Don’t back a dud: How to avoid losing money through crowdfunding
BROWSE, RESEARCH AND FUND CROWDFUNDING PROJECTS SAFELY WITH THESE HANDY TIPS.
CROWDFUNDING CAN BE a great way to snag a new product earlier, and at a reduced cost. The idea itself has become incredibly popular, with a range of crowdfunding websites, and some projects backed to the tune of up to $20 million. But it’s not without risk; some of the largest projects have not delivered and others face endless delays. While some scams are easy to spot, others look legitimate, so we have put together a guide to ensuring you back a winner.
CROWDFUNDING 101
A quick recap — crowdfunding allows a person or company to present their idea or product to a huge number of potential investors. Users can browse and research the campaigns and financially back them in return for different rewards, such as an actual product. Importantly, crowdfunding is not the same as pre-ordering — users are more like investors. This means there is a real risk involved and, if a project does not come to fruition, refunds are not readily available. The actual crowdfunding sites themselves don’t take a side — rather they are just a platform to get creators and funding together.
Many crowdfunding campaigns have simply been outright scams, with creators who never intended to actually follow through. More common, though, are projects where the creator is genuine and passionate, but has simply underestimated how difficult the process would be, and either can’t deliver, or under delivers. Being overly successful can actually compound the problem, as despite the extra funding, producing large numbers of a product is a huge challenge. Of course, scam or not, the end result is the same — the backer loses their money.
CROWDFUNDING WEBSITES
While Kickstarter ( www.kickstarter.com) is one of the biggest, there are loads of other crowdfunding websites around. Indiegogo ( www.indiegogo.com) is another solid choice and Pozible ( www.pozible.com) is an Australian based funding site. GoFundMe ( www.gofundme.com) is a very popular crowdfunding site, concentrating on non-incentive-based campaigns, such as support for medical expenses.
SPOTTING A SCAM OR IMMINENT FAILURE
The biggest defence against dodgy crowdfunding campaigns is good old common sense. If a project seems too good to be true, it probably is. For example, Triton — a James Bond-esque underwater rebreather device — flaunted the laws of physics, had an unconvincing demo and description, but still
MANY CROWDFUNDING CAMPAIGNS HAVE SIMPLY BEEN OUTRIGHT SCAMS, WITH CREATORS WHO NEVER INTENDED TO FOLLOW THROUGH.
raised over US$900,000, before being cancelled by Kickstarter. Other campaigns have done the dodgy by attempting to crowdfund an existing product, rather than actually creating something new.
THE SIGNS
Crowdfunding campaigns are ideally meant to show a working prototype, and be looking for funding to re ne it into a nished product and start production. Pictures or video that don’t show everything the product is meant to do is a dead giveaway that the prototype is not as good as claimed. Pictures should be of actual products, not renders. If in doubt, perform a reverse Google search on the pictures, as scam campaigns have used images taken from other websites in the past. While not all campaigns are created by those with English as a rst language, look for confusing writing, or poorly described features.
e next step is to do a Google search on the campaign and creators’ names and see what comes up. Check what other campaigns they have completed in the past, and if they were successful. It’s also possible to message the creator themselves and ask further questions. Look for discussion about any potential issues and unbiased media coverage of the campaign.
Sometimes, a campaign is shut down on one platform, but quickly pops up on another, which is easily found with a Google search. Another scam involves copying a successful campaign from another platform, in the hope it won’t get shut down before being funded.
RESEARCH WEBSITES
While a search can nd a lot, there are loads of resources dedicated to tracking and warning about dodgy crowdfunding campaigns. A good place to start is Kickscammed ( where users can report and discuss dodgy crowdfunding projects. Online communities such as Reddit ( and GoFraudMe.com are great ways to research crowdfunding campaigns and learn more about potential scams or risky projects.
WHAT NEXT?
e good news is that, if you jump on board early with a crowdfunding campaign, you can still cancel your payment at any time before the campaign is complete, with no penalty. Even if the project looks totally legit, it’s worth double-checking the latest updates right before the end of the campaign. Websites such as Kickstarter even have a reminder button that sends an email 48 hours before the end of a campaign — though it does not apply if you have already backed the project. If the project has already been funded, you can request a refund, but it’s not super likely that your money will be returned. It’s possible to pursue via legal means, but once again, there is little chance of seeing your money again.