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Earning money from crowdfunding just got a lot safer

Crowdfunding is the latest trend in small business startups. It lets the little guy raise money for his or her big idea without being on the hook to the big banks and their high interest rates.

Unfortunately, for every bright entrepreneur there's a crook. Many crooks have taken to Kickstarter, the world's most popular crowdfunding platform, to make a buck promoting a scam idea, raking in the cash and then running.

Bad news for scammers: An update to Kickstarter might have just made them legally responsible for their actions

Kickstarter works like this: People looking to have their concept funded post a pitch, set a funding goal and hope that people "pledge" money to the project.

"Backers" put up cash in exchange for rewards. The rewards vary by the amount that a backer pledges. While Kickstarter's original concept was focused more around art, the platform's most successful projects have been commercial.

Things get tricky when companies start using Kickstarter as a glorified pre-order service for a run-of-the-mill product. When people see a gadget that they can see themselves buying and put down money for it, they're not supporting the arts. They're paying for an upcoming smart watch in advance.

The one thing that Kickstarter didn't seem to think about or even consider the last four years is accountability. That might have changed with a policy update from the company and I quote:

When a project is successfully funded, the creator must complete the project and fulfill each reward. Once a creator has done so, they’ve satisfied their obligation to their backers.

In the past, companies would pitch a product, receive the money from their backers in a lump sum and sometimes not even deliver what they promised. While some projects were sued for not completing their projects, others have gotten away scot-free.

Bonus tip: These five whacky Kickstarter success stories will make your day and might just restore your faith in humanity.

While the company takes no responsibility for unfinished products in its updated policy, Kickstarter does now support the right of a project's backers to take legal action against something that goes unfinished. That's a good thing.

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