4 Very Important Things to Know About Crowdfunding Campaign Risks

Crowdfunding Campaign Risks

Crowdfunding has risen in popularity over the past few years. Companies see it as a great way to raise funds for their aspirational projects while consumers have used it as a way to get the newest, coolest innovations at a discounted rate long before they hit the market. Win-win right? Not if you don’t know the risks you are taking as a consumer.  There are crowdfunding campaign risks!

4 Very Important Things to Know About Crowdfunding Campaign Risks

Kickstarter and Indiegogo (and others like GoFundMe) are all platforms where you are investing in unfinished projects and prototypes. As much as we love to hear about an innovative new set of cans to feature in our “Latest News” vertical we do not endorse any of these companies. We are here merely to celebrate new tech. However, we also don’t stand for any companies who seek out to dupe customers. With that being said, not all companies not scams, but some are poorly budgeted. So, here is our list of “4 Important Things to Know About Crowdfunding Campaign Risks.”

1. A lot of creators have great ideas, but do not have any business expertise. This could lead to poor planning and budgeting. They also may not have any one to legally advise them on how to balance their short flow influx of money to launch and keep their business afloat. Do your research on the company to determine for yourself if you think the individuals behind the project can deliver – and in general have a good track record.

2. Many projects outsource production to manufacturers and there could be major delays in a very-real product. For example, CNN reported 84 percent of Pebble Watch’s campaign products were late to ship in 2012. This could happen in even the most mainstream of products. Cough… Apple Airpods.

3. Yes, do note, there is a very real possibility of being scammed into investing in a fake product. These platforms rely on a combination of transparency and risk. In Spring of 2016, a campaign called Triton emerged on Indiegogo. The campaign said it would provide backers with a pair of artificial, electronic gills were said to assist humans in breathing underwater. The campaign sounds too good to be true and that’s because it was. However, the company made over $100,000 in 24 hours despite the fact that there was no hardcore proof of how these gills were going to work. Be wary!

4. Crowdfunding platforms aren’t held liable to refund customers if the product or service is not received. According to Section 230 of the Communications Decency Act, a website is not liable for something someone else stated (or posted) on their site. Provided by Wikipedia, “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

As Kickstarter makes clear in their own FAQs “the creator is responsible for completing the project and fulfilling each reward. Their fundamental obligation to backers is to finish all the work that was promised… it’s the project creator’s responsibility to complete their project. Kickstarter is not involved in the development of the projects themselves. Kickstarter does not guarantee projects or investigate a creator’s ability to complete their project. On Kickstarter, backers (you!) ultimately decide the validity and worthiness of a project by whether they decide to fund it.”

Indiegogo has a similar disclaimer, “Indiegogo does not guarantee that contributions will be used as promised, that campaign owners will deliver perks, or that campaigns will achieve their goals. However, if our Terms of Use are violated, we will take action on behalf of our backers to make things right.” The company also adds, “Indiegogo does not resolve disputes, nor do we offer refunds once funds have been disbursed. It’s the entrepreneurs’ responsibility to provide as much information to potential backers as possible, and up to backers to decide whether or not to back a project.”

That being said, do you research and make sure you are prepared to take a few crowdfunding campaign risks when you invest. Happy crowdfunding!

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Sade is a journalist talking all things tech. Contact: sade@majorhifi.com