Crowdfunding platforms have given many individual entrepreneurs and small businesses an alternative resource for capital. But as the industry goes through some growing pains, companies are continually making improvements to ensure the credibility of their funding structure. As part of this effort, Indiegogo just announced it is going to put backers first by requiring campaign entrepreneurs to do more.
The Crowdfunding Ecosystem
Unlike stock brokerage firms, banks and other financing institutions, crowdfunding platforms don’t go through the same level of scrutiny. This places the burden of delivering on the investment a backer makes on the small business or individual entrepreneur, and to some degree the platform, in this case Indiegogo.
On the company blog, Indigogo Head of Trust and Safety Kerry Barker writes, “We want to make it easier for you. We now require Tech and Innovation entrepreneurs to select which Product Stage they are in, from Concept to Shipping. We’ve also clarified exactly what each stage means and the risks associated, especially for concept-stage campaigns.”
Indiegogo Is Putting Backers First
By making entrepreneurs more accountable, Indiegogo says it is putting backers first by requiring entrepreneurs to supply more information about the products they are seeking to fund.
Here are the new requirements for anyone looking to get funding in an Indiegogo campaign, along with some tips for engaging with backers.
Disclosure of product stage. From now on, entrepreneurs have to disclose what stage their product is in. This starts at concept and goes all the way to shipping. The company has also clarified what each stage means so that entrepreneurs know how to adequately disclose the stage of development their product is in.
Monthly backer updates. Entrepreneurs are now required to update their backers at least once a month. This includes the status of the project, pictures of warehouses and videos of teams working.
Experts to help entrepreneurs. In partnership with IBM and Arrow Electronics, Indiegogo is helping entrepreneurs with the process of creating, manufacturing, and shipping their product. This will not only help backers get their item on time, but keep beginners in the crowdfunding process from feeling overwhelmed.
Violating Term of Use
If the Indiegogo Terms of Use are violated, the company says it will use collection agencies to recover funds collected by crowdfunded groups and companies.
Tips For Creating Updates
If you have a campaign on Indiegogo, here are some tips from the company for the best way to engage your backers. Be honest about delays by posting them as soon as possible. Make your updates meaningful. Respond promptly to questions from backers. Regularly update manufacturing and shipping dates and engage with your community.
If you don’t want to alienate your backers, Indiegogo says don’t make vague statements, use updates to promote other campaigns, or post content unrelated to your campaign.
In the end, while the new requirements put more requirements on entrepreneurs, they also may help crowdfunders stay out of trouble with their backers, building trust and credibility and increasing the potential that current backers will also support future projects.
Images: Indiegogo