Crowdfunding is great tactic to generate revenue and awareness. But like much in this world, there are people that want to exploit people’s generosity and interest.
Since crowdfunding is built around trust, it gives fraudsters the opportunity to take advantage of this.
These scams sometimes come from online platforms such as Kickstarter, Indiegogo or GoFundMe. Usually because there’s no one to control or view campaigns for the authenticity. With the amount of traffic and campaigns each of these sites have, it proves to be difficult to review and check all campaigns that come through.
Examples of Scams.
The First crowdfunding fraud case was against a project creator who scammed contributors for more than $122,000. Erik Chavlier using a business name The Forking Path Co, asked for donations to produce a board game called The Doom of Atlantic City. Roughly 1,250 backers donated about $75 or more for a copy of the game.
Another was an Iowa woman raised thousands of dollars on GoFundMe to pay for daughter’s cancer treatments, which in fact the child did not have.
Yet another was a campaign created by the company, Magnus Fun Inc. The campaign was create a Kobe Red, Japanese beer fed Kobe beef jerky. The project raised more than $120,000 in donations (nearly 50 times the fundraising goal). Once the campaign exceeded its goal backers and evangelist began to become suspicious. A private investigator was hired to look into the project creator. They found sketchy details and publish their findings. The campaign was later removed by Kickstarter.
A fourth example of a crowdfunding scam was from a woman named Jen Hintz, who created a campaign for her new business, FibroFibers. She raised $26,000 however she used the money to pay for relocation expenses not a new business.
Methods to Built Trust.
There are many scams in crowdfunding, it’s important to ensure backers/donors can trust your campaign and your organization’s good work.
- Highlight your work and credentials.
Many of you have already have potential donors’ trust, by being known in the industry. So lean on that, highlight all the hard work you’ve been doing. You can do this by blogs, webinars, interviews, promo videos and more. If you are a start-up emphasize your credentials, where you came from and where you want to go.
- Expect the tough questions.
Regardless of which industry you’re in (or how known you are), you’re going have people question you. That’s not a bad thing! People want to be careful where they donate their money to. All that you need to do is answer the questions as they come through. A public forum is a great way to engage, this way others can see the question and response. Or provide an FAQ, so that top questions regarding their donations are already answered and clear. Crowdfunding is built on transparency and understanding.
- Your champions.
Do you have champions who are known in their industries? Can you lean on them to speak out for you? You can always benefit from asking your champions to speak and highlight your good work. Just make sure to provide a guide or even a script that they can use.
- Show their impact.
During and after your campaign it’s important to keep your donors informed of where their dollar went. It highlights the public of the work you’re doing it. This will help create a community within your organization.Show their impact.
- Highlight your environment.
What is your team like?
Do you guys have morning breakfast or lunch together?
Do you go for drinks after work?
Are you a group of comedians?
Highlighting who your team is helps legitimize who you are to donors. It will also help emphasize your organization’s personality.
If you want to learn more about how to improve trust with your donors, reach out to our staff and we are happy to help! Reach out to us at, firstname.lastname@example.org