The growing pains of Crowd Funding.

Crowd funding sites like Kickstarter are growing like crazy. They haul in money by the, literally, millions of dollars for their project creators and cream a bit off the top. But what happens if the projects that their creators have painstakenly put together an attractive marketing pitch for, crumble apart and fail to deliver?

Crowdfunding-photo

Photo courtesy of Forbes.com

The Kickstarter website has been setup originally as an alternative to, amongst other things, venture capital. When an investor invests a large sum of capital into a company, he/she runs the risk of losing it all as the company might fail to come up with the goods. Sites like Kickstarter essentially gives us all the possibility to become an investor in a company without having to separate from our life savings. Therefore decreasing the size of the risk to a small sum. But the risk does still exist.

Unfortunately it seems that people pledging money on Crowd Funding websites have developed the notion that Kickstarter is just another website to get cheap products. This has perhaps come about as the rewards that are set for pledging are more and more actual products.  Consequently people using the site expect something tangible in return for their invested money. Kickstarter have clarified their position in this blog entry here recently. They claim to not have any accountability over what project creators do with the money they crowd sourced. And from their perspective, that is fair enough. They are just the facilitator in the process of crowd funding.

However I do think that sites like Kickstarter should put more emphasis on the fact that any person pledging money to a project runs the risk of losing it. That any people pledging money should think about themselves as investers rather than shoppers.
It would be very sad if this change in attitude would mean the end of crowd funding as it is a valuable tool to realease us from the grip of the very wealthy that have money to invest. Crowd funding is the tool to make sure that the resources spread horizontally across the community rather than staying in one spot.

Or as KickStarter said in 2009:

..it’s a way to break beyond the traditional methods — loans, investment, industry deals, grants — to discover that we can offer each other value through creation without a middleman dictating the product and terms.

Let’s foster this thought and try not the break it!

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2 thoughts on “The growing pains of Crowd Funding.

  1. Wonderful post. Very similar to a post I have Queued up on my blog for later this week. Buyer beware has always been spelled out in their FAQ, but I don’t think emphasizing that to everyone would do any harm.

    Never invest or gale more than you can bear to lose.

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