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Crowdfunding Is A Mess, So Where Are The Regulators

One of Kickstarters higher profil failures

Crowdfunding sites like Indiegogo and Kickstarter are shop fronts masquerading as investment opportunities. Their success rate is somewhere short of terrible and the business model they promote is open for abuse by the sort of people who have no qualms about ripping off the little guy.

Currently ZX Spectrum clone producer RCL is making all the wrong headlines for its late Indiegogo campaign for the Vega+. Cancelled it may be, but only after raking in around $500k in pledges.

There's no scrutiny of a project's ability to deliver the product or service it is seeking funding for. Yet because of the way that these projects are presented, when they do fail it is the investor who is left to carry the can, even though their investment amounts to no more or less than a transfer of property. Or what we usually call a purchase.

It's about time regulators on both sides of the Atlantic started taking an interest in the activities of crowd funding sites, which by virtue of their fee based model, are guaranteed to profit from every venture and thus encouraged to put forward the good, bad and ugly with absolute indifference.

Crowdfunding sites are a shop window for a product which is paid for up front and doesn't exist yet. They are in every effect a retailer and should face a retailer's consequences for non-delivery.

By design or by accident projects and the sites they raise funds on are getting away with daylight robbery, and it is only the small amounts per investor which have kept the profile of these failures so low.

I've said it before and I'll say it again. Any project worth its salt will be able to gain funding through traditional routes and not have to transfer risk to the consumer. When it comes to crowdfunding, keep your wallet in your pocket and walk on by.