Kickstarter relaxes crowdfunding project rules

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BBC News | | June 4, 2014

Owlet care campaign previously rejected by KSCrowdfunding site Kickstarter has relaxed its rules about which projects can be placed on its site.

The change ends outright bans on cosmetics, eyewear, electronic surveillance equipment and all health, medical and safety products.

However, weapons, drugs, pornography and political fundraising remain prohibited.

The New York-based firm said it wanted to "simplify" its rules. The move may also help it compete against rivals.

Alternatives, including Indiegogo and UK-based GoGetFunding, ban illegal and deliberately misleading projects, but otherwise take a more relaxed policy.

"Indiegogo's 'open-door' policy does have some drawbacks but it has proved that crowdfunding has much wider applications than the rather narrow rules which Kickstarter has had until now," said Barry James, founder of the UK-based Crowdfunding Centre advisory service.

"It's also shown that it's open-by-default nature helps enormously in the evaluation of projects and the early detection of any attempted fraud."

Indiegogo allowed cosmetics start-ups on its site when they were banned on Kickstarter

View:  Canadian Crowdfunding Directory

However, Nesta - an innovation-focused charity that has researched the crowdfunding industry - warned that the move carried risks.

"Kickstarter has had a reputation for being one of the more difficult platforms to get on, and I think the effect will be bad news for its rivals in the short term as it starts picking up the sort of projects it rejected in the past," its senior researcher Liam Colllins said.

"But I'd expect this to lead to an increased failed-project rate and potentially more issues with late delivery of rewards.

"The question is whether its brand is strong enough so that it can afford this and still enjoy market dominance."

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Kickstarter has attracted more than $1bn of pledges since it began operations in 2009.

Members of the public only hand over cash if a project hits its funding target. They do not get a stake in the business but may qualify for a reward, such as an early release of a product seeking cash.

Related:  Kickstarter fraud, Washington files first consumer protection lawsuit involving crowdfunding

The site makes money by taking a 5% cut of the total amount raised and also charges a payment processing fee.

Its chief executive Yancey Strickler blogged that the new rules are based on three principles that projects should abide by:

  • They must create something that can be shared with others
  • They must be honest and clearly presented
  • They cannot raise funds for charity, offer financial incentives or include any of the items on the slimmed-down "prohibited" list

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