At the Venture Association of New Jersey (VANJ) meeting in Whippany last week, a lively debate took place as panelists discussed whether the easy supply of seed-stage money being infused into new companies by unsophisticated investors is a good thing for entrepreneurs.

They also wondered if the emergence of crowdfunding will be good or bad for investors, entrepreneurs and the economy.

The discussion was moderated by Frank Graziano, managing partner of  Monmouth Venture Partners, who brought a diverse group of early-stage investors and one investor/entrepreneur to the table to discuss “Seed-Stage Investment: How to Get That First Round of Outside Capital.”

Panelists included Brian Cohen, chairman, New York Angels (New York); William Dioguardi, chairman and CEO, Four Springs Capital (Lake Como); Heather Gilchrist, VP Investments, RAK Tech Fund (New York); and entrepreneur Aaron Price, founder, NJ Tech Meetup, who also scouts early-stage deals for DFJ Gotham Ventures (New York).

The trend of inexperienced angels—like pop culture icon Ashton Kutcher —putting money into seed companies is not a good one, Cohen said. They don’t know how to mentor entrepreneurs and are not sophisticated enough to judge whether a firm will succeed.

“You need to value companies in a smart way,” he said. You need smart angel investors, not more angel investors. “If you don’t have smart angel investors you’ll have down rounds and bad money going after bad deals.”

Essentially, celebrities funding seed-stage companies is a phenomenon first observed when there was a vacuum and no other money was to be found, Dioguardi said. Prior to this year, smart money sat on the sidelines during small deals, he noted, but the period of fear has passed. He expects a lot of money to be available for seed-stage investments in the future.

Gilchrist added that while uninformed angel investors are out there, she believes companies now have access to tools using new methodology that will allow them to spend their money wisely.

Companies can learn about best practices through meetups and support groups like Startup Weekend, which can help them build a scalable startup business regardless of whether the angel investors offer just money or more than that. “The ecosystem on the entrepreneur education side is very healthy and improving, and … I’m glad there are more investors willing to get in to help those companies grow,” Gilchrist said.

Price agreed, saying the additional supply of capital is overwhelmingly a good thing for smart entrepreneurs who surround themselves with smart service professionals. “If entrepreneurs know what they are doing and exactly what they are getting into, they can handle some of the downside of not being involved with a professional angel investor. If they don’t know what they are doing, however, the two can be disastrous together.”

Responding to a question from an attendee about the recent passage of the Jumpstart Our Business Startups (JOBS) Act—a set of bills that have provisions that would allow small firms to use platforms similar to Kickstarter to ask for investments from the general public rather than using professionals—Dioguardi said he has mixed feelings about it.

Changes to the bill, which is expected to be signed by President Obama, have made things safer for small investors and entrepreneurs. The crowdfunding Internet platforms will have to register with the SEC, and companies using crowdfunding techniques will need to file financial statements for investors and, in some cases, have those statements reviewed by independent auditors.

Dioguardi said that, coming from a securities background, he fears a few bad apples could come in and create fraudulent situations. You have to wonder, he said, who is watching the business plan. On the positive side, he stated, “I think it will energize the economy … [and] bring a lot of new money into the market, but I’m very cautious about potential abuse.”

Cohen added that people forget they can’t just take money, throw it at an idea and all of a sudden have a business. It’s about the execution, he said. “I think that while opening this up sounds great, it’s bad … Now people who have money will be able to throw their money at ideas. But that’s all they are doing.

There is a limited amount of success in companies invested in by angels, only 2.6 percent. Opening up the floodgates doesn’t make businesses smarter.” Cohen called this a “wild, emotional moment” in which the public wants to play the investment game. “I’d rather see them put their money into social causes,” he said.

Speaking from the entrepreneur’s perspective, Price disagreed. “I think access to that capital solves one of the biggest problems: finding good capital … while there is a lot of good money in the market, there isn’t enough.”

Should crowdfunding in all its glory come to pass, Gilchrist said, “I think there will be an interesting new market for qualified mentors and advisors to help investors out. There is a model that could work, but there may be a painful adjustment time.”