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Pay up: Indiegogo to go after flaky campaigns

The crowdfunding platform beefs up its terms of use to help get refunds for backers of campaigns that fail to deliver.


Indiegogo updated its terms of service.

Hindustan Times via Getty Images

Indiegogo campaign owners be warned: The crowdfunding platform can send a collection agency after you.

As of Wednesday, a new addition to the site's terms of use lets Indiegogo take more serious measures to return pledged funds to backers after a campaign has breached its terms of service, or hasn't fulfilled its promise to those backers after the a campaign has ended.

"Indiegogo periodically makes changes meant to improve the experience for both backers and campaign owners on the platform," the company said in the statement.

Otherwise, Indiegogo's refund policy, which allows the platform to withhold money until the campaign ends, remains the same.

There's an inherent optimism in having a small mob of people give a little bit of money in order to bring a product to market, and thereby subvert the traditional way product development and manufacturing works. But there have been plenty of cases where campaigns buckled after becoming overwhelmed by demand, ran into unexpected issues or were outright fraudulent in the first place.

A December 2015 study from the University of Pennsylvania, which crowdfunding site Kickstarter now has housed on its site, found that 9 percent of Kickstarter campaigns did not deliver rewards promised to backers.

Sometimes campaigns are flagged and suspended on time, sometimes they're not. For instance, in January 2015, a project called Zano launched on Kickstarter for a small drone that could take video and pictures. It raised more than $3 million, but production and delivery issues meant that most backers never got their drone.

To this point, backers have mostly taken the hit as platforms don't always guarantee projects. In May, PayPal ended protection it offered customers investing in crowdfunding campaigns, meaning no more refunds when the campaign goes awry.

Indiegogo also published a blog post on trust and safety saying, "We will do everything in our power to recover funds for our backers, including contacting third-party collections agencies." Though, the post also said in certain cases, the platform will reach out to the campaign owner first.