Asurvest thinks it has found a way to protect people from the murky dangers of crowdfunding

By James Robinson , written on April 25, 2014

From The News Desk

The concept of crowdfunding insurance seems partly ridiculous. My first thought upon hearing about it, was the old Family Guy episode where a salesman tricks Peter Griffin into buying volcano insurance. Just do your research and don’t move next to an active volcano (or back shady crowdfunding campaigns), right?

But what say if the 4,469 supporters of the Healbe GoBe on Indiegogo weren’t just throwing a million dollars of good money after a bad idea? What if there was a way for them to insure themselves?

Luke Cooper, a former lawyer and investment banker thinks the time is now, which is why he found Baltimore-based Asurvest. Cooper is deadly serious about this idea. The company is now a year old and has captured over 10,000 data points from transactions across equity and reward-based crowd funding campaigns, as well as person-to-person lending services. Using traditional actuarial science, Cooper believes Asurves has built a risk engine that can assess the chance of you getting taken for a ride next time you're on Kickstarter.

“We’ve come up with lots of non-traditional insurance loading metrics,” Cooper says. “We’ve found some really interesting correlations.” He doesn’t want to give all of Asurvest’s secrets away, but shares a few examples. For startups, everything from the ratio of male-to-female founders to social media influence can apparently predict success. In crowdfunding campaigns, the proximity of the company itself to where the product is being manufactured can also be a tell-tale sign of something shipping, he says.

Asurvest will allow consumers to buy insurance at the moment they support a campaign. It is already in a pilot program with one major crowdfunding site and is set to announce its first batch official of partners early next month. Cooper wants Asurvest to be as nontraditional and flexible in the terms it offers as many of the crowdfunding platforms that it backstops. People won’t be locked in to insurance well past the point where they are confident their product is about to arrive.

“Insurance companies tend to select a lot of the various terms and then push them on to customers," Cooper says. "We want the consumer to dictate the terms. They want to pay monthly? For nine months? 12 months? We’ll give them those. Asurvest will make a simple, binary assessment of success and failure based on the time lapsed since contribution, versus promises made.

Cooper wants this to be the gold standard for all crowdfunding platforms. He says that crowdfunding solutions offer a new and more democratic way for “average incomers” to invest and grow their wealth.  The appeal of this service is that  it offers “a user-defined suite of financial services,” he says. In crowdfunding, the investor is in charge.

But for all of the talk about finance being democratized, the rampant opportunities for fraud make people much less willing to contribute to crowdfunding campaigns. Asurvest interviewed several hundred people in person and sent out 10,000 surveys prior to launching its service. Naturally, fraud was seemingly all these respondents talked about when asked their concerns with crowdfunding.

“Someone like Ashton Kutcher can invest all day long and not wonder how that $100,000 will affect him, but that’s just not true for the average investor putting $2,000-$3,000 in online,” Cooper says.

My primary beef with the idea, which I put to Cooper, is that by offering insurance to people to protect them against fraudulent crowdfunding campaigns you might be guilty of taking the onus off the platforms themselves to be vigilant against fraudsters. No wonder all of the sites had responded so well to the idea. If they offer Asurvest, they’re freed up from having angry people yell at them that they got ripped off on their website.

“I see parallels between the nascency of crowdfunding and the mobile cellphone market in the mid-1990s, when companies like Asurion found a huge market offering insurance on phones,” Cooper says.

The  problem with this way of thinking is an iPhone can slip and crack at a moment's notice and you never know when you're about to get mugged. Consumers should be able to make a fair assessment of a crowdfunding campaign's validity with a bit of due diligence.

Not that Cooper is arguing that crowdfunding sites should be free to beg off responsibility -- like Indiegogo tried ad nauseam -- by claiming that they’re an impartial platform.

“Those kind of relationships that involve money and someone’s participation, you owe it to them that the transaction is maintained with the utmost integrity, you’re responsible for the integrity,” he says. Perhaps Asurvest can help them hold the line, without holding it for them.

Cooper aims for Asurvest to release its commercial product in around six months, once it clears the regulatory hurdles associated with offering a financial service. When that happens, he hopes it will encourage people to participate in the crowdfunding economy without fear.

First stop, however, might be convincing people that crowd funding is something they should be afraid of to begin with.

[illustration by Brad Jonas for Pando]