Top 100 Crowdfunding Index by www.alexa.com

Top 100 Crowdfunding Index by www.alexa.com

PayPal Frozen Accounts Reveal Crowdfunding Growing Pains

PayPal Frozen Accounts Reveal Crowdfunding Growing Pains

Robert J. Mullins CFB Sr.Staff writer

The controversy over PayPal freezing funds of crowdfunded startups has given the payments processing site a black eye, but a closer look shows it’s just an indication of how existing financial institutions have to adapt to the nascent crowdfunding phenomenon.

PayPal is in the process of reviewing and revising its policies related to accepting funds from donors to projects that use crowdfunding platforms such as Kickstarter, Indiegogo and others to collect funds. When a donor gives money to a startup through those platforms, PayPal processes the payments that go into specific projects.

Payments processing firms like PayPal, which is owned by eBay, are subject to some of the same regulations that companies like Visa and MasterCard have to follow, which are designed to protect consumers. And like so many scams that proliferate on the Internet, sites like PayPal have to be on the lookout for fraud.

Lately, PayPal has frozen some of the accounts of crowdfunded projects because of questions about their validity. According to news reports, companies subject to their funds being frozen include the wearable glasses maker GlassUp, a gaming company call Red Thread Games and an e-mail tools company called Mailpile. Each of them had their funds frozen for a time over the last two months, generating plenty of criticism for PayPal.

In a blog post dated Sept. 11, Tomer Barel, vice president of risk management for PayPal, tried to explain PayPal’s position on the issue and that it is reviewing its policies.

“There are unique regulatory and risk aspects inherent to this new way to raise money from supporters around the world,” Barel wrote. “Because the model is so new, it is potentially open to abuse. PayPal has a responsibility to ensure that the system remains secure, in compliance … and that consumers who contribute to these campaigns understand where their money is going.”

Contacted this week by CrowdFundBeat, a spokeswoman for PayPal said the review is still underway.

Commenters to Barel’s post were not in a charitable mood.

“Perhaps it’s time to get your priorities straight and deal with issues that cause real harm to the community,” wrote one poster. Said another: “The problem … is that you collect tens of thousands of dollars of other people’s money, and THEN decide to just hold onto it. That’s exactly as bad as a completely fraudulent crowdfund.”

But even one of PayPal’s competitors says there are legitimate reasons why PayPal would have concerns. However, Bill Clerico, co-founder and CEO of WePay, said he thinks his company has a better approach to studying certain suspicious transactions and quickly letting the legitimate ones go through.

Payments processors are subject to state, U.S. and international regulations governing such transactions, said Clerico. In addition, these companies are subject to Payment Card Industry (PCI) compliance, an industry group headed by Visa, MasterCard and others.

Clerico understands why PayPal would be suspicious seeing

Bill Clerico, CEO of WePay

a crowdfund site suddenly have its funding skyrocket from zero to $1 million in just a few days and want to put the brakes on.

“Crowdfunding is sort of this new area of payment processing and it’s not really clear how it fits into the existing regulatory framework, and so they are still trying to figure that out,” he said.

Processing systems also have to be on the lookout for fraud, just as the public in general has to be wary of e-mail scams. In the wake of natural disasters like Hurricane Sandy and tragedies like the Boston Marathon bombing, Web scams proliferated online disguised as fundraisers for victims of those calamities. Frauds can exploit crowdfunding sites, too, said Clerico.

WePay offers an open application program interface (API) that crowdfunding platforms can use to set up a simple but secure way of accepting crowdfund payments and verifying their legitimacy. Clerico says WePay has been processing such payments securely for almost two years and that it gets more of its business from crowdfunding than does PayPal. Because a smaller percentage of PayPal’s processing is for crowdfunding sites, it may take it more time to support those payments securely.

WePay is to announce Oct. 21 that it processes $1.5 million in payments per day to crowdfunding platforms such as GoFundMe, CustomMade, Bookfresh and Soldsie.

5 Reasons Why You Should Crowdfund Your Tech Startup

Share on facebookShare on twitterShare on emailShare on pinterest_shareMore Sharing Services 0 Photo by Daily Crowdsource Photo by Daily Crowdsource By Solomon Nabatiyan. Most startup companies usually face a lot of glitches especially in the initial phase of setting up a business. As a startup tech company, you may have a world-changing product and are ready for business to bring it to the world. But if you cannot manage to obtain the funding you need to get up and running, the product is as good as nothing. As an entrepreneur, it is also equally important for you to make people see what makes your idea so special. If you cannot do so, the greatest of ideas and plans can come crashing down. Crowdfunding is a unique solution that has already helped numerous entrepreneurs and their startup companies have access to that all important launch pad for their products. You can truly maximize your chances of success by using a crowdfunding platform for project fundraising, particularly for technology products and services. The following are 5 significant benefits startups enjoy by using crowdfunding services. No Dependence on Banks Applying to a bank for a loan is a tedious process. Getting bank loans for innovative ideas is not all that easy and these days requires a spotless credit history and a lot of convincing. Then there is the hassle of collateral, high rates of interest etc. making it a costly and risky proposition. On the other hand, with crowdfunding, you can always share your idea through large inter-connected networks of relevant supporters and backers such as social media tools. If you present and spread the word about your startup and its product/service well enough, you can be rest assured that the contributions will flow in. At this stage of your project, all of your activity also serves as free marketing and the building of a fundamental support base that you can draw on much later on as your business develops. Free Publicity and Press As if simple and straightforward, no-strings attached funding was not enough, with crowdfunding, you can also reap the benefits of free press. Once your project starts making a name for itself and becomes popular, you can leave it up to bloggers, online papers and other forms of media to publicize your cause on your behalf. While other entrepreneurs can be found scrambling for this kind of publicity, through crowdfunding you will get free access to it in addition to a contribution stream of revenue to help our startup during its leanest times when operations are just getting underway. Validation of Your Idea As an entrepreneur and new startup, it is not just enough for you and your closest circle to appreciate your idea, technology and vision for a product or service. If others, particularly your intended customer base, does not see sense in you or your products, it will ultimately not sell. As a result, every contribution you collect towards your crowdfunding project is like a vote of validation for your idea. Total Control Using crowdfunding to collect contributions from people who support your idea and believe in it is one of the biggest advantages of using this method. This is always a better option than going about the old fashioned way and taking the assistance of investors who over the past few years have become increasingly demanding, short-term oriented, bottom-line driven and uncompassionate to the original founders of a company or inventors behind it. As crowdfunding does not impose you restrictions and never tells you how to run your business or ask you to give up anything in return for the contributions you collect, you can always exercise more control in executing your project and assure a more successful transition from a new startup to established firm. Street Credibility Once you are able to run a successful project on a crowdfunding site, your credibility in the market is bound to rise. This will help you gain extra leverage when going for future funding projects or funding from banks or traditional investors for big-growth spurts. Keep in mind that once you have a number of people who believe in your company and ideas, they will influence others as well and help spread the gospel. A healthy chain reaction of recognition, influence and popularity are all what crowdfunding campaigns can enable. The best way to get started is to browse and chose one of a handful of recently launched crowdfunding platforms devoted to and specialized in technology startup fundraising. They are the key in providing entrepreneurs the power to raise funds specific to their technology projects. source

10 fascinating tech projects that crowdfunding has made possible

10 fascinating tech projects that crowdfunding has made possible