‘Crowdfunding’ Businesses Have Obligations to Investors

More and more start-up businesses are seeking funding on websites such as Kickstarter or Indiegogo, promising small rewards to individual investors in return for micro-contributions.

These include the Veronica Mars movie, which raised millions of dollars by promising small contributors posters, DVDs and movie scripts, and a space telescope project that offered “space selfies.”

But keep in mind that these promises are a legal obligation – so if you end up getting hundreds or even thousands of contributors by offering small rewards, you’ll have to follow through on each one of them.

Recently, the state of Washington accused a Kickstarter company of reneging on its promise to send small contributors decks of horror-themed playing cards. The state is seeking restitution plus additional damages of $2,000 per contributor and the costs of bringing the suit.

Image courtesy of David Castillo Dominici at Freedigitalphotos.net.