Crowd Funding

So some of you may use it regularly, some of you may of been burnt by it, and some of you may of received everything and be really happy using it. However, there is growing concern the way some companies are running there startups in the crowd funding space.

We are promised “rewards” but we are actually purchasing an item, i’ll go into more detail on this later, but with the current big news, certainly in the UK being that Zano has failed and gone for voluntary insolvency, and the Coolest selling on Amazon before supplying funders, where do you stand legally.

Its a tough question, and until trading standards or courts get involved we don’t actually know. Certainly in the UK you have the protection from card providers and distance selling regulations, but this may require that it is a UK start up, and a UK card etc, so it is not a be all and end all to your problem solving, personally, i think that you have a contract for supply, and the protection afforded you, would indeed be superseded by any update on delivery to the original contract, that is not to say that you could not ask for a refund, and if refused you would have a right to contact your card provider, this is where the complications start, you are asking for a refund from Kickstarter (or similar) and not the Company you backed, BUT and the law can work in different ways, by the simple fact that you paid Kickstarter, you have a contract with them, and the LAW will always over ride the terms and conditions of the sale. Now at the start of KS this was always a problem for backers outside of the country that the start up was based, but with distance selling regulations firmly established throughout the EU now, this could very well afford you more protection as they are selling in an area that is covered.

I would also like to see someone take a start up to court, not for a product, but like the Coolest in the US, where they are now selling before delivering to backers, they have already breached there contract, and it would be interesting to see if you could challenge them in court to convert your initial “investment” into something other than a reward, i.e. a claim to a percentage of the company as an investor, the is after all what they call you, an investor… Would be an interesting challenge to see happen for sure.

Anyway, with Kickstarter falling foul of backers anger, and the way companies are perceived, it is a very dangerous game to dump huge sums of money into right now, you have to be able to say, ok, i can afford to lose the money, just like any other investment. The most i have ever handed over to a company on KS is $2305 for Airdog, they are currently 12 months late, a year, but they have delivered beta units, they still have a few teething problems they are working closely with the beta testers, and they have employed more internal testers to ensure we get a working unit when they ship.

My advice, to any KS company, is to be brutally honest with backers, they will take truth far better than games and lies, they want to be involved, they want to see the answers to tough questions, and above all they want you to succeed. Many companies simply stop communicating, are very slow to answer stuff, and don’t keep backers upto date, we had a period of time with Airdog, where this was the case, now we have the complete opposite, a more open forthcoming dialogue that has helped an awful lot, however there are still people that are asking for refunds, and that is there right, and it is sensible to do as Airdog are doing, and that they allow this to happen, they are far more likely to have them back as a customer at a later date, rather than have them bad mouthing you and not wanting the product when you do eventually ship.

As for Zano, they have a whole heap of trouble coming there way. Who knows, we just don’t have the info right now. But if it does turn into a criminal case, this could well be the death of Kickstarter, as they will of been complicit in the company actually being allowed to take so much money in what could end up the biggest fraud on crowd funding ever. The video used was not from prototypes, and there own rules specify this must be the case, others are going the same way.

PhoneDrone could well end up with issues down the line, they are currently using video of a drone using a mobile device as the computer, but the footage is very suspect, they have also got another uncompleted device yet to ship in a different funding period, on top of this they got Shark Tank backing in the USA, so they have some money, but they are surely better to finish one project before starting another? Or are they simply stretching themselves too far in terms of capability as a company. I know you cannot stand still as a company, you have to keep moving, but if the 1st one is not real, the staff already employed should be working on that project, not something else to bring in more money, this is a very dangerous precedent to set for crowd funding, and it should not be allowed.

Personally i have to say, i am done with crowd funding, i will not be backing anymore projects, i have been lucky, but no more, it makes no sense to do so, not financially anyway, if a project really is worth investing in then they will find the funding to make the product, i honestly believe that crowd funding is now in a place where any idiot can come up with an idea and get money, with no real understanding of what it will involve.

The result is that YOU and only you can decide if you want to back a project, ask very tough questions during the funding period, things such as VAT are issues that need to be covered, is it included etc, get this in an answer for ALL to see while the funding is ongoing, if they give you an answer hat it is extra then you have the choice before money is paid, if you wait until a later date and they refuse a refund, then you are liable for the tax as well, it is not always them that have to disclose, although it is good business practice. Also if they use a video, ask, is it real footage, once they say yes, they cannot take that back, they are stuck with the answer they gave, if in 6 months they still can’t show a working prototype, then make sure you ask for a refund, you DO have rights still, and it will be your card provider that you start this with. But most of all, only back a project if you are really confident they can deliver what they are saying they can deliver. Time is a different thing altogether, most projects come in late some significantly, the more complicated it is the longer the delays will be, and if they don’t have enough funding, they may not make it to the end, so be mindful of that as well.