Kickstarter has been a monumental success for anyone looking to start a small project but require funding for it. With many people turning away from the idea of using a bank loan or taking out more money from your house loan to finance your endeavour, what a lot of creators (and mega trolls) have turned to is places like Kickstarter and Indiegogo, which provide you with the ability to pitch your project to interested persons and have them wire you money for the project, with people who donate more than others paying higher amounts for the more expensive pledges which come with special benefits.
But one issue with that is that you’re getting free money from these people – should your project fail, you have no obligation to pay back your backers or notify Kickstarter if it was successful or not. It’s very hands-off and a lot of people have either abused this tremendously or created projects with the intention of failing just so the money can flow in. Well, that’s all about to change now that Kickstarter has changed their terms of service to avoid this.
Kickstarter’s new terms and conditions cover the company for situations like these but also give backers of failed projects a way to receive compensation for it. One of the changes is that creators using the platform that receive funding must take responsibility for their failures, with the option for backers to now legally pursue the project creators should they not keep their promises. Kickstarter won’t be involved in those cases should they arise, as they are only acting as the portal between the backer and the project creator.
Essentially, whilst pledging to a project doesn’t create a legal agreement, Kickstarter’s terms now say that should Zack Brown fail to make four times as much potato salad, backers will be able to launch a class action lawsuit and claim back the money they donated legally.
There’s also now a checklist of items for creators that they must study before putting up their project officially. Creators must be able to continually provide feedback on the status of the project, for one. Creators of failed projects must also be able to provide some documentation as to how project funds were spent and what cause the failure. The creators must be able to show that “every reasonable effort to complete the project as promised.”
In addition, backers of failed projects will be able to claim back money from whatever funds are left, calculated proportionally against what they pledged initially to the project. The new terms of service come into effect on 19 October 2014 and do not affect failed projects from before that date.
CLANG! (no, no-one’s getting their money back from that one)