The Inherent Dangers of the Crowdfunding Casino

The Inherent Dangers of the Crowdfunding Casino

I’ve been a fan of Kickstarter (and Indiegogo) for quite some time. I’ve backed some bigger project — as well as some smaller ones — and I’ve been generally happy overall. Like many that use crowdfunding, I understand the risks that come along with it — the promises that may be broken, the chance that I’ll lose whatever money I put forward, that I may not ever receive the product I’m backing — and that’s okay. Yet there are people out there that still get upset when things go south or a campaign isn’t completed as promised and they lose their money. The general nature of crowdfunding includes this risk right off the bat (it’s literally written into the sites) so failing to see that you could lose what you put in is totally missing the point of the entire process.

Is crowdfunding for everyone?
The main question is if crowdfunding for everyone

The worst thing that could happen is that the goal is not met, the project fails and you get your money back!

No, of course not. But if you’re among the many early-adopters of the world, it’s pretty much tailor-made for you. Much like the hundreds of thousands that wait in line at the Apple store on launch day, crowdfunding backers can get in on the latest and greatest without ever having to leave the house — but also not without risk.

I’m not getting on a pedestal here and telling people to stay clear of these types of things. They’re not scams (99% of them at least). Actually quite the contrary. If you see something amazing that you want to be a part of, then absolutely throw your money in the hat and cross your fingers. Most times the worst thing that could happen is that the goal isn’t met, the project fails and you get your money back. In those extreme cases, the project will be funded, but something (or many things) will happen and you’ll never see that product — or whatever money you put in to start. But those are few and far between.

There are inherent risks that come with the crowdfunding game, and even if you’ve been at the game for a while with great success, there’s always that chance that you’ll back a dud. In case you haven’t had the pleasure of backing a busted project — we’ll lay it out for you in a bit more detail.

Know What You’re Getting Into

Know the risks of crowdfunding
I’ve been fortunate enough to get in early on some great projects over the years which were fully funded and delivered more or less as promised. I’ve only had a few unfortunate ones that were delayed by a few months, one in which I never received the product but did get a refund, and just one that totally flopped, took my money and never delivered. But still, I get the risks that come along with pledging my money to some unknown product in hopes that I’ll be one of the first to get a cool new toy to play with. It’s almost like gambling in a sense, where you put down money in hopes of getting something even more awesome in return.

Pledging a sweet new cooler or an electronic watch, then waiting months or more to see it at your door. The feeling is pretty great in the end when the final product gets to you and works as described. But it’s equally not so great if the product suffers delays or worse, doesn’t come to fruition at all.

Kickstarter crowdfunding

Kickstarter helps creators find the resources and support they need to make their ideas a reality

I go on Kickstarter about once a week to look for new and cool projects to back, and I usually go for a least one or two a month providing they won’t make me broke. I’ve been fortunate so far to not lose too much money with my addiction, and I sure hope it continues that way. I’ll pledge a cool board game or a multi-tool or even a “revolutionary” coffee mug without too much hesitation. Something like the Pebble was a no-brainer for me as well (more on that later) and same goes for the Kreyos — a product that was amazing on various levels but was the one that let me down the most.

Pebble Brings Kickstarter Mainstream
first true smartwatch to do smartwatch things really well

Pebble buzzed all over the internet and brought Kickstarter to the mainstream

I’d say the original Pebble was my first “big” campaign. It was buzzed all over the internet and at the time, was the first true smartwatch to do smartwatch things really well. It seemed like an eternity after submitting that initial pledge, but I followed along step-by-step through the whole process. There were delays and updates — even a worry period where I thought I may never actually receive my Pebble — but sure enough, the waiting paid off and I never looked back. I received my Pebble, instantly became a fan and was hooked not only on smartwatches but of Kickstarter as well.

This led to Pebble’s next endeavor, the Pebble Time, of which I was also a happy Kickstarter backer. I can’t say I totally agree with the route Pebble took in going back to Kickstarter for their second-generation device (that’s another article altogether) but I will say that I’m happy with the end result, and absolutely loved my Pebble Time.

Pebble Time 2 was never released

While Pebble gave me some of my best Kickstarter, they also gave me some of the worst. Only a few months back, Pebble launched their third campaign for their latest smartwatches — the Pebble 2 and Pebble Time 2. A slight variation of the Pebble Time, the new model’s improved in numbers areas and was sure to be better than the last. Backing this project on day one was a no-brainer for me. The first campaign was record-breaking, the second went smoothly, so how could this be any different, right? WRONG.

Pebble 2 is the slight variation of Pebble

Pebble launched their third campaign for their latest smartwatches-the Pebble 2 and Pebble Time 2.

I backed the project and followed the updates, but things weren’t progressing as they should have been. Updates were slow, dates came and went, and the Pebble Time 2 (which I had backed) wasn’t anywhere in sight. It was then that the news dropped that the supreme fitness tracker company Fitbit had purchased Pebble the company. That meant the project was canned, the Pebble Time 2 was canned, and I was left with extreme disappointment.

Pebble had managed to get their initial run of the Pebble 2 out the door, but the Pebble Time 2 didn’t make the cut. That meant they were left with a plethora of angry backers who wouldn’t be receiving their watches. This normally would have caused a crazy outrage and backlash, but thankfully Pebble agreed to refund backers who had not received their product. This case isn’t the norm though. Companies in this space are under no obligations to refund your money should a project go in the tank. In this case, Pebble just fessed up, did the right thing and (mostly) set things right for Pebble fans.

Meteor Crash

One such project that didn’t have a happy ending though was another prospective smartwatch — the Kreyos Meteor. Kreyos had an Indiegogo campaign for the Meteor, which at the time was billed as “the only smartwatch with voice and gesture control.” The Meteor could be had for as little at $100 for early-adopters, which was awesome. That’s the tier I jumped in on. The folks at Kreyos compared the Meteor to the Pebble and noted all of the cool things it had like gesture and voice control, a built-in activity tracker, and all kinds of fun accessories. Kreyos dumped a ton into marketing efforts and actually did a really good job. Heck, they even had a booth at CES and showed off live, working versions of the Meteor. There were no red flags whatsoever.

It wasn’t long before things went downhill though. Updates came — albeit slowly — noting setbacks and delays. Eventually, some Meteor units did go out to backers, but they barely worked. Some couldn’t connect or function, others just didn’t power up at all. It was a mess. Unfortunately, my unit didn’t show up at all, so I was out my $100 and heartbroken that a piece of awesome tech I had wanted for months would never find its way to me.

Kreoyos Founder Apologised For Not Delivering

It wasn’t until Kreyos founder, Steve Tan, dropped a huge post on Facebook that everyone knew things were really over. Tan started off by saying:

“I want to offer my sincerest apologies to all the backers and customers who pledged for or pre-ordered the Kreyos Meteor. I am fully aware that the final product didn’t end up being the product we envisioned and ultimately detailed on our Indiegogo campaign.”

Tan went on and on about basically the entire history of Kreyos up until this point, and then ended saying that operations were shutting down and that was that. The $1.5 million that Kreyos had raised was gone, and so were all signs of the Meteor. Backers were out money and that was that. End of story.

This was the point when I became skeptical of crowdfunding. I’m glad to say that so far I’ve only been burned by one project thus far though. Was it a bummer? Sure. But like I said, that’s the risk you take. I was pissed, much like other backers, but I also get that that’s how it goes sometimes, and I’m okay with it.

The Crowdfunding Casino

That’s the nature of the beast when it comes to the crowdfunding game. It’s really just like walking into a casino, cash in hand, and throwing it down on the blackjack table in hopes of walking away with even more money. You know what you’re going in with, you know what you want the outcome to be, and you certainly know the risk associated with the practice. This is the nearly the exact science of crowdfunding. There’s someone out there that willingly takes your money with a promise of returning something awesome to you in the form of a product or service. You don’t know for sure that this idea will become a reality, but you put your confidence (and your money) in the campaign, knowing well the risk beforehand.

 There’s someone out there that willingly takes your money with a promise of returning something awesome to you in the form of a product or service.

Crowdfunding gives creators the opportunity to fund their dreams and visions when they normally wouldn’t be able to!

All that being said, don’t let this steer you away from the crowdfunding game — it’s a wonderful thing. It gives creators the opportunity to fund their dreams and visions when they normally wouldn’t be able to, and it gives consumers the ability to buy into those dreams and receive a great product (in most cases) in return. Think of some of the best projects from crowdfunding platforms, and where they would be without said platform. Would Pebble have been able to fund and get exposure? How would we have found out about the Coolest Cooler? We’d have no exploding kittens and no Veronica Mars movie. Life as we know it would be forever changed (or something).

If You Don’t Know the Risk, Don’t Play the Game

I’ve backed some great projects over the years (and some terrible ones as well) and I’m overall very happy with how things went. I’ve received some amazing products — original Pebble, Pebble Time, Fidget Cube, ZipChip, Keyprop, Exploding Kittens — and only really been burned by Kreyos. I’m since written that one off, and I think that my win to loss ratio is still great overall. I never let that one deter me (though I was pretty pissed about it at the time) and I continue to go on Kickstarter each week — not each day like I used to — and find new and exciting products that I can be a part of.

It’s funny, actually, since I am in most cases a very impatient person and want instant gratification. I’m the guy that always pays extra for expedited shipping or will run to the store at the most inconvenient time just to get what I need. So the thought of actually waiting months and months for a product that I’m excited about to show up at my door should scare me, but it actually gets me excited and I love the thrill of the hunt, following along with the process and then ultimately (hopefully) receiving the product at my doorstep.

The moral of the story here is that crowdfunding — like life — has its ups and downs. Do your research, know what you’re getting into and you’ll be fine. As long as you realize that you can possibly lose money, you’ll be fine. In almost all cases you’ll get in on something amazing and get a great product or service out of it with no regrets — just don’t beat yourself up if you do get burned.