Crowdfunding Risky but Rewarding (Venturebeat)


 

Illustration by Bloomberg BusinessWeek

Last month, Amazon pulled the plug on the e-book crowdfunding site unglue.it and a number of other similar sites. Amazon says it is no longer able to support certain crowdfunding or social fundraising sites, despite the wild success of Kickstarter, which was built on Amazon’s platform. (Kickstarter still utilizes Amazon.com payments, however.)

But why? Although standout campaigns have served as great proof-of-concept for crowdfunding’s worth, like the Pebble wristwatch raising $10.2 million on Kickstarterseemingly overnight, the challenges that come along with the medium are almost too overwhelming to enumerate.

To name a few:

 

  • Fraudsters capable of producing a slick video or business plan can now dupe thousands of people into buying vaporware or investing in a ghost company;
  • Incompetent entrepreneurs can fail to deliver on their promises, spending millions of dollars of other people’s money in the process;
  • Unsatisfied customers or investors can dispute their purchases or investments, amassing huge liabilities for the businesses, platforms, and payment processors;
  • Insecure and non-compliant platforms can risk cardholder data, misappropriate funds, and violate federal and state statutes.

I can’t necessarily blame Amazon for wanting to avoid the regulatory and compliance issues that come along with processing payments for other platforms. Amazon Payments, Google Payments, and PayPal (eBay) were built to support merchants within those respective marketplaces. It does not make sense to shift their focus to a more complex and labor-intensive niche, regardless of its promise.

 

READ MORE HERE

 

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