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© evertiq General | November 24, 2015

Crowdfunding – a potential money trap

Kickstarter and similar sites have given inventors and dreamers a platform to reach out to the end users with their (not yet finished) products.
Cool gadgets and ideas that might have stayed buried in the attic or cellar get a chance to reach a wider (global) audience. And with a bit of luck – and a sound business sense – one might be able to turn dream into reality.

However, as great as the concept of crowdfunding sounds, it is grappling with inherent problems. Kickstarter and other growdfunding platforms seem to have 'disasters' on their hands; more often than it maybe should.


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A great idea

Let's look at a few recent Kickstarter projects that – after a fantastic start – frizzled out, where cancelled or thrown off the platform (suspended).

British nano drone Zano declared bankruptcy less than a year after it raised GBP 2.3m in funding. Coolest Cooler had to turn to Amazon to sell stock in an effort to raise enough money to continue production of its units it had promised its backers. And then we have The Skarp Laser Razor which was suspended at Kickstarter, just to pop up at IndieGogo a short while later.

In January 2015, Zano was a success story. The company managed to raise millions on Kickstarter for a device that could be controlled from mobile phones – just like many other drones. However, the drone could supposedly also follow a specific smartphone. Unsurprisingly – and with a tagline “ Taking your selfies to new heights” – it was targeted to a specific audience.

Trouble started soon after the campaign ended. The release was rescheduled month after month and – when products finally shipped to backers – reports on widespread technical errors started popping up. Several media reports suggest that only 600 of the 15'000 ordered drones were actually shipped. On November 18, 2015, Torquing Group Ltd – the company behind Zano – issued a statements to all backers that they had decided to file for voluntary liquidation.

The Coolest Cooler has been more successful. Or rather the 'MacGyver-Gadget' – the LED back-lighted beer cooler with built in bluetooth speaker, iPhone dock, ice-crushing blender, USB charger, bottle opener, cutting board, plates, a knife and corkscrew – works and has already been shipped to backers. At least some of them. The rest are slightly miffed, because a non-backer can now purchase a Cooles Cooler on Amazon.

In other words, the people who provided the capital to enter production will now be among the last to actually receive one. The cooler’s initial shipping date was February 2015, but the first units actually left for new homes only in July 2015. While the company has shipped to many of its backers, the backlog seems to be huge.

Skarp is an altogether different story. A brilliant idea. Viral appeal. Millions of dollars. Controversy. 'Shave with this laser, and you'll never need to buy blades again', the company promises. At the same time, technical details are kept very vague. We are talking laser razor (coming close to hover-boards and jetpacks), but as for now the Skarp Laser Razor – as pitched on Kickstarter (and later on IndieGogo) – does not exist.

It has raised scrutiny from Reddit, where most are of the opinion that it is a scam. However, it raised USD 4m on Kickstarter before the platform pulled the plug on it. Shortly after, the project appeared on competitor IndieGogo's site, where it was able to raise USD 433'480.

The end

All three companies illustrate the continuing risks with investing money into projects on Kickstarter and similar platforms. With an increasing number of very professionally-run campaigns (that do succeed thanks to crowdfunding), it can also offer the perfect recipe for disaster. Just like in real life.

The difference? Shopping affords the possibility of complaint and refund/replacement. Backing is more like, sitting comfortably and hoping for the best (or as a minimum hoping for something that resembles the product that you backed).

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