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Risks in backing a crowdfunding project

Risks in backing a crowdfunding project


Today I want to highlight one of the main risks in backing a crowdfunding project that is rewards based. My focus is on the larger crowdfunding sites for projects initiating from Australia: Pozible, kickstarter and indiegogo

As most people are aware, crowdfunding as a method of financing has grown exponentially over the last few years and the vast majority of people experience no problems.

However, one of the problems which does occur for reward campaigns is in the fulfilment of those rewards. Specifically, not being able to fulfill the rewards in the timeframe promised, or not providing them at all.

If you find yourself in that situation, what level of support and follow up can you expect from the above platforms?. Speaking directly from my own personal experience with one of them, I can say very little.

The policies of each of the above platforms are listed below.

Pozible – terms of use

The Project Creator is wholly responsible for meeting any obligation or Reward stated or implied in their project. Pozible is not responsible for the delivery of Rewards stated in projects. Project Supporters should contact the Project Creator if the delivery terms are not clearly stated in the project description. 

kickstarter – terms of use

Kickstarter is not liable for any damages or loss incurred related to rewards or any other use of the Service. Kickstarter is under no obligation to become involved in disputes between any Users, or between Users and any third party arising in connection with the use of the Service. This includes, but is not limited to, delivery of goods and services, and any other terms, conditions, warranties, or representations associated with campaigns on the Site. Kickstarter does not oversee the performance or punctuality of projects. The Company does not endorse any User Submissions. 

indiegogo – terms of use

Indiegogo requires campaign owners to fufill their Perks as a part of our Terms of Service. Perks are managed solely by campaign owners; we do not guarantee or take any legal responsibility for Perk fulfillment. Contributors can use our Terms of Service as a document in the court of law, should you choose to take legal action against a campaign owner for failing to fulfill a Perk.  

In summary, you will get little if any practical support from these platforms in pursuing the fulfilment of rewards.

Below is an excerpt from an email I received from one of the above platforms after requesting support to pursue fulfilment of rewards on one of their crowdfunding projects.

Think of  …………  as a shopping centre and this project as a shop within our shopping centre. We charge a rent but can’t be held responsible if the shop does not deliver on the goods they promised.It’s the same with eBay as well.

In response I would say that.

1. When I shop at a JB Hi Fi in a shopping centre the transaction is with JB Hi Fi directly, not via the shopping centre so yes any issues I have I need to follow up with JB Hi Fi directly. In the case of these crowdsourcing platforms, my transaction is with them, the shopping centre, not the store. Once they collect all the funds from backers, they transfer the funds to the project initiator less commission. Thus my direct relationship is with the shopping centre not the store.

2. As far as eBay goes, eBay offer specific support in the case of any transaction problems as can be seen on their website

If you encounter a problem when buying or selling on eBay, we offer guidelines, tools, and protection services that can help.We make it easy to contact members to resolve problems. If direct communication doesn’t work, you can use eBay’s Resolution Centre to work out a solution with your buyer or seller and report the problem to eBay.

In summary, I think the policies of the crowdsourcing platforms are woefully inadequate on this issue.

I have learnt my lesson. Do your own due diligence. Backer beware.

by Konrad Markham

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About Konrad Markham

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