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Crowdfunding: Be Wary Of Over-Promising

Horror stories can be funny but companies have a duty to deliver

23Jun

For every major success on a crowdfunding platform, there are just as many high-profile disasters. Kickstarter, for example, has seen major successes - Pebble, who raised over $1 million in an hour in June 2016; Exploding Kittens, a card game that saw a whopping $8.8 million by its campaign closed; and 3Doodler, a 3D printing pen that impressive enough to raise over $2.3 million. Examples of Kickstarter successes are inspiring because they show that a great idea can come to fruition regardless of the financial position of those pursuing it.

The disasters are numerous, though. Aside from all the campaigns that never manage to meet their funding targets, there are a seemingly endless list of those that did but failed to properly deliver on the product. One of the most high profile is Coolest. After pulling in some $13 million to build its multi-functional cooler, the company then repeatedly struggled to actually ship its product to its backers. The consistent delays were made only worse when it put the product up for sale on Amazon before its original shipping commitments had been fulfilled. Creator Ryan Grepper later reportedly told Kickstarter that the Portland company had stopped producing the coolers and was seeking a further $15 million, a third of which would go towards fulfilling the 36,000 outstanding orders from backers.

Another example is the Laser Razor. Manufacturer Skarp managed to raise $4 million for its futuristic razor, before Kickstarted pulled the funding pledge in its entirety because the company had nothing close to resembling a working prototype. It eventually moved to Indiegogo and raised over $442,000, but the eventual prototype could reportedly only cut one or two hairs at a time. The shipment date has been repeatedly pushed back, with backers claiming the company isn’t responsive to requests on updates.

These examples are extreme, but they highlight the inherent risk involved in backing crowdfunding projects - the product may not ever be successfully produced. There are a number of commentators that frequently see design projects that they know will be difficult to follow through with. Part of the problem is a widening audience for crowdfunding campaigns; technophiles and enthusiasts had the expertise to adjudge the validity of a campaign, but the now wider audience includes average consumers who see it as more of a marketplace and are less attuned to the inherent risk involved.

The duty, though, lies with the startup asking for funding and the crowdfunding website itself. The former should ensure that it has a workable product before it begins any crowdfunding campaign, and the latter should actively encourage transparency at every stage in the product’s development. Kickstarter has been the most proactive in this area - potentially misleading photorealistic renderings of products that don’t yet exist are banned. The site also requires that projects show backers a prototype of what they’re making, so that wild promises can be vetted before anyone parts with any cash.

When crowdfunding works, it can be brilliant. Products can get off the ground that may never have seen the light of day, and backers can feel part of the project at large and be directly involved its development. To avoid more high-profile missteps, though, both backers and crowdfunding sites need to be discerning. Startups, too, should be both transparent and confident in their ability to fulfil the promises laid out in their pitches. If not, the incredibly useful craze could fizzle out. 

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