Backing a project
How does reward crowdfunding work?
You pledge money to a project and get the reward its creator promised, like the finished product, once it's made. You don't get a share of the business. The money waits until the campaign reaches its goal by the deadline, and only then goes to the creator.
Is backing the same as investing?
No, and mixing the two up is what costs people most. When you back a project, you're ordering something before it exists. You don't buy a share, you have no claim on profits, and what you backed can't grow in value.
If the project is a huge success, you get the reward you were promised and nothing more. That's the deal, and a platform that suggests otherwise is misleading you.
Where does the money sit in the meantime?
On most platforms, pledges wait in the platform's own bank account. Here's exactly what happens to yours on CoFunders:
Your pledge sits in an escrow account the program controls, not in a CoFunders account. Under the program's rules, only the creator can claim a campaign's funds once it reaches its goal, and only you can take your pledge back if it misses. The program can still be upgraded, and today one key we hold can upgrade it (see /security).
Ask any platform who can change the rules that hold the money. Someone almost always can.
Can you check it yourself?
Yes. Each campaign's escrow is an account on a public network, with its balance and every transfer in view. The escrow checker reads one for you, with no account needed.
Escrow protects you from a creator spending the money before the goal is met. It doesn't protect you from a creator who collects fairly and then doesn't deliver. That risk is yours on every platform.
How much of a pledge reaches the campaign?
On the free plan, each pledge pays two fees: 1.5% of the pledge and a flat $0.99. So a $100 pledge puts $97.51 toward the goal.
The percentage fee on a pledge follows the plan of the account making it. It's taken when the pledge is made, so it isn't returned if the campaign misses its goal. Paid plans aren't on sale today, so the published fee is the free plan's fee.
The smallest pledge the contract accepts is $10. What it costs to back a project goes through every cost, and the fee calculator works it out for any amount.
What happens when a project fails?
There are two ways to fail, and they end differently.
A campaign that misses its goal never gets the money. Here's exactly what happens to your pledge then:
If the goal isn't met by the deadline, you take your pledge back from escrow with one tap, and nobody has to approve it. What comes back is the amount held for you: your pledge minus the fees taken when you backed (the platform fee, the flat fee, any tip and any share reward the campaign pays).
A campaign that reaches its goal and then doesn't deliver is different. Many early projects fail, usually not through fraud, but because making something is harder than it looked. The money is already with the creator, so you take it up with them, not with the platform that introduced you. How to check a campaign helps you pick the ones likely to deliver.
Your next step
Follow one pledge from the day you back to the day the goal decides, in what happens to your pledge.