11 August, 2012


Crowdfunding has certainly enjoyed a bit of time in the sun recently. While the idea has been around for quite some time (think of charity drives - they're essentially a giant crowdfund initiative to fund something with a massive budget), it's only really recently with the rise of social media that they've kicked off as a popular way of raising money.

They're used for many things - the arts, charitable works, startup funds (or top up funds) for profit-driven entities.

As anyone who has used one of the popular crowdfunding websites (Kickstarter or Pozible, for example) knows, usually what is offered in return for the funding is a reward. These rewards usually increase on a sliding scale - the bigger the investment by the user, the bigger return they should see once the funds are raised and used.

And this, I think, is key.

I've been quietly watching a story unfold in the Australian knitting world. Without going into too much detail, people who invested through the crowd fund are being told (by the person who was raising this money) that they weren't investing in a business venture, but an idea. That because of this they have no right to complain that they haven't received their finished product, even when the finished product was being sold to the public at a recent agricultural show. They're being told that they have no recourse to complain to the site that hosted the crowd fund.

Well, I can't speak for those affected, but I can say for sure that I would be pretty peeved if I was in that situation.

It has certainly gotten me thinking about the risks of crowdfunding. As a user investing into someone's idea, you'd have to assume that they'd created a comprehensive plan, had costed everything out and had determined that they were capable of running/producing/doing whatever they're promising. It's worrying that it appears that there are people out there seeking money for ventures without having put the idea through what I would call an appropriate amount of scrutiny.

At the same time, I don't want to hold back from putting money into a crowd fund for a reason or product I believe in... (hah, fencesitter much!)

Does anyone have any ideas on how to handle this sort of thing?


  1. My 2 recent crowdfunds - Steampunk Tempest & Ton of Wool - both came through. I donated in the expectation that there was an even chance they may not but it was a show of faith as well as a financial decision. It was a shame that in the second case this trust was not reciprocated to all the donors although I did receive my skein of yarn.
    I still like the concept though & support other Micro Loan projects like Kiva.

  2. I've blogged on this too. To my mind, some of what you pay is a donation, or you can just pay a donation. But if you've selected an option that promises something back for at least some of your money, it should be sent to you if the fundraising was successful. If you take money for what you're doing without any promise of return, that's a charity. If you promise a return that's a business

  3. The following comment is by Merrin - for some reason the blog didn't want to take it!

    "As a person who invested in this venture and who has yet to see the promised return after a year, with at least two promised delivery dates - next promise by Tues next week, I must admit to having not only rose-coloured glasses as to the "cause" - keeping yarn processing in this country - but also jumping in without any thought to possible ramifications as to non-delivery / fulfillment of promised returns. Never gave it a thought - what redress is there on this sort of venture, what bone fides does the organizer have that an investor can be sure that they will get their promised return in exchange for their monetary investment?

    I do NOT think for a moment that this particular venture was / is shonky in any way, but I think this experience has opened the eyes of many (including myself) so that, possibly unfortunately for some funding seekers, people will be more hesitant in future to invest in projects such as this if their return is not guaranteed. As soon as the required level of funding is reached accounts are activated and debited but what can anyone do after that to ensure that goods/ services are received - we are totally at the mercy of the person who organized it and who, as recent events have shown, can disenfranchise us for simply trying to ascertain concrete delivery dates.
    I have learned that this method of "fund-raising" has the possibility to be a VERY risky way to invest in what can be a "great cause" and I won't be jumping in again quite so quickly. Trust is a very delicate concept and not to be taken for granted."

  4. Kate - Great to hear that you received your yarn and that your other venture was also successful! I've been wanting to invest in a couple of crowdfunds, however the stories emerging out of this one have given me pause.

    M-H - I will be going to have a read of that! I think you are right in the sense of donation, and certainly I've seen crowdfunding where the small denominations are essentially a donation (with perhaps a thank you card or something) - and if that's the expectation, then it's justified. If you, however, invest with the expectation that you will receive a product, or tickets to the event, or similar, then I would certainly be expecting to receive those when the time came.

    Merrin - I think you're in the same place as me! I am quite wary at this point, not sure whether I want to go ahead with any.