A hot potato: It’s concerning that crowdfunding may be taking the commercial route, seemingly pushing out independent creators and their ideas in favor of big companies that bring their own financial backing to the table.
Traditional crowdfunding popularized by services like Kickstarter and Indiegogo are inherently risky. Whether intentionally, through misfortune or via incompetence, some campaigns are going to fail and backers will be left empty-handed. It’s unfortunate but like playing the stock market, it’s a risk that supporters are aware of up front.
This fact has tarnished the reputation of crowdfunding which has prompted organizers to introduce some buyer protections. I’m all for that but when it disrupts the spirit of crowdfunding, it starts to become worrisome. Allow me to explain.
Indiegogo CEO David Mandelbrot tells The Verge that his company will soon be expanding a payment method called “guaranteed shipping” to crowdfunding campaigns (it has already been tested in Indiegogo’s Marketplace which resembles eBay and Etsy). Those who back guaranteed campaigns are guaranteed to get their item; if they don’t, they’ll get their money back. Sounds great, right?
Well, not so fast.
Indiegogo won’t be footing the bill for refunds. Instead, creators participating in this program will have their funds withheld until the product ships. But wait, isn’t the whole purpose of crowdfunding to generate revenue to help design, manufacture and ship a product? How is that going to happen if funding is tied up until after a product ships?
Welcome to the commercialization of crowdfunding.
As you may have noticed, large companies that already have the financial backing to create products on their own have been dabbling in the crowdfunding space as of late, using it as a sandbox to play with ideas. These companies can afford to foot the bill for development and manufacturing up front and thus will benefit from offering backers a “guarantee.” Small start-ups with little more than a vision for a great product don’t have that luxury, hence why they turned to crowdfunding in the first place. For them, this “guarantee” is a major roadblock.