People usually refer to crowdfunding projects as “campaigns”, and they do so for a good reason. They require meticulous planning, rational resource allocation, consistent execution, and the awareness that even the best-laid plans may not live to realise initial contact with customers.
Indeed, there are many successful crowdfunding campaigns that you have heard of, but there are also many that have failed.
Some of the characteristics of unsuccessful ventures include:
Lack of research and planning:
Some companies rush to get funding with a prototype that has not yet been tested or validated by the market, leading to delayed releases, excess spending on R&D, and even complete failure of the business. While throwing an MVP (Minimum Viable Product) on the market is a viable strategy that is the cornerstone of a Lean Start-Up, thought and planning are still the essential prerequisites for success.
This is an absolute killer as you will see in the campaigns mentioned below. Startups that burn through their funding too fast tend to collapse. You cannot be in charge and in control of your business if you cannot account for every coin.
Poor leadership and incompetence:
When people are looking for a reason why a well funded project failed, they usually turn to the leadership and their competence. You need the right team to get your product ready in time. Teams where the founders are skilled in the industry of their creation tend to be better leaders, because they know exactly what is needed. Many teams do also fail when trust issues arise which is especially true, when a company is started by a group of friends.
Here are some well-funded crowdfunding campaigns that failed to deliver on their promises for one or more of the reasons mentioned above:
The Ouya is a product that led to some incredible, though niche, applications, and became a great representation of the versatility of Android – can run on anything.
Ouya is an Android-based micro-console whose pre-lease announcement was made on July 3rd, 2012, and its Kickstarter campaign launch on July 10, just after Google revealed its Nexus 7 2012 tablet. Many of its specifications were similar to those of Google’s latest device, which helped to create a lot of buzz in the Android community.
The developers also promised to make the device “hacker friendly” so users could tinker the hardware without voiding the warranty.
Intrigued by the idea of a device that could bridge mobile and console-style gaming, backers helped to raise the requested amount within 8 hours, and by the end of the campaign on August 9th, it had raised nearly $8.6 million – $7.7 million more than the target and a record-breaking project on Kickstarter.
By October 2012, there were announcements of production of the physical hardware and release of the SDK, which made backers hopeful of an early release, but this is when the problems started. The shipping of developer units started in late December, those of backers started in Late March, and public sales started three months later.
By then, there were numerous complaints on the internet about shipping errors, delays on the units, and some backers had not even received their devices until they went on-sale. The pre-release units sent to the tech press received terrible reviews. Nearly everyone complained of problems with the wireless controller, buttons getting stuck underneath the plating, and even input lag that made it impossible to play.
Numerous system updates made the software better, but hardware revisions were also needed, plus the user-interface remains unorganised and confusing to this day. Three years later, the gaming company with failed leadership, led by inexperienced executives and an equally incompetent marketing team, is in serious debt and desperately looking for a buyout. Luckily for them, Alibaba came to the rescue with a much needed $10m infusion.
2. Kreyos Meteor Smartwatch
When Kreyos started their campaign in July 2013, they did not expect to raise $1.4 million more than their original target. Still, they set to work creating their well-funded and purportedly unique product – a smartwatch with voice and gesture control.
The product was going to sell at $100 for early backers and $140 for regular consumers, which was quite a bargain considering that the advertised product featured flawless voice control, water-resistance up to 5 feet, fitness tracking, seven-day battery life, and compatibility with Android, iOS, and Windows devices.
The company promised to send early backers their watches by November 2013 – only three months after completion of the campaign. However, this did not happen, causing the backers to get suspicious. But they should have been suspicious from the very start, considering the red flags that were so apparent from the onset of the campaign: unrealistic promises, an absurdly low budget, and an unbelievably low price tag.
According to the campaign posted on Indiegogo, the raised funds would be used to make the Meteor mode advanced; plus the units illustrated in the video were allegedly injection-molded items – not actual prototypes.
So, the Kreyos team promised to release their first batch of 5,000 finished smartwatches in November 2013 (only 5 months after launching the campaign).
One year later, July 2014, Kreyos started shipping their watches to backers, who were extremely disappointed with the product. The smartwatch did not deliver on any of its promises: the watch could not survive a quick shower let alone a shallow immersion; the in-built pedometer was completely inaccurate because the vibrate functions kept activating; the battery life was at best 24 hours; none of the promised features works – sleep tracking, gesture control, or the gamification platform; and the device did not even have a touchscreen for gesture support.
But perhaps the most frustrating detail is that the piece couldn’t keep time! The company also changed their refund policy to retroactively disqualify backers from refunds.
3. Smarty Ring
The designers behind the Smarty ring started their first campaign on Indiegogo in December 2013 without a working prototype. However, the Indian startup created a demo video and promo images using computer-generated visuals promising to deliver a highly unique product to early buyers in April 2014, which never happened. The company started another campaign for $500 in March 2014 that raised $101,476.
During the fundraising, the Indian team claimed that it had spent eight months conducting “technical research” and had “finalised the feasible prototype model” that “corresponded” with the visuals given to backers and investors on the crowdfunding platform. The idea was based on the view that smartphone owners would rather get their notifications from their finger rather than keep checking their smartphones.
So, the Smarty ring was to feature Bluetooth 4.0 connectivity to your Android or iOS smartphone, allowing you to answer calls and control music playback on your phone. It would also come with a digital clock with five time zones, a countdown timer, a stopwatch, 24-hour battery life, and ability to track your phone.
It is possible that the initial alleged prototype was completely unworkable, or the team deliberately misled their backers.
One year since the launch of the campaign, the startup company is still struggling to put together a working prototype, let alone start manufacturing or shipping. Their last update was in
December 2014, promising backers that they would still get their smarty rings, but it is becoming apparent that this was a scam.
Yogventures is a rather ambitious video game campaign that was launched on Kickstarter in April 2012 by a group of YouTubers calling themselves Yogscast. They managed to get more than double their target amount, and set out to create what they considered to be “the game you’ve always wanted”. Two years later, in July 2014, the developers announced that they had canceled the game because they had run out of money, and that backers would not be getting their money back. So, what happened?
For starters, the group (Yogcast) comprises popular personalities that regularly make and upload videos on YouTube about games like World of Warcraft and Minecraft. In fact, the group has over 7 million subscribers on YouTube alone, and they have evolved over the years to form a genuine organisation with their own store, forums, and podcast that their fans find entertaining. Indeed, they seem organised; but just before the launch of their campaign on Kickstarter, things did not seem quite okay.
On their campaign page, they made it apparent that they did not know how to code, and would be relying on their close friends at Winterkewl to design the “open world sandbox game”, and still managed to raise over half a million with over 13,000 backers.
There were many red flags with this project:
- first this was going to be Winterkewl’s first game to code;
- second the group made many ambitious promises without careful research on their viability, including customisable characters, an in-game physics engine, a crafting system, randomly-generated game worlds, etc.
- they also claimed that users would recommend the features that they’d like in the game, and get it ready by December 2012.
They missed the release date, and announced in March 2013 that they had entered alpha. By August of 2013, they were talking about serious financial problems, claiming that they had exhausted their fund in R&D by December 2012, and were currently funding the project out-of-pocket with daytime jobs and only working during their free time.
It seemed convincing, considering that they entered open beta for their backers on August 2013.
Those who weren’t backers had to pay $30 for access. Players sent their feedback to the developers, and the game was regularly updated until early 2014 when Winterkewl went silent.
Winterkewl founder, Kris Vale, later announced in July that he had shut down his company, and had handed over all development work to Yogscast. A few weeks later, Yogscast informed their backers that the game had been cancelled, and promised to send out codes for a different game called TUG – developed by some of their friends.
5. myIDkey – Passwords at the tip of your finger
The Kickstarter campaign for the password manager dongle, myIDkey, was launched in February 2013 by a company called Arkami. The gadget was essentially a USB drive with a fingerprint reader and built-in display that would automatically fill login and password details when attached to a computer.
By the end of the campaign in March, Arkami had received triple their target amount from backers. The prototype for myIDkey won awards at the 2013 Consumer Electronics Show, received extensive coverage from nearly every major tech news outlet, and managed to attract an additional $3 million in startup funding during later investment rounds.
As per Kickstarter’s rules, there was a functional myIDkey prototype before the campaign launch. On their campaign’s page, the creators claimed that all the “Designs” were complete, patents files, suppliers for the different components identified, the fabrication process defined, and the contract manufacturer (CM) chosen, so they would be able to start shipping in September 2013 if they managed to raise their funds.
More than one year later, only a small number of the device had been shipped, and most of those who received complained about freezing displays and failing buttons. Ultimately, a whole $3.5 million had been spent with little to show for it, making myIDkeys one the top case studies for mismanagement.
After they ran out of funding, Arkami restructured their management team and started to revise their prototype – adding features, like a scroll function for the fingerprint reader. They also changed their production manufacturers and component suppliers multiple times, though there was no noticeable change in functionality of myIDkey; it was still as faulty and as “buggy” as described by one reporter from the OC Register newspaper.
Ultimately, the company announced that they would be stopping many of their business functions, including manufacturing, sales, and marketing to focus on RMAs, iterating new firmware builds, and fixing issues, in order to come up with a flawless product. That was in May 22nd, 2014.
. Final Note
Many startups fail for different reasons with poor leadership, incompetence, and financial mismanagement being the key factors that lead to failure. Some entrepreneurs also don’t factor in a salary when raising money, or pay themselves a huge sum of the money, leading to time constraints when you have to keep your day job or less funds, respectively.
When planning a campaign, surround yourself with experts, and think through the entire process from end to end, and all the associated costs that go along with it, to ensure your deliverables are true. Or risk ending up like as a case study on our list.