| The core difference is that Kickstarter only offers "all or nothing" funding, because of their focus on creative sites: << All-or-nothing funding is a core part of Kickstarter and it has a number of advantages: It's less risk for everyone. If you need $5,000, it's tough having $1,000 and a bunch of people expecting you to complete a $5,000 project. It motivates. If people want to see a project come to life, they're going to spread the word. It works. Of the projects that have reached 20% of their funding goal, 82% were successfully funded. Of the projects that have reached 60% of their funding goal, 98% were successfully funded. Projects either make their goal or find little support. There's little in-between. >>
http://www.kickstarter.com/help/faq/kickstarter%20basics Meanwhile, Indiegogo is more agnostic about the projects they work with. Because their projects aren't all creative, you can set up your projects to either use "all or nothing" funding (aka Fixed Funding) or more "Flexible Funding": << If your campaign is set up as Flexible Funding, you will be able to keep the funds you raise, even if you don't meet your goal. If your campaign is set up as Fixed Funding, all contributions will be returned to your funders if you do not meet your goal. Flexible Funding campaigns that meet their goal are only charged 4% as our platform fee, whereas campaigns that do not meet their goal are charged 9%. >>
http://www.indiegogo.com/indiegogo-faq Indiegogo does offer refunds to backers of Fixed Funding projects that don't fully fund... but they don't offer refunds to members of Flexible Funding projects. In fact, they charge 9% to those people... possibly to offset the margin loss they incur for refunds of Fixed Funding projects that don't fully fund. In any case, there are two ways to program pledges from backers, given these specs: 1) You can charge the backer's credit card right away and then refund if the campaign doesn't fully fund.
2) Or you can auth the card right away and then only charge the credit card if the projects fully fund. Kickstarter does the latter: their backend (powered by Amazon Payments) authorizes a backer's credit card when someone pledges... but then doesn't charge the card right away. Instead, Kickstarter waits until the project successfully funds before charging the card. If the project doesn't fully fund, then the credit card of the pledger is never charged. Not a lot of payment processors will support such a model. Amazon Payments is one of the few... although they actually stopped onboarding new crowdfunding sites last year:
http://www.wired.com/business/2012/08/crowdfunding-gets-stic... So in short, it's less of a legal complexity (as far as I can tell) and more of an issue around: 1) Margin risk around refunds of projects that don't fully fund.
2) Making sure the customer experience of pledgers is a good one. |