If crowdfunding facilitators were to offer an optional risk management strategy, would you be more likely to back a project ?
What i am thinking of, might take the form of an optional project failure insurance. The facilitator could decide on a rate, either in general, or on a project by project basis. ( A company like Kickstarter certainly has the data to make this sort of actuarial calculation. ) It might be in the range 3% - 4% ( a loss in the range of 1 in 30 or 1 in 25, of the amounts invested ). This money is kept by the facilitator and does not go to the project developers. If after some period of time after the originally scheduled delivery date, let’s say 4 or 5 years, if the project has not been delivered, the insured customer has the option to terminate the contract, and receive the entire sum, minus the 3% - 4% insurance fee, back. This is paid entirely by the facilitator. The customer could obviously decide to continue to wait, but could opt to get their money back at any time after the “failed delivery”.
An additional benefit to this is that the facilitator then has skin in the game. This insurance should be set up to break even for the facilitator, it shouldn’t become the income generator for them, only a way to reassure some customers.
The rate could be variable, or set, between different projects, the facilitator most likely has the data to make those sorts of decisions. A variable rate also might help the customer, better understand the risk. If for instance the facilitator says the insurance will be 10% on a certain project, that might be a good indicator of a projects assessed risk.
As is typically the case, the insurer has the right to find recompense as well for the insurance paid. They might have means a single customer would not.
So back to the original question. If you had the option to take the hedge, and insure against a complete loss, would that make you more likely to buy into a crowdfunded project ?