DailyDirt: Avoid Crowdfunding Scams

from the urls-we-dig-up dept

Mon, Dec 15th 2014 5:00pm — Michael Ho

Some crowdfunding projects are really impressive and have gotten a lot of attention and praise that is well deserved. However, there are also quite a few projects that haven't quite lived up to their promise. It's disappointing to say the least when a project gets over a million bucks and still fails to deliver a working product to its backers. Some backers get upset when their favorite crowdfunded project sells out to Facebook. How can companies like Kickstarter and Indiegogo and the like deal with these problems? There might be escrow schemes or insurance policies that could help, but in the end, it seems like buyer beware is the ultimate answer. Here are just a few links on this situation of dealing with crowdfunding disappointments and outright scams.

Indiegogo is trying out an optional insurance feature that would provide a refund if the project fails to deliver its product within 3 months of its estimated delivery date. So far, this insurance policy is in testing and costs $15, so it doesn't apply to every (or even many) campaign on Indiegogo, but it's an interesting way to provide backers with some kind of guarantee that their faith/money is not being completely misplaced. However, it looks like only 3 people have tried it, and we'll have to wait until early 2016 to see if those folks will qualify for a insurance claim. [url]
Kickstarter is generally seen as dominant crowdfunding platform, and the company behind it wants to be known as a responsible corporation. Will being named a Certified B Corporation boost Kickstarters reputation at all? Or will its certification simply be taken away if more backers are dissatisfied when projects don't deliver as promised? [url]
It's not hard to find crowdfunding projects that just won't work.. because physics or the second law of thermodynamics. Maybe crowdfunding platforms need to crowdsource some peer review for a project approval process? [url]

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Filed Under: buyer beware, certified b corporation, crowdfunding, crowdsourcing, customer service, escrow, insurance, reputation, scams
Companies: indiegogo, kickstarter

6 Comments

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NO you are the Bomb, 15 Dec 2014 @ 5:49pm

funding scams
The shiaty thing is that real projects will get side lined and Ontario Securities Commission will allow only publicly traded companies to not pay tax as income, IE if you raise a million dollars and you are not a publicly traded company you pay as if it was your personal income...

Another lets rig the game.
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- John Fenderson (profile), 16 Dec 2014 @ 9:39am
  
  Re: funding scams
  But surely you are allowed to deduct legitimate business expenses and losses, though, right? So in the end it wouldn't matter quite so much.
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DB (profile), 15 Dec 2014 @ 8:03pm

It seems that most Kickstarter campaigns are sketchy.

Some are outright scams. Some are really just marketing operations, either for a product already made by someone else or for long-established companies that already have easy access to capital.

The rest seem to be "give me money for my sideline hobby/business and I'll send you a T-shirt". Catering and cake baking are typical examples.
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- Anonymous Coward, 16 Dec 2014 @ 1:03am
  
  Re:
  I can't comment more generally, since my interest in Kickstarter is limited to computer games, but for those games the impetus is for the developers to get funding outside of big publishers. Publishers tend to call the shots in any publisher/dev relationship, and are very risk averse in funding in general, leading to the situation we all know and love in Hollywood, where the same situation applies - sequelitis and bland cookie-cutter crap. Kickstarter allows devs to get the funding to create games that publishers won't fund. And that's what I want to see.
  
  It *generally* works pretty well, with the occasional failure (to be expected,) game turning out to be rubbish, or outright scam (Areal etc.) - I've backed a fair number of projects, and haven't had many issues. Only a single failure to finish, and Elite Dangerous' bait and switch (so far, touch wood.) Not a bad record.
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Anonymous Coward, 15 Dec 2014 @ 10:26pm

Those crazy Kickstarters are great fodder for sci-fi roleplaying, anyway. My next starship is definitely going to have a Reactionless Thermal Drive.
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Anonymous Coward, 16 Dec 2014 @ 2:26am

As with the US stock market after the scandal-plagued freewheeling era of the 1920s, it's almost inevitable that, sooner or later, crowd-funding will be government regulated. Two reasons: First of all, it's extremely susceptible to abuse by scam artists and deceptions of all types. And perhaps most important, it tends to undercut big established companies in favor of tiny startups (though there's nothing to prevent big corporations from getting in the game by masquerading as small independents).

Like anything else, the fact that crowd-funding (currently) works fine most of the time will tend to get over-ridden by the rare headline-grabbing exceptions. Hopefully crowd-funding won't follow the same rise and fall as hitch-hiking or Halloween trick-or-treating.
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