Crowd Funding: When Enough Is Enough.

By: Chase Sagum  |  November 25, 2014

Crowd Funding is a powerful source of soliciting capital for unique ventures. Recently, a company seeking to produce a hover board similar the one used by Marty McFly in Back To The Future Part II, raised nearly $500,000 dollars using the crowd-funding site KickerStarter. They originally requested $250,000. An aspiring author, whose book is nearly finished, solicited funding for publishing his book on business ethics. He has already received double what he initially requested.

In the case of the aspiring author, Aaron Beam has already received well over his original request. His original solicitation stated that his funding goal will ensure that he can distribute copies to “libraries throughout Alabama, including all the colleges.” If his original goal was sufficient to provide his intended service, who ensures that the excess funds are used in a similar fashion?

Perhaps Steve Tan shows the most startling example of the dangers of crowd funding. He solicited funding to produce a waterproof and voice activated smart watch. He sought $100,000 via crowd funding site, Indiegogo, yet he received nearly $1.5 million in capital. Funders received a watch that couldn’t even keep time properly, while the creator posted photos of him shopping in high-end stores and posing with a Ferrari.

Neither KickStarter nor Indiegogo evaluate projects. Kickstarter requires that projects must be unique and honest, Indiegogo prohibits scams, and neither site allows projects that are inherently illegal. It is up to the funders to determine which projects merit funding. More importantly, it is up to the funders to know when enough is enough.

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