PayPal recently announced plans to “overhaul” its policies to become more crowdfunding-friendly. This is a welcome move after several startups have had their funds frozen by PayPal after a successful crowdfunding campaign. An example includes the temporary pause in the release of Yatagarasu Attack on Cataclysm’s funds earned during its Indiegogo campaign.
PayPal VP Risk Management Tomer Barel wrote in an update on PayPal’s site that they “will ensure that each crowdfunding campaign is reviewed by a senior member of my team before any action is taken.” While crowdinvesting is not supported at the moment, we’re happy to see companies taking such big strides forward in the crowdfunding space.
How does it currently work?
At the moment, there is a lot of legwork to be done to by the entity seeking funds through PayPal. There is an extensive document for startups and people who are looking to crowdfund available on PayPal’s site. The document outlines how to design and implement a compliant crowdfunding application which will then have to be sent to PayPal for review.
The only kinds of crowdfunding that can be supported by PayPal are limited to fundraising with or without small incentives, the supporting a nonprofit organization, or fundraising in exchange for a compatible value of products or services (such as products that are born out of the Kickstarter model).
To ensure the legal transaction of money, PayPal will review each crowdfunding application to ensure it complies with their best practices and guidelines. We hope that PayPal’s review of its policies will help facilitate the growing entrepreneurial movement that is very much needed across the globe.