The Downsides of Crowd-Funding

Wired shows potential limitations of Kickstarter,

The March issue of Wired features a lengthy profile of the folks who founded Kickstarter, a site launched in 2009 to help inventors and artists of all kinds raise money for projects, little by little. It’s simple to use, and growing in popularity; the site now successfully raises about $1 million a week for the luckiest fundraisers. A Raw File blog post on Tuesday addresses the much-hyped, as well: it’s a crowd-funding site specifically for photographers and visual journalists.

Although the downsides of crowdfunding are not the focus of these two pieces, both authors raise important points about potential complications that could occur if fundraisers depended too heavily on a process out of their control, or, especially, if fundraisers abused the system. got off to “a shaky start” when its developers couldn’t meet its planned launch date; as a result, some photographers counting on backing from the site had to go it alone for a while. At least one photographer raised money for his project on his own website rather than depend on He said:

“I would not recommend tight schedules where one has to juggle shooting, fundraising and a withering travel schedule. It’s been very intense keeping all the elements on track.”

Raising money on your own website would give you a smaller pool of potential funders, for sure, but you would have complete control over the smaller-scale process, not to mention 100 percent of the donations ( charges a 15 percent fee).

The Kickstarter profile raises a few more points about problems the site could encounter if it grows too popular—that is, if it outgrows its kicky-upstart roots. Carlye Adler writes:

Right now, Kickstarter donors are happy to chip in funds to help a new artist or fledgling company get started. If they don’t receive the rewards they were promised—if that CD never gets recorded or that camera strap never gets made—it’s mildly disappointing but an acceptable risk.

But if Kickstarter loses its personal touch, if it becomes little more than a corporate presales channel, things get more complicated…. What happens when a Kickstarter inventor fails—when he can’t deliver the product his customers think they’ve already purchased? What is the creator’s responsibility when she raises more money than she needs?

And that’s if the fundraiser has the best of intentions, of course. What if she doesn’t? Adler continues:

What if someone simply scams funders, taking the cash and running off to Barbados? Right now, the site operates on the honor system. But if the stakes grow higher, it doesn’t take much imagination to foresee a morass of lawsuits, escrow accounts, and mellow-harshing rules and regulations.

Kickstarter has helped a lot of people make a lot of projects come to life, and has great potential to do the same. But they also show that no fundraising process is without complications.

*[Update: An early version of this post accidentally credited the blog post about to Wired Magazine’s Epicenter blog; it appeared on Raw File. The error has been corrected.]

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Lauren Kirchner is a freelance writer covering digital security for CJR. Find her on Twitter at @lkirchner Tags: , , ,