UPDATED 23:56 EDT / SEPTEMBER 07 2017

EMERGING TECH

Indiegogo cracks down on crowdfunding campaigns with new disclosure rules

Crowdfunding services operator Indiegogo Inc. is cracking down on companies seeking to raise funds with a new set of rules that are meant to provide improved product disclosure to investors.

At the top of the list is a rule change that will now require all companies raising money on Indiegogo to disclose the current state of their product. In particular, that means whether at the given point the product is only in at concept stage or is further developed, such as being ready for manufacturing.

Focused entirely on providing better information for investors, the company noted that while it’s “proud to help entrepreneurs wherever they are,” determining risk for those investing in crowdfunding campaigns can be challenging. “Our goal is to give you the context you need to make a more informed decision before backing a campaign,” the company said in a blog post Thursday.

Second on the list of changes in compulsory “monthly backer updates,” a requirement for companies to provide, as the name suggests, monthly news to those who have invested in their crowdfunding campaign to what is actually happening with the product on a monthly basis. There’s no strict requirement on what an update should entail, with Indiegogo noting that “photos of warehouses, videos of the team at work, we want it all!”

The changes are primarily consumer-facing, but Indiegogo also noted that it remains committed to helping entrepreneurs through partners including IBM Corp. and Arrow Electronics Inc. Although the changes involve a large carrot, they also come with a stick, in that Indiegogo will employ debt collectors if a company breaches its terms and and fails to deliver the product promised.

The news that Indiegogo is getting somewhat tougher on companies using its service comes after another spate of failed companies that had raised money using the financing method. The most recent high-profile crowdfunding fail came from a company called Kanoa Inc. which failed to deliver wireless earbuds. But it’s hardly alone. A report in 2016 noted that only one-third of crowdfunding campaigns meet their initial fundraising goal and of those that do, some 9 percent (on Kickstarter, Indiegogo’s major competitor) go on to fail as well.

Photo: ter-burg/Flickr

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