Kickstarter: Project Backers Must Get Rewards (But Leave Us Out Of It)

kickstartergrabWhen you pledge your money to a Kickstarter project, you do so knowing that you won’t actually be charged unless the project reaches its funding goal. While that protects against an unfundable project from running off with your money, what about those projects that reached their goal but still don’t deliver the promised rewards?

The current Terms of Use for Kickstarter state that “Project Creators agree to make a good faith attempt to fulfill each reward by its Estimated Delivery Date.”

It also says that Project Creators are “required to fulfill all rewards of their successful fundraising campaigns or refund any Backer whose reward they do not or cannot fulfill,” but that the Creators are “not required to grant a Backer’s request for a refund unless the Project Creator is unable or unwilling to fulfill the reward.”

This has led to numerous instances of successfully funded projects where the backers wait much longer than expected for their promised rewards, and where the project creators stop responding to queries and refund requests.

And as the Terms clearly spell out, “Kickstarter does not offer refunds,” and it doesn’t get involved in these disputes.

In just the last few months, we’ve told you about Ping Wallet, a project that raised $59,000 — almost double its funding goal — a year ago, with the promise of delivering rewards by Dec. 2013. After disgruntled backers brought their story to the media’s attention, the creators re-emerged, promising to deliver rewards by the end of 2014.

And earlier this year, Washington state’s attorney general sued the creators of a Kickstarter project that raised $25,000 in the fall of 2012, but has yet to deliver rewards to backers.

Today, Kickstarter announced that it has revised its Terms to make them more readable and to include an entire section that spells out creators’ obligations to their backers.

The section, entitled “How Projects Work,” puts this duty in language that leaves less room for interpretation.

“When a project is successfully funded, the creator must complete the project and fulfill each reward,” reads the updated Terms (bolding in original text). “Once a creator has done so, they’ve satisfied their obligation to their backers.”

The revised terms, which go into effect on Oct. 19, also clarifies that creators “owe their backers a high standard of effort, honest communication, and a dedication to bringing the project to life,” while asking backers to have some patience, as “they’re helping to create something new — not ordering something that already exists,” which might mean delays, and — in the worst cases — the inability to make good on the project.

For example, while a Kickstarter project might get its full funding goal, it’s possible the creator could have grossly underestimated the costs to actually produce the finished product. Even with all the money from backers, it may not be enough to finish.

“If a creator is unable to complete their project and fulfill rewards, they’ve failed to live up to the basic obligations of this agreement,” read the new Terms. “To right this, they must make every reasonable effort to find another way of bringing the project to the best possible conclusion for backers.”

Ways in which this can be done, says Kickstarter, include creators posting an update on the site that “explains what work has been done, how funds were used, and what prevents them from finishing the project as planned.”

Creators should be able to demonstrate that they’ve worked “diligently and in good faith” to make the project a reality, and that funds were used appropriately.

If there is any crowdfunded money remaining, Kickstarter also advises (but does not require) creators of funded-but-failed projects offer to return any remaining funds to backers who have not received their reward.

For all of its tougher talk and helpful guidance, Kickstarter, which collects a 5% fee on fully funded projects, still does not provide refunds to backers or get involved in rewards disputes after a project is funded.

“The creator is solely responsible for fulfilling the promises made in their project,” cautions the new Terms. “If they’re unable to satisfy the terms of this agreement, they may be subject to legal action by backers.”

Here are a few things you need to keep in mind when deciding whether to fund a Kickstarter project:

1. Am I willing to lose my full investment?
Remember, in spite of its rewards-based funding process, Kickstarter is not a store. You are providing funds to completely new ventures and you run the risk that nothing will ever come of your investment.

2. Is the funding goal sufficient to complete the project?
If someone sets a funding goal that looks too low for what they’re trying to do, you have to wonder if the creator has underestimated the actual costs of completion or if they are just setting a goal that is reachable so they can get the funds and disappear. In some cases, the goal may be low relative to the overall costs of a project because the creator already has some money and just needs to get over the hump.

3. Is the timeline for the rewards realistic?
Manufacturing takes time, shipping takes time, sourcing materials takes time. Many project creators over-promise when it comes to delivery times on rewards. If a creator is promising turnaround of a new, manufactured product in only a couple months, you probably shouldn’t expect it to arrive when promised.