In another post, I analyse the maximum loss that a backer could incur in a crowdfunding transaction. The maximum loss has a monetary value, but I think that there is more at stake than just losing $40, for example.
The “more at stake” is because crowdfunding is an emotional investment for the backer. By participating in a crowdfunding transaction, the backer and project creator a complete a journey together. The project creator has a dream, and the backer helps the project creator to fulfill it.
In the event that the project creator fails to deliver, the maximum loss experienced by the backer is a combination of the monetary loss as well as the:
- lost opportunity cost of backing the project;
- betrayal of the backer’s trust and support offered to the project creator;
- disrespecting who the backer is, namely an innovator and early adopter. and what backers represent to the crowdfunding process;
- creating distrust when engaging in future crowdfunding transactions.
Initially, crowdfunding can be described as “buyer beware”, but if the project creators fails to deliver, then the transaction and experiences morphs into “project creator beware”. This is because future project creators carry the burden of how current project creators treat backers.