A few short years ago, paying for a nonexistent product would have been unthinkable, but this practice has become commonplace with the advent of crowdfunding platforms like Kickstarter and Indiegogo.
Buying from Kickstarter or Indiegogo may feel just like buying from a regular store, but despite the rise in these sites’ popularity, this type of purchase is quite different from your traditional retail buy. In reality, there’s more to backing crowdfunding projects than meets the eye, which is why it’s important to know what you’re getting into. We have put together a few tips to get you going in our crowdfunding buyers guide.
What Is Crowdfunding?
Before we get into the nitty-gritty of crowdfunding for consumers, we wanted to give a brief overview of what this practice is.
Crowdfunding is a way for entrepreneurs to raise capital by leveraging the power of social networks and crowdfunding platforms. By doing so, the entrepreneur essentially widens the investor pool from traditional methods like banks and venture capital firms to their network of family, friends, and other investors.
Entrepreneurs benefit from this practice, and so do investors, who, despite paying for products that don’t yet exist, generally receive some reward or profit when the project is completed.
Advantages of Buying from Crowdfunding Sites
So why do consumers willingly back products that don’t exist? The answer is simple: buying off crowdfunding platforms can be advantageous them.
Access to Innovative Products
Being able to access innovative products is a significant motivator that leads consumers to part with their money before products exist. Creators carefully curate their crowdfunding pages to be as attractive as possible, and consumers are moved by exciting ideas they want to see to fruition. The promise of something avant-garde leads many to invest.
Along with access to innovative things, buyers invest because of the perks that come along with doing so, like access to products that may have limited production or the ability to receive a product well before its release date.
Some creators also give investors behind-the-scenes access to the product, which is another big selling point. Many people are genuinely curious about what goes into bringing a project to life, and they enjoy the feeling of being in the know before everyone else is.
Crowdfunded purchases usually come with some attractive discount to incentivize buyers to back them. These discounts come in many forms. Sometimes that means shipping prices get slashed, sometimes it means receiving a larger quantity of the product, and sometimes it means a significant discount on the eventual market price.
Supporting a Good Cause
Goodwill forms an integral part of the crowdfunding mentality, and for many, it’s a critical reason to invest. Charities are the original crowdfunding beneficiaries, and these platforms have allowed lots of people to get behind their charity of choice in a meaningful way.
Backing a crowdfunding project is also a way to support entrepreneurs throughout the creation process and a tangible way to help others reach their goals.
Disadvantages of Buying From Crowdfunding Sites
Now that we’ve taken a look at some of the advantages, it’s time to go into the possible pitfalls–because buying from Indiegogo and similar crowdfunding sites can come with some serious downsides.
Potential Differences Between What’s Promised vs. What’s Delivered
You know what you’re getting when you go to a store and buy a product because you can hold it in your hand. With buying off crowdfunding platforms, there is no physical product you can touch. Furthermore, there’s no guarantee that the creator will deliver on their promise when it comes to the product’s attributes.
Some of this has to do with the fact that not all crowdfunding platforms require creators to show an actual replica of their product. And some of it also has to do with the fact that the creator might have difficulty bringing their vision to life. Whatever the reason, you might not exactly get what you thought you were getting.
No Delivery Guarantee
Unlike traditional retail, with crowdfunding there is no guarantee that you’ll receive what you invested in. And that’s because there are a lot of things that can go wrong between the moment a creator receives funding for their product and receiving that item on your doorstep–despite the best of intentions.
Entrepreneurs can fall victim to many problems, such as manufacturing issues, miscalculating the funding they need to complete productions, and inability to scale production processes. All of which can be bad news for you.
Most creators are well-intentioned, and the fraud rate is relatively low, but scams do exist. And unfortunately, despite most crowdfunding platforms claiming they vet campaign organizers, you’re giving money at your own risk.
How to Protect Yourself As a Consumer
Given the risks involved in backing a creator, it’s important to know what red flags to look out for before investing. There are several ways to protect yourself when buying from Indiegogo or similar sites.
Research the Creator
Social presence–or lack thereof–is a fantastic credibility indicator. If a person is willing to stand behind their product publicly, it means that they’re exposing themselves should something go wrong.
Do your due diligence and take ten minutes to check out the creator’s social channels, such as LinkedIn and Facebook. Google them. And be wary if you can’t find a company page or any information about them online.
We also recommend digging into the creator’s background. Look for projects completed, experience with the thing they’re creating, and similar achievements, which are all indicators that the person is reliable.
Assess Project Complexity
The adage “If it sounds too good to be true, it probably is” is applicable here. Some ideas are just too complicated to be brought to life, so take a look at the project’s complexity to assess whether or not it’s likely to come to fruition.
A clear example comes to mind, that of a team from Sweden that quickly exceeded their funding goals for a futuristic device: artificial gills that would allow you to breathe underwater. Many people were lured in by the awe-factor of this product, but it turned out to be a scam and a lesson that if it seems impossible, it probably is.
Look at Comments
A place you shouldn’t miss is the public comments section on the creator’s crowdfunding page. Comments are a great way to get an idea of whether or not the project is likely to succeed and the overall trustworthiness of the creator.
Does the creator respond to comments? If they don’t, that’s not a good sign. If they do, what kind of information does the creator provide? The comment section can be incredibly telling, so don’t hesitate to look at it frequently.
While it may seem like the onus is on the creator to deliver on their promises (and in large part, it is), it’s unwise to invest in a product and not follow it through its various phases. Most issues happen after reaching the funding goal, so it’s wise to check the crowdfunding page and look at the updates and comments.
If the creator isn’t giving any updates, don’t hesitate to reach out and ask for one. If the project has gone sideways, this is a great time to ask for a refund.
Buy from successful campaigns
Many successful campaigns continue to sell on the various platforms after first rounds of financing and production. While you may not be getting the bests discounts, you will have other consumer reviews to go by to ensure the product was fully decveloped and fulfills your needs. IndieGogo will also guarentee delivery of any purchase made on their IndieGogo Marketplace.
Crowdfunding for You
Crowdfunding platforms are a great way to find unique and innovative products. If you do your homework, similar to any other purchase, you will safely find cool products that suit your needs and wants. At iReviews, we test a number of unique pre- and post-production products for your information. Have a look at our and our user reviews for your next cool toy.