Crowdfunding Website Indiegogo Takes Steps to Combat Risks of Delayed or Canceled Products

Founded in 2008, Indiegogo’s crowdfunding model offers entrepreneurs and start-ups the ability to find funding from an unusual source: individuals. The company’s rewards-based model offers these individual investors some form of gift in return for their investment—often one of the products whose production they are helping to fund—rather than an equity stake in the start-up.

However, for all the benefits of Indiegogo’s crowdfunding model, there have been clear drawbacks for the individual investors that keep the site going. The products and gadgets that investors are promised as a gift in return for their investment are often delayed (sometimes for years) or never shipped at all. While this risk had always been inherent in the crowdfunding model, Indiegogo and other crowdfunding services like it have been feeling pressure to add in more protections for the individual backers that support its platform.

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In response, Indiegogo plans to introduce new features that remove some of the risk to investors that they may not see a return on their investment. Speaking with The Verge, Indiegogo CEO David Mandelbrot announced a new campaign type to be unveiled this year: “guaranteed delivery.” Campaigns that launch with this badge attached offer investors the assurance that they will either get the product they’ve been promised or have their investment refunded.

Mandelbrot was careful to make clear that the “guaranteed delivery” option won’t supplant the crowdfunding site’s current model, but rather that offering both options will help make the risks of such investments clearer to Indiegogo’s customers: “What we’re really trying to do is create a platform that’s flexible enough to meet the needs of the entrepreneurs and backers on our platform,” with the goal of getting backers to “be more understanding in those non-guaranteed delivery projects when the entrepreneur faces more challenges.”

Indiegogo also plans to bring in a roster of well-established corporate partners, with the hopes that these companies will use the crowdfunding service more as a marketing tool than a source for seed funding. So far, General Electric has debuted a new ice maker via Indiegogo while Lego has launched an new product experience aimed at adults.

While there are some that may say that these changes go against the spirit of crowdfunding, Mandelbrot firmly disagrees: “To me, crowdfunding is defined as the elimination of the gatekeepers between the entrepreneurs and the backers.”