits.

Red lunar highlands indicate low iron and titanium. Mare Serenitatis is roughly 1300 km across and North is at 5:00. The 95 km diameter crater Posidonius, centered at 32 N, 30 E, is at the middle of the bottom of the frame.

Image: NASA [high-resolution]

Caption: NASA

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Boyz II Men to Vegas for extended gig at the Mirage

(Reuters) – One-time boy band Boyz II Men is Vegas-bound for an extended stay at the Mirage hotel and casino, the group said on Friday.

The Grammy-award winning R&B trio will begin performances on March 1, with 78 shows slated through December 2013.

“We’ve been dreaming of this day since we performed an extended holiday show two years ago in Las Vegas,” said founding member Nathan Morris in a statement, adding “we can’t wait to take the stage in March and be a part of the Las Vegas community.”

Formed in 1990 and known for hits including “I’ll Make Love To You” and “End of the Road,” the group includes tenors Wanya Morris and Shawn Stockman, in addition to baritone Morris.

With more than 60 million albums sold, it is reportedly the best-selling R&B group of all time.

(Reporting by Chris Michaud, editing by Jill Serjeant and Sandra Maler)

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The New Old Age: Murray Span, 1922-2012

One consequence of our elders’ extended lifespans is that we half expect them to keep chugging along forever. My father, a busy yoga practitioner and blackjack player, celebrated his 90th birthday in September in reasonably good health.

So when I had the sad task of letting people know that Murray Span died on Dec. 8, after just a few days’ illness, the primary response was disbelief. “No! I just talked to him Tuesday! He was fine!”

And he was. We’d gone out for lunch on Saturday, our usual routine, and he demolished a whole stack of blueberry pancakes.

But on Wednesday, he called to say he had bad abdominal pain and had hardly slept. The nurses at his facility were on the case; his geriatrician prescribed a clear liquid diet.

Like many in his generation, my dad tended towards stoicism. When he said, the following morning, “the pain is terrible,” that meant agony. I drove over.

His doctor shared our preference for conservative treatment. For patients at advanced ages, hospitals and emergency rooms can become perilous places. My dad had come through a July heart attack in good shape, but he had also signed a do-not-resuscitate order. He saw evidence all around him that eventually the body fails and life can become a torturous series of health crises and hospitalizations from which one never truly rebounds.

So over the next two days we tried to relieve his pain at home. He had abdominal x-rays that showed some kind of obstruction. He tried laxatives and enemas and Tylenol, to no effect. He couldn’t sleep.

On Friday, we agreed to go to the emergency room for a CT scan. Maybe, I thought, there’s a simple fix, even for a 90-year-old with diabetes and heart disease. But I carried his advance directives in my bag, because you never know.

When it is someone else’s narrative, it’s easier to see where things go off the rails, where a loving family authorizes procedures whose risks outweigh their benefits.

But when it’s your father groaning on the gurney, the conveyor belt of contemporary medicine can sweep you along, one incremental decision at a time.

All I wanted was for him to stop hurting, so it seemed reasonable to permit an IV for hydration and pain relief and a thin oxygen tube tucked beneath his nose.

Then, after Dad drank the first of two big containers of contrast liquid needed for his scan, his breathing grew phlegmy and labored. His geriatrician arrived and urged the insertion of a nasogastric tube to suck out all the liquid Dad had just downed.

His blood oxygen levels dropped, so there were soon two doctors and two nurses suctioning his throat until he gagged and fastening an oxygen mask over his nose and mouth.

At one point, I looked at my poor father, still in pain despite all the apparatus, and thought, “This is what suffering looks like.” I despaired, convinced I had failed in my most basic responsibility.

“I’m just so tired,” Dad told me, more than once. “There are too many things going wrong.”

Let me abridge this long story. The scan showed evidence of a perforation of some sort, among other abnormalities. A chest X-ray indicated pneumonia in both lungs. I spoke with Dad’s doctor, with the E.R. doc, with a friend who is a prominent geriatrician.

These are always profound decisions, and I’m sure that, given the number of unknowns, other people might have made other choices. Fortunately, I didn’t have to decide; I could ask my still-lucid father.

I leaned close to his good ear, the one with the hearing aid, and told him about the pneumonia, about the second CT scan the radiologist wanted, about antibiotics. “Or, we can stop all this and go home and call hospice,” I said.

He had seen my daughter earlier that day (and asked her about the hockey strike), and my sister and her son were en route. The important hands had been clasped, or soon would be.

He knew what hospice meant; its nurses and aides helped us care for my mother as she died. “Call hospice,” he said. We tiffed a bit about whether to have hospice care in his apartment or mine. I told his doctors we wanted comfort care only.

As in a film run backwards, the tubes came out, the oxygen mask came off. Then we settled in for a night in a hospital room while I called hospices — and a handyman to move the furniture out of my dining room, so I could install his hospital bed there.

In between, I assured my father that I was there, that we were taking care of him, that he didn’t have to worry. For the first few hours after the morphine began, finally seeming to ease his pain, he could respond, “OK.” Then, he couldn’t.

The next morning, as I awaited the hospital case manager to arrange the hospice transfer, my father stopped breathing.

We held his funeral at the South Jersey synagogue where he’d had his belated bar mitzvah at age 88, and buried him next to my mother in a small Jewish cemetery in the countryside. I’d written a fair amount about him here, so I thought readers might want to know.

We weren’t ready, if anyone ever really is, but in our sorrow, my sister and I recite this mantra: 90 good years, four bad days. That’s a ratio any of us might choose.

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Paula Span is the author of “When the Time Comes: Families With Aging Parents Share Their Struggles and Solutions.”

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Fair Game: Bank Settlement May Leave Tiny Slices of a Smaller Pie

IF you were hoping that things might be different in 2013 — you know, that bankers would be held responsible for bad behavior or that the government might actually assist troubled homeowners — you can forget it. A settlement reportedly in the works with big banks will soon end a review into foreclosure abuses, and it means more of the same: no accountability for financial institutions and little help for borrowers.

Last week, The New York Times reported that regulators were close to settling with 14 banks whose foreclosure practices had ridden roughshod over borrowers and the rule of law. Although the deal has not been made official and its terms are as yet unknown, the initial report said borrowers who had lost their homes because of improprieties would receive a total of $3.75 billion in cash. An additional $6.25 billion would be put toward principal reduction for homeowners in distress.

The possible settlement will conclude a regulatory enforcement action brought in 2011 by the Comptroller of the Currency and the Federal Reserve. Regulators moved against 14 large home loan servicers after evidence emerged of rampant misdeeds marring the foreclosure process.

Under the enforcement action, the banks were required to review foreclosures conducted in 2009 and 2010. They hired consultants to analyze cases in which borrowers suspected that they had been injured by bank practices, such as levying excessive and improper fees or foreclosing when a borrower was undergoing a loan modification. Some 4.4 million borrowers journeyed through the foreclosure maze during the period.

Some back-of-the-envelope arithmetic on this deal is your first clue that it is another gift to the banks. It’s not clear which borrowers will receive what money, but divvying up $3.75 billion among millions of people doesn’t amount to much per person. If, say, half of the 4.4 million borrowers were subject to foreclosure abuses, they would each receive less than $2,000, on average. If 10 percent of the 4.4 million were harmed, each would get roughly $8,500.

This is a far cry from the possible penalties outlined last year by the federal regulators requiring these reviews. For instance, regulators said that if a bank had foreclosed while a borrower was making payments under a loan modification, it might have to pay $15,000 and rescind the foreclosure. And if it couldn’t be rescinded because the house had been sold, the bank could have had to pay the borrower $125,000 and any accrued equity.

Recall that the foreclosure exams came about because regulators had found pervasive problems. A study by the Fed and the comptroller’s office found “critical weaknesses in servicers’ foreclosure governance processes, foreclosure document preparation processes, and oversight and monitoring of third-party vendors, including foreclosure attorneys.” The United States Trustee, which oversees the nation’s bankruptcy courts, also uncovered huge flaws in bank practices.

So if you start to hear rumbling that the reviews didn’t turn up many misdeeds, you can discount it as nonsense. One could easily argue that this reported settlement was pushed by the banks so they could limit the damage they would have incurred if an aggressive review had continued.

“We think if the reviews were done right, the payouts would have been significantly higher than they appear to be under this settlement,” said Alys Cohen, staff attorney at the National Consumer Law Center. “The regulators will have abdicated their responsibility if the banks end up getting off the hook easily and cheaply.”

Let’s not forget that this looming settlement will also conclude the foreclosure reviews that were supposed to provide regulators with chapter and verse on how banks abused their customers. Stopping the reviews before they are finished means that the banks will be allowed to claim that abuses were rare and that $10 billion is an adequate penalty.

A spokesman at the Office of the Comptroller of the Currency declined to comment on whether a settlement was imminent or what it might look like. But with no clear details about its terms, many questions remain. First, of course, is how many borrowers will receive the $3.75 billion, and how will that money be shared? And who will ensure that the funds go to the right people? The fact is, most people will not be hiring a lawyer to pursue their cases further against servicers, so this money is all that they will receive.

Another problem is that the money will be doled out to wronged borrowers based on work done by consultants hired by the banks responsible for the improprieties. How can their findings be trusted? What’s more, the reviews’ conclusions about harm are based on the servicers’ side of the story, not homeowners’.

Because the consultants work for the banks, it is also possible that these institutions may use the information gleaned from the foreclosure reviews to profit once again on troubled borrowers. If foreclosed borrowers left a property while owing the difference between the amount of the loan and what the bank received in a sale of the home, the bank may not have known the borrowers’ whereabouts until that information was reported in a request for review.

Finally, what if victims of an improper foreclosure didn’t receive a review because they didn’t know about the program? Letters about the program sent to 5.3 percent of targeted borrowers were returned as undeliverable, regulators said.

And many of those who did receive the mailings may not have understood them. In a study last June, the Government Accountability Office concluded that the initial letter, the request-for-review form and foreclosure review Web site were “written above the average reading level of the U.S. population.” What’s more, the study said, the materials did not include specifics about what borrowers might receive as a remedy, possibly affecting their motivation to respond.

In any case, as of Dec. 6, 2012, only 322,771 borrowers had requested an independent review, according to the Fed. That’s 7.3 percent of the affected borrowers during the period, a figure that does not mirror the widespread problems regulators said they had identified in the foreclosure system.

“The O.C.C.-Fed review is just another flawed outreach program designed to fail,” said Ned Brown, a legislative strategist at the marketing consultant Prairie Strategies in Washington. “The servicers rolled the regulators.”

New year, same story.

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House approves $9.7 billion in Sandy disaster aid

WASHINGTON — Responding to the political storm over delays in disaster aid to the Northeast, the House on Friday approved a $9.7-billion flood insurance bill, the first segment of a possible $60-billion Superstorm Sandy recovery package.

The measure’s approval comes after New Jersey Gov. Chris Christie and Rep. Pete King of New York, among others, publicly slammed House Speaker John Boehner, a fellow Republican, for putting off a vote on a relief measure in the closing days of the 112^thCongress.

The 354-67 vote sent the bill to the Senate, where it could be approved by the end of the day. 

But Democrats were still fuming that it has taken 68 days for the House to act – and that a  broader relief bill still must be approved.

"Talk about fiddling while New York City burns,’’ said Rep. Nydia Velazquez (D-N.Y.), calling the delay an "embarrassment’’ to the House. 

"How dare you come to this floor and make people think everything is OK,’’ Rep. Bill Pascrell Jr. (D-N.J.) told Republicans.

Rep. Frank LoBiondo (R-N.J.), among the Northeast lawmakers who complained earlier this week about congressional inaction on a relief bill, called the vote a "key step in getting critical federal assistance to the residents, businesses and communities devastated by Hurricane Sandy.

“This week’s events make it clear that the need for help is real and that any additional delays in providing federal aid will be met with fierce resistance from myself, members of the delegation, and Gov. Christie,’’ he added.

The larger aid package, due to come before the House on Jan. 15, would fund such things as repairing roads, the electric grid, transportation system and Liberty Island, where the Statue of Liberty has been closed since the storm hit, and shoring up defenses against future storms.

That measure, expected to cost $51 billion, could still run into resistance from conservative lawmakers, some of whom have sought to offset the new spending with budget cuts elsewhere.

The conservative Club for Growth urged a no vote on the flood insurance measure, saying, "Congress should not allow the federal government to be involved in the flood insurance industry in the first place, let alone expand the national flood insurance program's authority."

The measure approved Friday  would increase the borrowing authority for the national flood insurance program to cover insurance claims for flood damage.

The Federal Emergency Management Agency has warned that without congressional action, funds available to pay claims would be exhausted next week.   

Sandy, which was a hurricane before the center of the storm made landfall  Oct. 29 in New Jersey, caused more than 125 deaths in the United States.

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Richard.simon@latimes.com

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CIA Official Who Destroyed Torture Tapes Squirms at <em>Zero Dark Thirty</em> Abuse

Jose Rodriguez thinks the new movie about the hunt for Osama bin Laden is “well worth seeing.” But the retired CIA veteran has reservations about its gut-churning portrayal of the CIA’s treatment of detainees. Which is rich, coming from the man who destroyed the video footage documenting many of those brutal agency interrogations.

In an op-ed for the Washington Post on Friday, the former chief of the CIA’s Counterterrorism Center and its clandestine service takes issue with Zero Dark Thirty’s torture scenes. Those scenes are admittedly hard to watch. They show terrified, disoriented and bloodied detainees kept awake for days on end by having their arms painfully suspended from the ceilings of secret jails; stuffed into tiny wooden boxes when they don’t cooperate with their inquisitors; and waterboarded on soiled mattresses while interrogators bark questions. They also largely match up with the minimal public disclosure of how the post-9/11 program actually operated.

But they offend Rodriguez, who describes himself as “intimately involved in setting up and administering” a program he has steadfastly denied amounted to torture. Most CIA detainees weren’t subject to what he euphemistically calls “enhanced interrogation.” Those who were experienced “harsh measures for only a few days or weeks at the start of their detention.” And director Kathryn Bigelow left out all the bureaucratic red tape CIA interrogators encountered: “To give a detainee a single open-fingered slap across the face, CIA officers had to receive written authorization from Washington.”

Except there’s a problem with Rodriguez’s account that he sidesteps in calling the film inaccurate. While at the CIA, Rodriguez himself destroyed nearly 100 video recordings of brutal interrogations, including those of two al-Qaida figures who most definitely were subjected to “harsh measures,” Abu Zubaydah and 9/11 architect Khalid Shaikh Mohammed. If Bigelow and screenwriter Mark Boal are in the dark about torture — like the rest of the country — Rodriguez is a big part of the reason why.

It took a Justice Department inquiry to reveal even the outlines of the destruction of the torture tapes. In 2009, the government disclosed that Rodriguez in 2005 ordered the destruction of 92 videotapes of interrogation footage totaling hundreds of hours’ worth of footage. As the New York Times noted, Rodriguez’s order came at a time when “Congress and the courts were intensifying their scrutiny of the agency’s detention and interrogation program.” The destruction was a deliberative process: Rodriguez wrote in his memoir last year that he used a shredder packing “five spinning and two stationary blades” capable of chewing through “hundreds of pounds of material in a single hour.”

Rodriguez claims he ordered the destruction on his own after his bosses vacillated on whether the tapes ought to be destroyed. His stated rationale for liquidating evidence that was relevant to a potential criminal investigation was to protect his interrogators. It had the effect of destroying a major aspect of the historical record. When Rodriguez swears in his op-ed that the torture program worked as he says it did, he left observers with few independent ways to check his claims.

Ultimately, a Justice Department special prosecutor opted to abandon criminal cases against CIA interrogators who had received authorization from senior government officials for the interrogation program. Rodriguez himself never faced criminal charges for the destruction of the tapes.

Despite the destruction, Rodriguez’s insider account isn’t the only one that has survived. Phil Zelikow, a former aide to Secretary of State Condoleezza Rice, told Danger Room last year that the CIA’s brutal interrogations amounted to “war crimes,” an assessment he conveyed during an internal 2006 debate about the CIA program. One of the CIA interrogators involved in the program’s early days has lamented that he “destroyed a man’s life” through the abusive techniques.

There are other reasons to doubt aspects of Rodriguez’s accounts. He writes that “When the detainee became compliant, the techniques stopped — forever.” But three powerful senators who helped helm a four-year classified study of the CIA program, Dianne Feinstein, John McCain and Carl Levin, wrote to the CIA on December 19 that “The CIA detainee who provided the most accurate information about the courier [to Osama bin Laden] provided the information prior to being subjected to coercive interrogation techniques.”

Feinstein, McCain and Levin have now turned their focus to the CIA’s cooperation with a movie that they believe conveys the mistaken impression that torture led to the killing of Osama bin Laden. Rodriguez makes no secret of what he thinks about Congress prying into the CIA’s dark corners. He singles out a scene in Zero Dark Thirty when an agency employee threatens to alert a congressional committee about her boss’s seeming failures. “Now that,” Rodriguez writes, “would be torture.”

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Actor Dempsey: Coffee chain bid appears successful

SEATTLE (AP) — Actor Patrick Dempsey said it appears his bid to buy a small coffee chain has prevailed in a bankruptcy auction that included Starbucks Corp.

Late Thursday night, Dempsey announced that his company, Global Baristas LLC, made the winning bid for Tully’s Coffee. He noted in a KOMO-TV interview that a bankruptcy judge will have the final say on Jan. 11. Still, Dempsey tweeted “We got it! Thank you Seattle!”

Dempsey’s company will pay $ 9,150,000 for Tully’s and complete the purchase later this month after the court hearing, he said in a statement.

“I’m thrilled that we won and I’m even more excited about saving Tully’s Coffee and its hundreds of jobs,” he said. “Tully’s is a great company with committed employees, and with its base in Seattle, one of the world’s greatest cities, I’m confident we will be able to successfully build the brand and help grow the economy. “

Tully’s Coffee has 47 company-owned locations in Washington and California. The company, with more than 500 employees, filed for Chapter 11 bankruptcy protection in October.

Dempsey, who gained the nickname “McDreamy” on the TV show “Grey’s Anatomy” set in a fictional Seattle hospital, has said he wants to rescue the chain.

“Seattle has been very good to me over my career, and I am honored to have the privilege to own Tully’s and work closely with the company’s employees,” he said in his statement.

After Thursday’s auction, Starbucks spokesman Zack Hutson confirmed his company participated and “is currently in a back-up position” for some of Tully’s assets. The final certification of the winning bid won’t occur until the Jan. 11 bankruptcy court hearing, Hutson said.

“We have to wait until next week to make sure everything — I believe the 11th — to make sure it’s all finalized,” Dempsey told KOMO-TV.

The Starbucks spokesman said his company made an offer for 13 of Tully’s company-owned stores in the Puget Sound region plus 12 outlets at Boeing Co. sites. Hutson said another bidder made an offer for all other assets — and is in a back-up position for those.

Also in the running was Baristas Coffee, which operates a chain of drive-thru espresso stands featuring female employees in skimpy outfits.

Both Starbucks and Tully’s are based in Seattle.

The auction process was not public.

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Scant Proof Is Found to Back Up Claims by Energy Drinks

Energy drinks are the fastest-growing part of the beverage industry, with sales in the United States reaching more than $10 billion in 2012 — more than Americans spent on iced tea or sports beverages like Gatorade.

Their rising popularity represents a generational shift in what people drink, and reflects a successful campaign to convince consumers, particularly teenagers, that the drinks provide a mental and physical edge.

The drinks are now under scrutiny by the Food and Drug Administration after reports of deaths and serious injuries that may be linked to their high caffeine levels. But however that review ends, one thing is clear, interviews with researchers and a review of scientific studies show: the energy drink industry is based on a brew of ingredients that, apart from caffeine, have little, if any benefit for consumers.

“If you had a cup of coffee you are going to affect metabolism in the same way,” said Dr. Robert W. Pettitt, an associate professor at Minnesota State University in Mankato, who has studied the drinks.

Energy drink companies have promoted their products not as caffeine-fueled concoctions but as specially engineered blends that provide something more. For example, producers claim that “Red Bull gives you wings,” that Rockstar Energy is “scientifically formulated” and Monster Energy is a “killer energy brew.” Representative Edward J. Markey of Massachusetts, a Democrat, has asked the government to investigate the industry’s marketing claims.

Promoting a message beyond caffeine has enabled the beverage makers to charge premium prices. A 16-ounce energy drink that sells for $2.99 a can contains about the same amount of caffeine as a tablet of NoDoz that costs 30 cents. Even Starbucks coffee is cheap by comparison; a 12-ounce cup that costs $1.85 has even more caffeine.

As with earlier elixirs, a dearth of evidence underlies such claims. Only a few human studies of energy drinks or the ingredients in them have been performed and they point to a similar conclusion, researchers say — that the beverages are mainly about caffeine.

Caffeine is called the world’s most widely used drug. A stimulant, it increases alertness, awareness and, if taken at the right time, improves athletic performance, studies show. Energy drink users feel its kick faster because the beverages are typically swallowed quickly or are sold as concentrates.

“These are caffeine delivery systems,” said Dr. Roland Griffiths, a researcher at Johns Hopkins University who has studied energy drinks. “They don’t want to say this is equivalent to a NoDoz because that is not a very sexy sales message.”

A scientist at the University of Wisconsin became puzzled as he researched an ingredient used in energy drinks like Red Bull, 5-Hour Energy and Monster Energy. The researcher, Dr. Craig A. Goodman, could not find any trials in humans of the additive, a substance with the tongue-twisting name of glucuronolactone that is related to glucose, a sugar. But Dr. Goodman, who had studied other energy drink ingredients, eventually found two 40-year-old studies from Japan that had examined it.

In the experiments, scientists injected large doses of the substance into laboratory rats. Afterward, the rats swam better. “I have no idea what it does in energy drinks,” Dr. Goodman said.

Energy drink manufacturers say it is their proprietary formulas, rather than specific ingredients, that provide users with physical and mental benefits. But that has not prevented them from implying otherwise.

Consider the case of taurine, an additive used in most energy products.

On its Web site, the producer of Red Bull, for example, states that “more than 2,500 reports have been published about taurine and its physiological effects,” including acting as a “detoxifying agent.” In addition, that company, Red Bull of Austria, points to a 2009 safety study by a European regulatory group that gave it a clean bill of health.

But Red Bull’s Web site does not mention reports by that same group, the European Food Safety Authority, which concluded that claims about the benefits in energy drinks lacked scientific support. Based on those findings, the European Commission has refused to approve claims that taurine helps maintain mental function and heart health and reduces muscle fatigue.

Taurine, an amino acidlike substance that got its name because it was first found in the bile of bulls, does play a role in bodily functions, and recent research suggests it might help prevent heart attacks in women with high cholesterol. However, most people get more than adequate amounts from foods like meat, experts said. And researchers added that those with heart problems who may need supplements would find far better sources than energy drinks.

Hiroko Tabuchi contributed reporting from Tokyo and Poypiti Amatatham from Bangkok.

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