<i>&quot;I have a hobby business in a niche where I&#x27;ve seen a few small entrepreneurs take pre-orders (often 50% down payments), spend the money, go broke, and face a bunch of angry customers. They can&#x27;t deliver product, and they can&#x27;t refund the money.&quot;</i><p>Yes, and then the Federal Trade Commission dumps on you for violating the 30 Day Rule, which covers refunds and delays.[1]<p>In the early days of the Internet, many little companies ran into this. They put up a web site and started taking orders on line.  But in those days, the online ordering system was usually disconnected from inventory control and fulfillment. A successful product could suddenly generate far more paid orders than the seller could fill.  Instead of the seller refunding the money after the 60 day limit like they&#x27;re supposed to, they held onto it, hoping to catch up later. (After 30 days, you have to notify the customer they can get their money back, and refund them if they ask. After 60 days, you have to refund even if the customer doesn&#x27;t ask.)<p>Kickstarter is sort of a gimmick to get around the 30-Day Rule, by explicitly dumping more risk on the buyer.  That doesn&#x27;t always work for the seller.[2]<p>[1] <a href="https:&#x2F;&#x2F;www.ftc.gov&#x2F;tips-advice&#x2F;business-center&#x2F;guidance&#x2F;business-guide-ftcs-mail-internet-or-telephone-order" rel="nofollow">https:&#x2F;&#x2F;www.ftc.gov&#x2F;tips-advice&#x2F;business-center&#x2F;guidance&#x2F;bus...</a>
[2] <a href="http:&#x2F;&#x2F;arstechnica.com&#x2F;tech-policy&#x2F;2015&#x2F;06&#x2F;feds-take-first-action-against-a-failed-kickstarter-with-112k-judgment&#x2F;" rel="nofollow">http:&#x2F;&#x2F;arstechnica.com&#x2F;tech-policy&#x2F;2015&#x2F;06&#x2F;feds-take-first-a...</a>