In response to NPR’s segment on the woes crowdfunding contributors face if projects fail to deliver – namely what happens to the money acquired through funding – Kickstarter released an update to their Terms of Use on their blog. Not surprisingly, Kickstarter maintained that they are not responsible for overseeing refunds to “Backers” (the term Kickstarter uses in reference to those who contribute to a project) should a project fail to reach the market – on time or at all. And while they do mandate that “Project Creators are required to fulfill all rewards of their successful fundraising campaigns or refund any Backer whose reward they do not or cannot fulfill” they have no way to enforce such a mandate and there is no legal way to reclaim losses if the funds were used attempting to complete the project.

Here’s how the funding process currently works: Backers pledge whatever amount they want, and receive a reward (often scaling with how much they contribute) such as a product or keepsake based on what the Project Creator has chosen to give Backers in return for helping fund the project. Some backers may not care about receiving a reward, and are instead motivated to support projects of personal interest or help others manifest “worthwhile” dreams. Others are interested in purchasing intriguing products  by pledging dollars for items that exist in idea or prototype form. They’re essentially relying on the Project Creator to deliver on an idea – in full and on time.

Unfortunately, sometimes that’s easier said than done. And to make things more challenging, there is no real way to vet the creator of a project, or the project itself. That’s nothing new to professional Backers. All the due diligence in the world won’t guarantee, with absolute certainty, that a project goal will be delivered in full and on time. Just ask any banker, venture capitalist or other professional investor. There is an understood risk associated with backing businesses, and crowdfunding is no exception.

What are you pledging money to, then?

You’re pledging to a possibility. You’re taking a chance to help – minutely or massively – fund a product or idea you wish to see become a reality. Your contribution, and those of all other Backers, in no way guarantees the success of the proposed product. It merely helps create opportunities for success. You should, in essence, ask yourself this two-part question before “investing”: “How much am I willing to spend funding the possible creation of this project; and am I willing to accept the risk that, despite best intentions, this project may not become a reality?” Refunds – after funding closes – are not included.