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Indiegogo switches gears to more closely screen crowdfunding campaigns

Indiegogo switches gears to more closely screen crowdfunding campaigns


It’s also starting a crowdfunding alliance with rival GoFundMe

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Logo of the Crowdfunding Trust Alliance, showing a hand with a shield and checkmark. The image lists Indiegogo and GoFundMe as members.

Crowdfunding platform Indiegogo is changing the way it does business, shifting from an open platform where anyone can raise money for just about any purpose to a closed model where every campaign will receive a manual review before it can go live.

“Candidly, we have not always lived up to our backers’ expectations,” said Will Haines, vice president of product and customer trust at Indiegogo. When the company launched in 2008, there were few restrictions on would-be entrepreneurs seeking to raise money from like-minded backers. But Haines says that “open” isn’t what the crowdfunding community really wants now, more than a decade later.

“Crowdfunding is not shopping — people generally understand that now — but it also shouldn’t be a leap in the dark,” he said. Backers count on the platform to be a safe and trusted space, Haines said. But, he added, “the risk has to be worth it, and backers need the tools to make an informed decision.” In addition to reviewing campaigns before they can launch, the company plans to work more closely with the entrepreneurs behind a campaign to ensure they have a solid plan and enough knowledge to bring their product or idea to market.

The new approach is being used on a small number of campaigns and will be rolled out more widely in the coming months, the company said. Indiegogo also has created an internal review board to oversee and evaluate the riskiest campaigns on its platform, as determined by its community of backers. The board can take action ranging from banning campaign owners from launching new campaigns, sending campaign owners to collections, and reporting them to law enforcement if necessary. Such actions would be reserved for campaigns Indiegogo believed to be working under “malintent” and if the company doesn’t hear back from a campaign owner after several attempts to contact them or failure to comply with its terms of service.

Haines said that Indiegogo’s mission at launch was to create a global network, where a community of entrepreneurs and enthusiasts could bring ideas to life. Built into that ethos was a negative perception of gatekeepers, Haines said. “Our biggest asset is the crowd, the people willing to take on some level of risk.” The company said between 2010 and 2020, Indiegogo contributions — the money backers give to campaigns — have grown by 5,515 percent.

“... the thing you ultimately receive is not going to be exactly the sketch on the napkin.”

Entrepreneurs, however — especially those seeking to raise money — have been incentivized to oversell their ideas and present them as groundbreaking or revolutionary, a mindset with which most crowdfunding backers are unlikely to be familiar. That can create something of a gap in understanding between the two sides. “Our job is to identify what’s needed to fill that gap, to make sure backers understand what the gap is,” Haines said. “What I see as the holy grail for us moving forward is not to remove all the risk but be clear about the level of risk. If you want to get in on something when it’s a sketch on a napkin, you should recognize that the thing you ultimately receive is not going to be exactly the sketch on the napkin.”

As part of its efforts toward cracking down on fraudulent campaigns, Indiegogo has partnered with fellow crowdfunding platform GoFundMe to create a new entity to establish best practices for the crowdfunding industry and to weed out bad actors who defraud well-meaning backers of crowdfunding campaigns. The companies describe the Crowdfunding Trust Alliance as a way for platforms to work collectively toward the goal of creating “clear trust and safety standards for the industry as a whole.”

The two companies haven’t yet invited Kickstarter, the largest crowdfunding platform, to join the alliance, but an Indiegogo spokesperson said both companies want any reputable crowdfunding platforms involved and “absolutely encourage [Kickstarter] to join.” The founding members of the alliance will be reaching out to other platforms in the near future, the spokesperson said.

It’s a bit of a shift for an industry that has largely disclaimed responsibility if a campaign fails to deliver on its promises; they’re just the conduit, the platforms have maintained, and any crowdfunding backer assumes a certain amount of risk.

“A high-profile failure reflects on the whole industry”

Under the terms of the new alliance, organizations won’t share confidential information, and third-party vendors won’t be allowed to join. To be eligible, an organization has to be well-established — at least three years old — and “generally respected” within the industry. Alliance members must unanimously approve any new applicants. So details about specific campaigns or campaign organizers wouldn’t be up for discussion, but members might share best practices to handle certain trust and safety situations they encounter, for instance.

There’s good reason for crowdfunding as an industry to tighten oversight of people who would use their platforms for nefarious purposes; a well-publicized scam on one platform creates wariness among potential backers for any future crowdfunding effort. “A high-profile failure reflects on the whole industry,” Haines said. “It’s in all of our best interests that platforms are reputable.” He added that he doesn’t think it’s necessary to have every crowdfunding platform on board with the new alliance, but he’d be happy to see a larger reduction in scams. “If there’s nowhere for the fraudsters to go, that’s fantastic,” he said. “I want to get there.”

“... a lot of the bad folks collaborate pretty well”

Juan Benitez, president of GoFundMe, said working with other platforms will be key for reducing crowdfunding fraud across the board. “And I’ll be quite honest, you know, a lot of the bad folks collaborate pretty well,” he said. “So I think it’s very important for the platforms to collaborate and have sharing of best practices, technology and resources.”

Benitez added that GoFundMe would welcome more members of the crowdfunding industry to join the new alliance. “That just collectively helps us all be stronger.”

In addition to expanding globally over the past decade, crowdfunding platforms have also evolved to include much more personal campaigns for things like medical bills or funeral costs. Benitez says he has found the variety of situations that people can be involved in to be striking. “It’s so amazing, and frankly energizing, for GoFundMe to be able to create a place where people can engage on those things.”

In a blog post announcing the alliance with Indiegogo, Benitez described the aftermath of the June building collapse in Surfside, Florida that killed 98 people. Many people wanted to donate to help the families of the victims, and many scammers were lined up to take advantage of that generosity, Benitez wrote. But the company was able to identify and remove 23 suspicious fundraisers before they could raise any money. Campaigns the company verified raised $2.4 million to help the Surfside families.

While scammers in crowdfunding get a lot of the spotlight, Benitez said the focus for GoFundMe remains on building a trustworthy and safe platform. “The reality is the vast, vast majority of activity on our platform is all good people trying to do good things and trying to help each other.”

Haines says that in addition to creating more transparency about how crowdfunding campaigns are run, he sees Indiegogo playing more of a role in helping entrepreneurs on its platform be more successful overall, acting as a kind of coach. “Some campaigns don’t ever raise any money,” he noted. “But we want to focus our attention on where the backers are, because that’s where the risk is, and where the money is.”