Crowdfunding has been a gift to the creative and business-minded
of the world, and to the many thousands of people around the world
who have pledged money to projects and received something valuable
in return. The course of crowdfunding doesn’t
always run smooth however: timelines fall to the wayside; backers
get restless; ambitious ideas prove difficult to execute.
In the light of this, the world’s best-known crowdfunding site
Kickstarter has updated its terms and conditions to make it clear both to
backers and creators what is expected of them. This is the second time this year Kickstarter has rejigged its rules,
and the second time it has focussed on simplifying the language
The real emphasis here though has been on addressing what
happens when things don’t go to plan. Kickstarter says it has used
best practices it has spotted from within the community to define
The new rules reiterate that when backers pledge money to a
project they are entering into a contract with the project’s
creator. In terms of creators, says Kickstarter, they owe their
backers “a high standard of effort, honest communication, and a
dedication to bringing the project to life”. Backers, on the other
hand, must remember that “when they back a project, they’re helping
to create something new — not ordering something that already
exists”. They therefore should understand that there could
potentially be delays and that occasionally projects won’t come to
Should this happen, Kickstarter says that creators have not met
their obligations and should therefore take certain steps to
explain what has happened. These include demonstrating that funds
have been used appropriately, that they have worked diligently to
bring the project to a conclusion and what has prevented them from
finishing it. They must also offer any remaining funds to backers
who have not received their reward, or explain how the funds will
be used to complete the project in another way. You can read the full
list of steps here.
As always, Kickstarter reminds creators that they are
responsible for fulfilling promises made to backers and that
backers may take legal action if they do not keep to the agreement.
The first incidence of this occurred in 2012 when backer Neil Singh
sued creator Seth Quest, a designer from San Francisco who failed
to deliver on his Hanfree iPad stand project and had to file for
bankruptcy as a result.
To creators, this is just one of several horror stories that
shows why significant research and preparation is necessary before
asking people to pledge money through crowdfunding. Because
Kickstarter does not have any financial responsibility for failed
projects, the personal cost to individuals can be significant.
Similarly, it serves as a warning to creators to do their own
reading before pledging their money. Reputable sites like
Kickstarter and Indiegogo have strict
criteria for projects that have resulted in many success stories,
but the element of risk is never completely removed.