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A big problem with crowdfunding is that many backers don't seem to understand the risk they are taking on. It is distressing to see pages and pages of comments

by nefitty 11y ago

A big problem with crowdfunding is that many backers don't seem to understand the risk they are taking on. It is distressing to see pages and pages of comments complaining about a project's failure, but in the same vein, I've never seen a gambler bang on a slot machine because it didn't payout this time. Is this due to a lack of basic business knowledge among the public? I think a big reason I've never contributed to a campaign is because there's a greater than 50% chance my money will evaporate.

jacquesm 11y ago
> A big problem with crowdfunding is that many backers don't seem to understand the risk they are taking on. The bigger problem is that the people starting crowdfunding initiatives have no idea about what it takes to bring a new product to market, if they're not outright scams.
- Balgair 11y ago
  Related: http://www.iflscience.com/technology/artificial-gills-underwater-breathing-device-has-820000-funding-despite-being http://www.iflscience.com/technology/artificial-gills-underw... And yes, indegogo, but its basically the same platform as kickstarter.
  - slantyyz 11y ago
    It looks like I just got burned on an Indiegogo project myself (https://www.indiegogo.com/projects/zaptip-the-world-s-first-magnetic-super-charger/x/7261196#/story https://www.indiegogo.com/projects/zaptip-the-world-s-first-...) - I was aware of the risks, but the product was "just" a cable, so I considered it low risk. I had previously participated in a couple of other Indiegogo projects worked out wonderfully. The worst thing about my IndieGogo Zaptip failure is that there are now tons of ZapTip knockoffs already available through Amazon, eBay and other channels, and at lower price than what I paid to fund the Indiegogo project.
  - makomk 11y ago
    Indiegogo is where projects go when they're too shady for Kickstarter. They're much less willing to give the boot to scammers and actively welcome projects that have been kicked off Kickstarter.
- jasonlaramburu 11y ago
  The reality is no one can 100% derisk a new venture, and hardware is a particularly complex industry. Even those with lots of experience in hardware face challenges (google Tony Fadell and Nest). It's up to consumers/backers to do their due diligence on a campaign and its founders. The same is true of any investment or purchase.
dmcginty 11y ago
I think the most annoying thing about the Coolest Cooler campaign is this quote: I'm just frustrated that people who live in my same town [...] who purchased their Coolest cooler AFTER I did [...] have received their shipment before I have. I've contributed to several Kickstarter campaigns, one of which failed. I was bitter about the failure, but I understood the risk. However, I think I would be much more upset if my neighbor received their product and I didn't.
jonesb6 11y ago
People expect immediate gratification. They pay for it and expect it two days later. We become upset because it falls out of the patterns we have adapted to.
- TheOtherHobbes 11y ago
  People don't expect to be ripped off. I've been watching one project since 2013. $500k raised, and they seem to have blown it on initial set-up and tooling. The items are being sold through an "exclusive" deal with a famous online outlet, and most backers still haven't received anything. I think that counts as outright fraud, and not just "becoming upset". Some backers have been talking to the FTC, so we'll see what happens then.
orky56 11y ago
Not to say this can't happen with accredited investors but the risk is less. Appropriate due diligence is a competitive advantage but not a requirement. At the end of the day, crowdfunding should be seen as an investment due to the risk and the crowdfunding reward is just as much of a resource for the founder as it is to the customer.
eewffwe 11y ago
>A big problem with crowdfunding is that many backers don't seem to understand the risk they are taking on. That's because Kickstarter advertises the potential benefits and buries the risks. If you read their KS page [1] it states: "Pledge $185 or more: COOLEST COOLER: Get your very own COOLEST, complete with blender, a waterproof Bluetooth speaker, USB Charger and all the other awesome features. You will be saving $115 off of the retail price of $299. (Just watch people flock to your gathering when you're the only one with a powered blender and thumping music!). You'll also get the COOLEST Drink Guide and all our updates. (add $15 for shipping)". Now, you and I know that means "maybe", but does the average backer? I don't think so - honest. It says, right there, in black and white, if I pay $185 I get XYZ. Sure, it says maybe not in the contract, but who reads those? Don't forget home loans in mid-2000. In that case, you heard "HOMES FOR $899 A MONTH!" not so much about the adjustable rate and the potential to collapse your living situation. Ramble ramble... [1] https://www.kickstarter.com/projects/ryangrepper/coolest-cooler-21st-century-cooler-thats-actually/description https://www.kickstarter.com/projects/ryangrepper/coolest-coo...

by nefitty 11y ago

jacquesm 11y ago

> A big problem with crowdfunding is that many backers don't seem to understand the risk they are taking on. The bigger problem is that the people starting crowdfunding initiatives have no idea about what it takes to bring a new product to market, if they're not outright scams.

Balgair 11y ago
Related: http://www.iflscience.com/technology/artificial-gills-underwater-breathing-device-has-820000-funding-despite-being http://www.iflscience.com/technology/artificial-gills-underw... And yes, indegogo, but its basically the same platform as kickstarter.
- slantyyz 11y ago
  It looks like I just got burned on an Indiegogo project myself (https://www.indiegogo.com/projects/zaptip-the-world-s-first-magnetic-super-charger/x/7261196#/story https://www.indiegogo.com/projects/zaptip-the-world-s-first-...) - I was aware of the risks, but the product was "just" a cable, so I considered it low risk. I had previously participated in a couple of other Indiegogo projects worked out wonderfully. The worst thing about my IndieGogo Zaptip failure is that there are now tons of ZapTip knockoffs already available through Amazon, eBay and other channels, and at lower price than what I paid to fund the Indiegogo project.
- makomk 11y ago
  Indiegogo is where projects go when they're too shady for Kickstarter. They're much less willing to give the boot to scammers and actively welcome projects that have been kicked off Kickstarter.
jasonlaramburu 11y ago
The reality is no one can 100% derisk a new venture, and hardware is a particularly complex industry. Even those with lots of experience in hardware face challenges (google Tony Fadell and Nest). It's up to consumers/backers to do their due diligence on a campaign and its founders. The same is true of any investment or purchase.

dmcginty 11y ago

I think the most annoying thing about the Coolest Cooler campaign is this quote: I'm just frustrated that people who live in my same town [...] who purchased their Coolest cooler AFTER I did [...] have received their shipment before I have. I've contributed to several Kickstarter campaigns, one of which failed. I was bitter about the failure, but I understood the risk. However, I think I would be much more upset if my neighbor received their product and I didn't.

jonesb6 11y ago

People expect immediate gratification. They pay for it and expect it two days later. We become upset because it falls out of the patterns we have adapted to.

TheOtherHobbes 11y ago
People don't expect to be ripped off. I've been watching one project since 2013. $500k raised, and they seem to have blown it on initial set-up and tooling. The items are being sold through an "exclusive" deal with a famous online outlet, and most backers still haven't received anything. I think that counts as outright fraud, and not just "becoming upset". Some backers have been talking to the FTC, so we'll see what happens then.

orky56 11y ago

Not to say this can't happen with accredited investors but the risk is less. Appropriate due diligence is a competitive advantage but not a requirement. At the end of the day, crowdfunding should be seen as an investment due to the risk and the crowdfunding reward is just as much of a resource for the founder as it is to the customer.

eewffwe 11y ago

>A big problem with crowdfunding is that many backers don't seem to understand the risk they are taking on. That's because Kickstarter advertises the potential benefits and buries the risks. If you read their KS page [1] it states: "Pledge $185 or more: COOLEST COOLER: Get your very own COOLEST, complete with blender, a waterproof Bluetooth speaker, USB Charger and all the other awesome features. You will be saving $115 off of the retail price of $299. (Just watch people flock to your gathering when you're the only one with a powered blender and thumping music!). You'll also get the COOLEST Drink Guide and all our updates. (add $15 for shipping)". Now, you and I know that means "maybe", but does the average backer? I don't think so - honest. It says, right there, in black and white, if I pay $185 I get XYZ. Sure, it says maybe not in the contract, but who reads those? Don't forget home loans in mid-2000. In that case, you heard "HOMES FOR $899 A MONTH!" not so much about the adjustable rate and the potential to collapse your living situation. Ramble ramble... [1] https://www.kickstarter.com/projects/ryangrepper/coolest-cooler-21st-century-cooler-thats-actually/description https://www.kickstarter.com/projects/ryangrepper/coolest-coo...