Bottom Line Inc

Crowdfund Scams

0

Crowdfund websites such as Kickstarter.com and Indiegogo.com connect projects in need of funding, such as inventions and charitable causes, with people willing to provide financing. But some of the projects are scams. The US Federal Trade Commission recently settled a fraud case against a would-be board game developer who, it claimed, spent much of the $122,000 he raised on Kickstarter on personal expenses. Earlier this year, a woman in Iowa received probation after she raised money to pay for cancer treatments for her healthy young daughter.

Before sending money…

Read the comments section. The major crowdfund websites let site visitors leave comments. If there’s something suspicious, there’s a chance that someone else will have called attention to it.

Also: The Reddit web page ­Shitty Kickstarters  serves as a forum for red flags. My site, CrowdfundInsider.com, covers potential scams, too.

Make sure plenty of other ­backers believe in the project. If a project has lots of support, that means lots of other people have decided it seems legitimate.

Explore the background of the person behind the project. Can you find legitimate-looking social-media pages for him/her? Does his track record include relevant experience? Has he launched other successful crowdfund campaigns in the past?

Be careful with Indiegogo projects involving the development of high-tech hardware. Claims of forthcoming technology can be hard to prove. Indiegogo does not require a working prototype for these projects. The other best-known crowdfunding site, Kickstarter, does ­require a working protoype.

See if similar products are already available elsewhere in the world. Occasionally someone takes a product already on sale, typically in Asia, and posts it on a crowdfund site as if it were a brand-new project he is trying to develop. Enter relevant keywords into search engines to see if similar products exist.

print
Source:  Andrew Dix, cofounder and CEO of Crowdfund Insider, which covers alternative finance. CrowdfundInsider.com Date: January 1, 2016 Publication: Bottom Line Personal
Keep Scrolling for related content View Comments