Crowdsourcing.org | Rose Spinelli | Nov 17, 2014

Editor’s Note: Thinking about starting a crowdfunding campaign but don’t know where to begin? Check out the advice column below from Rose Spinelli, a crowdfunding campaign consultant who runs The Crowdfundamentals and was named as a top 100 crowdfunding thought leader. Rose is answering questions from the crowd about raising cash via rewards-based crowdfunding. You can submit your own questions to Rose via tweet, Facebook or Google Plus comment, or leaving it in the comments below. You can find her previous tips here.

The question, via email:

Hi, I'm trying to collect some information for a research paper I'm working on. I'm not certain if this is relevant to your area of expertise, but any help would be appreciated. How will I know if the project creator is trustworthy and my rewards will be delivered as promised? What steps are being done to minimize the possibilities of fraud or false marketing on crowdfunding platforms? Your column seems very interesting. If you tackled my question there it would be great as well.

The answer:

This is a complicated topic so I’ll take the easy part of your question first: How can I trust my rewards will be delivered as promised?

You can’t. Do you love the idea or product? If so, your job is to make sure all of your questions are answered about the project you are considering funding. But remember that even though backers should perform their due diligence, when you fund a project, you are not buying a product, service, or idea; you are investing in the project because you believe in it and the creator and want to be a part of seeing it become a reality. There is no certainty in investing.

View:  In Crowdfunding, who is responsible for preventing fraud?

The more general question about trustworthiness is tougher, made more so by the fact that crowdfunding is still in its infancy. So not only are we learning as we go, but you can rest assured that those who live to game systems are busily testing waters. Some have already done damage.

One early example was the Kobe Red campaign, which raised over $120,000 before it was yanked. I think the cool thing about this campaign is that two filmmakers who were researching (and crowdfunding) a film about crowdfunding stumbled upon it, smelled a rat, pursued their concerns, and ultimately saved a lot of people some money.

From that experience here are a few things that could raise red flags:

• Does the project creator list his or her name and bio?
• Does he post his location?
• Is the story poorly written?
• Do the video or the testimonials seem generic or vague?
• Does the project creator seem nonresponsive or defensive to probing questions?
• Does the project have a website?
• Does it have social media profiles?
• Does it have a digital footprint that is traceable?

View:

• The importance of Crowdfunding background checks

• Why due diligence matters in equity

• NCFA launches crowdfunding standards initiative

• Tacking credibility gaps with Dropkicker

These are just a few questions to ask yourselves before considering laying down your cash. (As always, if anyone has personal experiences and would like to add to it, please share in the comments section.)

How can platforms help to minimize risk?

When fraud is uncovered, or even a whiff of it is suspected, there are many schools of thought on who’s responsible for reparations and why.

Many people rightfully feel unsupported by the platforms that take their percentage but abandon them when trouble emerges.

One point the libertarians among the groups like to say is that crowdfunding rose out of a recognition that gatekeepers to be removed. If you start laying down onerous rules, they say, you may as well just admit that the banks won and trudge back to the bank to try to get a loan. Good luck with that.

Continue to the full article --> here