So why do they actually do business with IndieGoGo? I would expect the vast majority of IGG campaigns not to be able to deliver within 20 business days. Since the users of IGG obviously intend to use the money to fund a lengthy process of building a product that sort of invalidates the use-case.

Presumably they've done the kind of review of IndieGoGo's business that they stated they'd like to do of Mailpile and found that IndieGoGo has their risk spread broadly enough (and has a cash buffer large enough) to underwrite the risk of a particular project going down.

As far as I understood the paypal payments came in as part of the IGG campaign, not separate from it. So the Ubuntu Phone campaing would face the same problem. As would face any other IGG campaign. I seriously don't understand the rationale behind that:

a) either Paypal/IGG can afford the risk

or

b) issues like this will crop up again and again and again, leaving frustrated businesses and a bad impression behind, regardless of who's technically to blame.

or c) I'm missing some point here.

The other thing I'm desperately trying to understand is why PayPal claims that the refund risk is high. Almost all benefits given by the IGG campaign are intangible or of neglectable value compared to the funding you give. The first tangible item starts at the 67USD tier (a postcard from iceland [!]). Later items include a T-Shirt for 256 USD and some overpriced USB-sticks. If someone at PP actually read through the descriptions, it would be pretty obvious that any backer was aware of what he's doing.

From the article:

"PayPal's position particularly ridiculous when contrasted with IndieGoGo's policy of transferring all funds to successful campaigns within 15 days of their conclusion. If IndieGoGo can do it, so can PayPal."

This seems to me to imply that the PayPal fundraising was done in parallel to IndieGoGo.

From the IGG campaing update:

"The bad news is, PayPal have frozen our PayPal account. This means roughly $45,000 of the $135,000 we have raised so far are in a state of limbo and we don't know when we will get access to the money"

And the campaign is currently at 137.000 USD. IGG offers PayPal as payment method along with CC payment and from what I've gathered those funds are handled via PayPal. AFAIK the funds at kickstarter are split in a similar fashion depending on the payment provider.

Ok, that seems to indicate otherwise. I'm just confused over how IndieGoGo's 15 day policy applies if the PayPal funds are sent directly to Mailpile.

It's pretty clearly laid out here http://support.indiegogo.com/entries/20501826-when-to-expect...

The gist is: For flexible funding campaigns the amount given via PayPal are transferred directly to the campaigns PP account (minus the fees obviously). For fixed funding campaigns the given amount is transferred after the campaign meets the funding goal. Money given via direct Credit Card payment will be cashed out after the campaign reaches its deadline and should arrive within 15 business days.

Mailpile is a flexible funding campaign, so the first rule applies and funds are directly placed in their PP account.

Because IndieGoGo is a single actor willing to absorb a good deal of the risk itself.

I don't get your point. PayPal works as a payment provider for IGG campaigns. If IGG is willing to absorb the risk, then PayPal, as their payment provider should as well. Or, if PayPal is not willing to follow through and act as payment provider for high-risk crowdfundings, then PayPal should not be payment provider for IGG campaigns. But the middle way, first offering payment through PP and then not cashing out the money just doesn't work in my eyes.

You're presuming IGG and PP have the same risk calculation. IGG might be more willing to take on risk than PP.

Then why does PP work as Payment Provider for IGG if they are so risk-averse?

Because PayPal has enough evidence that they will have resources to pull from IndieGoGo in case things go bad? IGG's risk to PP is much lower than MailPile's.

I'm in full agreement with your demonstration, however, as to the case at hand, it appears to me that it's not really the point : the fact is that it should not be qualified as a "presale" and Paypal here is not a trade intermediary but a postman. If that's not the case, Paypal needs to explain how "crowdfunding", which depending on the viewpoint could be characterized either as a capital investment or as a donation and therefore in any case NOT a commercial transaction, intersects "presale" which definitely is a commercial transaction...