TECH TALK: Crowdfunding - is it worth the risk?

(Joe Stiles) #1

With the release of Super Troopers 2 within reach, I’ve been thinking more about online crowdfunding and just how risky getting involved in this type of venture (as a donor) could be. For those who don’t know, Super Troopers 2 was entirely crowdfunded and is ranked as the 7th largest successfully-completed Indiegogo project raising $4.4-million from an original goal of $2-million.

This is not always the case though - so what happens to those smaller projects that never reach their goals? Do I get my money back? As it turns out…the risks can tend to outweigh the rewards - today we’ll look at the risk of fraud:

Funds may be used for different purposes than initially disclosed

  • The creator may portray an idea they don’t own
  • The creator may use the campaign data for Phishing purposes (of which we are all intimately familiar, right?)
    o Using donor’s payment data to gain access to personal and financial records
    o Using donor’s credit card information to defraud the donor

So what does this mean for us, the donors? Should we abstain from crowdfunding projects altogether? No, of course not! The name of the game here is ‘do your due diligence’ - investigate the company you’re interested in and learn about how your money will be used and how to protect your investment. Surveys show that donors fail to perform due diligence for these reasons:

  • Most donors are average people and not subject matter experts, ignorant of the processes involved in various projects
  • Most creator companies are small, private, and possibly unregistered, company accounts and business plans may not be available
  • Donors typically give small dollar amounts and do not value returns, therefore they write it off and ignore the larger risks
  • Everyone thinks everyone else has carried out due diligence when it is more likely nobody has

What do you think? Do you think online crowdfunding is the way of the future? Do you think it is being used more by the good guys than by the bad guys? Would you be a donor for a project you believed in? Would you do your own due diligence? (Be honest!)

Let us know in the comments below!