Crowdfunding is a multifaceted transaction, and as a backer, I transact with three parties when I participate in crowdfunding. These parties are:
- the project creator;
- the online crowdfunding platform, such as Kickstarter;
- Amazon Payments, if the project creator uses this to process payments.
The rights, obligations and roles are defined by the nature of the relationship with each of these parties.
- As a backer, my relationship with Kickstarter is limited to finding projects and using the platform to transact.
- My relationship with the project creator is more personal, and involves both an emotional and financial investment.
- In addition to the pledge, project creators ask backers to complete extra tasks, such as marketing, social media promotion, and beta testing of products.
- Amazon Payments fulfills the payment process, and as it operates in a regulated industry, offers backers security as charge backs are possible.
My relationship with the project creator
The primary relationship and legal contract is between the project creator and backer.
Each backer has personal goals for taking part in a crowdfunding process, but, in general, the backer’s role in a crowdfunding campaign is three-fold, namely to:
- provide upfront funds to convert an idea into a product that can be manufactured and shipped;
- encourage the project creator through participation in his project;
- interact with the project creator about how to make the product / service better, for example taking part in choosing a colour scheme or naming a character.
Project creators seem to have no qualm in asking backers to “work” for them, for free, by extending the backers’ role to include:
- promoting the project, via social media, spreading the word, printing posters;
- beta testing game play;
- reviewing documentation, such as the rule book for a game, and reporting any errors or omissions.
If the extra work carries a clear reward, for example, some project creators have social stretch goals to unlock additional items to the core product, then I am fine with tweeting or Facebooking. But otherwise, I am in two minds about how I feel about this extra work.
On the one hand, if I can help spread the word, then I could make a difference in the project funding achieved.
On the other hand, there is no guarantee of the product being delivered by the estimated shipping date, and if the number of backers increase due to spreading the word, the expected shipping date will slip even further. In effect, the project creator is asking me for funds and being a freelance, no pay, employee in exchange for possibly delivering on what he said he would.
Ultimately, it is your decision as to what extent you want to engage with the project creator. Some backers don’t mind working pro-bono completing these tasks; others do. Use your judgement accordingly, and don’t feel pressured. You have already supported the project creator by pledging.
Because the primary relationship and legal contract is set up between yourself and the project creator, your recourse in the event of a project that hasn’t delivered is with the project creator. One would assume that it is implicit that a project creator will show you the same respect as you have shown his idea, but sadly this is not always the case, and as a backer, you may have some options for legal recourse or even statutory rights.
Remember at all times that the project creator has motives for launching a crowdfunding project, and the more costs and risk he can push onto backers, the better for him.
My relationship Kickstarter
Kickstarter provides a service to me: they provide a platform which I can use to search for projects. For this service, they charge 5% of my pledge, collected only if the project is successfully funded.
As a Kickstarter user, I have certain reasonable expectations that Kickstarter should meet, in the same way that I have expectations of using Facebook, or Gmail, or Linkedin.
In all cases, it can be argued that Kickstarter fulfills their service to me. They list available projects, allow me to review the project, create the basic infrastructure needed to manage my pledges and backing history, create a payment process, and provide a communication service / interaction service with the project creators. My role with Kickstarter is to maintain my information and abide by the Terms and Conditions of using their platform.
Accordingly, if a project is successfully funded, but fails to deliver to the backers, there is no recourse to Kickstarter to recover any monies in the event a project fails to deliver. In some instances, there may be limited areas of recourse, for example, a backer may have recourse to Kickstarter only if Kickstarter knowingly listed a project that is likely to default, but the onus may be on the backer to prove this.
Remember at all times that Kickstarter has its own motives, with its primary goal to ensure that projects are funded, because that is how they make money.
My relationship with Amazon Payments
If I have an Amazon account, and if the project creator opted to use Amazon Payments to process the payments, then I form a relationship with Amazon payments in the crowdfunding process. This is the only regulated party in the crowdfunding transaction. By regulated, I mean that the financial authorities closely watch what happens to the money being processed. This is a large benefit to backers, as it offers a measure of security in the process. Additionally, because it is regulated, the option for a charge back on your card may be possible.
Overall, my role with Amazon Payments is minimal, except if there is a payment dispute or charge back claim.