Even as crowdfunding grows (Kickstarter records over $1.5 billion pledged by 7.6 million backers), the risk of fraud has not been addressed sufficiently. The person raising funds is not liable to anyone. Instead, the burden lies solely on the backer to do ‘their own homework’ on the starter’s credibility and the soundness of their project.
While platforms like Kickstarter are relatively stricter about the crowdfunding process, others like Indiegogo are more flexible and perceived as being more risky – even though both platforms have had their fair share of ‘scampaigns,’ delays and defaults.
In this context, Indiegogo’sexperiment to offer insurance is a good move.
The experiment seems to have covered only one product to date – the Olive stress management band which is available for $129 on Indiegogo. For an additional $15, backers can purchase insurance which secures them a full refund if they don’t receive the product within three months of the estimated delivery date. Indiegogo offered insurance on up to 25 bands only, cutting their own risk in the experiment.
The surprising part – despite all the coverage the insurance offer received in online news sites, only three people paid for it.
This could mean any number of things… backers felt more confident after seeing Indiegogo back this particular product… they were confident in their decision to back the company… they were unwilling to shell out more money… and so on.
Time, and more experimentation will tellif insurance will have any impact on people’s trust and the size of their investments.
What do you think? Tweet us at @PeoplesLab
This post is a part of our December monthly brief: Trends for 2015 – Insurance for Crowdfunding