29 Sep Are Kickstarters Scams?
One of the most worrying aspects of crowdfunding is Kickstarter scams. There is Kickstarter creators and Kickstarter backers scam that makes crowdfunding seem like a daunting experience.
However, like most online scams, Kickstarter scams can be avoided if you practice basic precautions when backing or creating a campaign. In this quick, article, we’ll show you some basic tips on how to avoid Kickstarter scams.
Are Kickstarter Scams – What Backers Should Know
No. Kickstarters are not scams.
Kickstarter campaigns are created by people who have an idea but don’t have the funds to turn their ideas into a product. Or, in some cases, they have the product but don’t have the funds to mass-produce the product, and need additional funding to scale production.
Why not go to a bank then?
Because banks don’t easily give out loans unless the product or idea demonstrates high profitability. Most products on Kickstarter are innovations that seldom have high-profit projections and hence most founders don’t qualify for bank loans.
Kickstarter crowdfunding, therefore, is the best option for most founders to get the initial funding they need to “kick start” their business.
Ok, why not a VC?
Because VC funding is an altogether different ballgame.
VC funders expect high returns on investment and because a new or innovative idea always has higher risks, most VC funders do not want to invest in a product unless there’s some initial success that determines potential.
Platforms like Kickstarter and Indiegogo then allow people with ideas to reach out to the public for help. The people who fund the projects are also considered as the target audience and who become the foundation on which these businesses build their customer base. It is with this initial audience that these projects are launched to market.
Kickstarter funding, therefore, helps with product launch as well as building the initial customer base.
So when you’re backing a Kickstarter product, you’re actually pre-ordering a product that is still in its initial stages. The campaign creator promises to deliver the product on a given date if they meet funding goals. Now as you can see, with this model, it’s often easy to get caught in Kickstarter scams.
Here’s what you should do to avoid these scams:
- Always assess the credibility of the project and the founder.
- Assess the complexity of the project and measure it against the timeline. If the product is complicated, but the timeline is too good to be true, then maybe it’s not legit.
- Assess the ambition of the project. If the project seems too ambitious like the infamous Dragonfly Futurefön was one of the biggest Kickstarter scams that were too good to be true.
- See what people are saying and how the company is responding to questions or criticism.
- Check the claims and do your own research. If a project claims technology or features that are too futuristic, chances are it’s still just an idea that isn’t coming to life any time soon.
Keep an eye on the project and if you feel that it’s failing to meet expectations, you can always claim a refund.
Can Kickstarter Creators be Scammed?
People rarely talk about this, but as much as backers are at risk of Kickstarter scams, creators are too.
One of the most common ways for creators to be scammed on Kickstarter is for a backer to pledge an amount of money, receive the rewards for the pledge, and then decide to claim a refund or dispute a charge on their credit card.
The good news is that this kind of scam very rarely happens. In fact, in all the years, it was just once that a backer scam was reported in 2013. Since then Kickstarter has implemented strict policies to protect creators. They have a dedicated Trust & Safety team that monitors the system for suspicious activity.
Compared to Kickstarter, Indiegogo scams are harder to detect especially since it’s a marketplace and Indiegogo does not have as stringent policies as Kickstarter.
So whether you’re a backer or a creator and want to step into the world of crowdfunding then Kickstarter is a great place to start!