What happens when a project that receives Kickstarter funding fails?
The question voiced above began to interest me when the company for which I work remotely, began not only to make plans, but also to take some real steps to post my own project on Kickstarter. The mood of the leadership is more than optimistic. Having read success stories, the prospect of getting financing "now", and thinking about commitments "later" just stupefies and attracts any entrepreneur. As a person who is more responsible for the technical part of the project, communicating slightly with potential contractors both in our area and in China, in parallel with a deeper understanding of our capabilities and details of the project, my indicator steadily grew one indicator - risks. Of course, I am a “team player”, “focused on the goal” and in time I light up the shine in my eyes and level my back at the right moment, but the fact is that I really like the company in which I work and whose work is interesting enough, so the project’s perspective, which can kill a business in which I, even a small cog, work comfortably does not please me. Initially, some remarks, and then more and more persistent focusing on potential risks still had an effect on the management (maybe because of its adequacy I like the place of work?) And turning my face to the problem, it was decided to find out what would happen if, after receiving financing company is not able to fulfill its obligations to sponsors?
And such cases have already been.
Eyez by ZionEyez HD Video Recording Glasses for Facebook is a project of glasses that can shoot a video of what the user sees (like a sensational Google Glass) and upload the captured video to Facebook. The project collected $ 343,415 (which amounted to 624% of the requested amount of $ 55,000). Each of 2,059 sponsors, who donated more than $ 150, was to receive a copy of the device in the “winter of 2011”. The year is already 2013, and nobody has seen the promised devices so far. Moreover, since April 2012, when the development team made the last announcement that it would take another 12 weeks to develop and test the glasses and another 12 or 16 weeks to produce the first batch, all activity on the part of the developers ceased. They stopped making updates on the project page, responded to emails - just disappeared.
Some of the disgruntled sponsors even called on to get together and "hire a killer to find Joe Taylor (Joe Taylor - founder) and his friend and hammer him to the level of the plinth."
The position of Kickstarter was very clear: the company does not provide compensation for failed projects and “only the community itself can put pressure on the project’s founders who have gone AWOL.” Some sponsors individually try to get compensation from their own banks, justifying this by the need to cancel the transfer of money to the account of ZionEyez, but so far no success has been heard.
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Another example of Hanfree iPad Accessory is the design of a convenient stand for the iPad. The founders of the project Seth Quest and its partner Juan Cespedes received $ 35,004 from 440 people with the goal of collecting $ 15,000 (233%). The founder of the project Seth Quest was a professional product designer, but he had no experience in founding a company and had never been involved in the production of anything material. The project began to stall and on November 28, 2011 the project founder officially acknowledged that the project failed and promised to return the money to sponsors within a week. Neither a week, nor later, the sponsors did not receive the money. Unfortunately for the project founder, one of the sponsors (Neil Singh) turned out to be a lawyer. His contribution was only $ 70, but the current situation with the failed project hurt him deeply, and having a goal and the possibility of its implementation, he filed a lawsuit against the founder of the project. Since Seth Quest did not have time to set up a company for the Hanfree project, he was personally responsible for the debts of the project. The desire to return the money to the sponsors was impossible to realize, since they were already spent on engineers, contracts with manufacturers and other goals. The trial declared Seth Quest bankrupt. He had to move to Brooklyn and get a job "not related to industrial design," due to tarnished reputation. To combat neurasthenia and hypertension, which he managed to earn during the litigation, he took up yoga and enrolled in a gym.
This case is the result of stupidity rather than malice, which the founder of the project admitted. At the same time, it was the first and illustrative lawsuit against a failed project on Kickstarter, which caused a lot of noise in the USA and made the service itself add an additional section mandatory for each project, stipulating the risks of the project and relieving Kickstarter of such failures. There were also rewritten and added to the manual for the design of technical projects and tightened the rules for the selection of technical projects before they start.
The Flint and Tinder: Premium Men's Underwear project raised $ 291,493 with the goal of raising only $ 30,000 (971%). For a casual observer, this looked like a resounding success, but for the founder of the Jake Bronstein project, the process of production and logistics turned into a complete nightmare. The producers with whom he worked said that they could not withstand the deadlines set with such a number of new “customers”. It was possible to deliver the promised clothes only three months later, and only thanks to the attraction of $ 1 million in venture capital.
The Kickstarter management is well aware of the problems listed above and by all means distances itself from any responsibility in the event of the failure of the projects. Carefully reading the Kickstarter work environment, it is easy to see how the company directly builds relations directly between sponsors and project founders in order to protect themselves from any legal consequences if the launched projects fail to provide the promised rewards:
At the same time, Kickstarter receives 5% from any project launched, regardless of whether or not the sponsors specified in the project will or will not be received. According to the Kickstarter rules, the inability to provide the promised reward or refund "may harm your reputation or even legal prosecution by the sponsors."
I would like to note that the above examples are not a reason to lose heart and give up intentions. This is just a sobering look at the possibilities and features of the financing model, now called “crowdfunding”. Kickstarter is not a store, and this needs to be understood both by the project founders and those who invest in their support. The model itself is based solely on trust and it looks like only a high entry threshold and the efforts to moderate projects by Kickstarter personnel are a barrier against the widespread fraud on the basis of this platform, but the relationship model itself does not contain “fuses” either from fraud or from losses project founders or sponsors. Crowdfunding is not an Eldorado, but one of the alternatives to receive funding, to which it is worthwhile to either carefully consider your strength and potential risks, or rush into the pool with your head if you are a player.
Ordinary fraud
And such cases have already been.
Eyez by ZionEyez HD Video Recording Glasses for Facebook is a project of glasses that can shoot a video of what the user sees (like a sensational Google Glass) and upload the captured video to Facebook. The project collected $ 343,415 (which amounted to 624% of the requested amount of $ 55,000). Each of 2,059 sponsors, who donated more than $ 150, was to receive a copy of the device in the “winter of 2011”. The year is already 2013, and nobody has seen the promised devices so far. Moreover, since April 2012, when the development team made the last announcement that it would take another 12 weeks to develop and test the glasses and another 12 or 16 weeks to produce the first batch, all activity on the part of the developers ceased. They stopped making updates on the project page, responded to emails - just disappeared.
Some of the disgruntled sponsors even called on to get together and "hire a killer to find Joe Taylor (Joe Taylor - founder) and his friend and hammer him to the level of the plinth."
The position of Kickstarter was very clear: the company does not provide compensation for failed projects and “only the community itself can put pressure on the project’s founders who have gone AWOL.” Some sponsors individually try to get compensation from their own banks, justifying this by the need to cancel the transfer of money to the account of ZionEyez, but so far no success has been heard.
')
More than just nonsense
Another example of Hanfree iPad Accessory is the design of a convenient stand for the iPad. The founders of the project Seth Quest and its partner Juan Cespedes received $ 35,004 from 440 people with the goal of collecting $ 15,000 (233%). The founder of the project Seth Quest was a professional product designer, but he had no experience in founding a company and had never been involved in the production of anything material. The project began to stall and on November 28, 2011 the project founder officially acknowledged that the project failed and promised to return the money to sponsors within a week. Neither a week, nor later, the sponsors did not receive the money. Unfortunately for the project founder, one of the sponsors (Neil Singh) turned out to be a lawyer. His contribution was only $ 70, but the current situation with the failed project hurt him deeply, and having a goal and the possibility of its implementation, he filed a lawsuit against the founder of the project. Since Seth Quest did not have time to set up a company for the Hanfree project, he was personally responsible for the debts of the project. The desire to return the money to the sponsors was impossible to realize, since they were already spent on engineers, contracts with manufacturers and other goals. The trial declared Seth Quest bankrupt. He had to move to Brooklyn and get a job "not related to industrial design," due to tarnished reputation. To combat neurasthenia and hypertension, which he managed to earn during the litigation, he took up yoga and enrolled in a gym.
This case is the result of stupidity rather than malice, which the founder of the project admitted. At the same time, it was the first and illustrative lawsuit against a failed project on Kickstarter, which caused a lot of noise in the USA and made the service itself add an additional section mandatory for each project, stipulating the risks of the project and relieving Kickstarter of such failures. There were also rewritten and added to the manual for the design of technical projects and tightened the rules for the selection of technical projects before they start.
Big money - big problems
The Flint and Tinder: Premium Men's Underwear project raised $ 291,493 with the goal of raising only $ 30,000 (971%). For a casual observer, this looked like a resounding success, but for the founder of the Jake Bronstein project, the process of production and logistics turned into a complete nightmare. The producers with whom he worked said that they could not withstand the deadlines set with such a number of new “customers”. It was possible to deliver the promised clothes only three months later, and only thanks to the attraction of $ 1 million in venture capital.
Kickstarter aside
The Kickstarter management is well aware of the problems listed above and by all means distances itself from any responsibility in the event of the failure of the projects. Carefully reading the Kickstarter work environment, it is easy to see how the company directly builds relations directly between sponsors and project founders in order to protect themselves from any legal consequences if the launched projects fail to provide the promised rewards:
" Kickstarter, , , . , , , . Kickstarter . ."At the same time, Kickstarter receives 5% from any project launched, regardless of whether or not the sponsors specified in the project will or will not be received. According to the Kickstarter rules, the inability to provide the promised reward or refund "may harm your reputation or even legal prosecution by the sponsors."
I would like to note that the above examples are not a reason to lose heart and give up intentions. This is just a sobering look at the possibilities and features of the financing model, now called “crowdfunding”. Kickstarter is not a store, and this needs to be understood both by the project founders and those who invest in their support. The model itself is based solely on trust and it looks like only a high entry threshold and the efforts to moderate projects by Kickstarter personnel are a barrier against the widespread fraud on the basis of this platform, but the relationship model itself does not contain “fuses” either from fraud or from losses project founders or sponsors. Crowdfunding is not an Eldorado, but one of the alternatives to receive funding, to which it is worthwhile to either carefully consider your strength and potential risks, or rush into the pool with your head if you are a player.
Source: https://habr.com/ru/post/179227/
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