Crowdfunding’s Biggest Enemy May be Itself

Crowdfunding has fallen into a challenging and often thought-provoking hole. A typical crowdfunded project is left open-ended. This is because many of the project leaders are not financially and legally obligated to pursue the project to completion. This problematic situation has cropped up a number of times in high-profile projects. Josh Dibb of the indie-pop group Animal Collective, ran headfirst into some serious backlash in 2012. He received upwards of a $100,000 projects to fund his latest solo album independent of any record label. Unfortunately, he never followed through. His credibility was tarnished. He did officially release an apology, but he has yet to step forward with a solo album.

Fans were then required to contact Kickstarter and get their money back. This occurred earlier in the lifespan of Kickstarter where refunds were still be maintained and organized. The big question for Kickstarter is how much of a chance do they provide successful projects? Dibb may have missed the initial deadline, but he could pull through later down the road. Kickstarter obviously wants the project to come to fruition. Even sales applications can possibly cover for the unknown by delivering detailed progress. The system can track sales as the project continues, and report to the independent investors that their money is actually working.

Crowdfunding needs some three strikes rule. It needs a system that coherently organizes the progress of the project, and it needs to have a built-in consequence for failing to fulfill obligations. There is no legal basis, as of now, for establishing such standards. But, projects that are not coming to fruition are ruining the brand of Kickstarter as well as other crowdfunded brands. It is a technology that has an inherent flaw. As long as that flaw remains gaping and exploitable, Crowdfunding may be a project that falls to the wayside in favor of more traditional streams. Crowdfunding works because of its flexibility and independence. If that comes at the cost of project completion, it may not be worth pursuing. Major developers have things known as contracts that establish a legal basis. It will be fascinating to see the bar of crowdfunding be raised to protect the system’s own credibility.