The dark side of crowdfunding

The Verge
16 Apr 201912:03
EducationalLearning
32 Likes 10 Comments

TLDRThe video script explores the challenges of crowdfunding for hardware products, focusing on the journey of Mousr, a cat toy that took four years to deliver. It discusses the complexities of manufacturing and fulfillment, the risks involved for backers, and the evolving responsibilities of platforms like Kickstarter and Indiegogo. The script also highlights the importance of creators being realistic and transparent with their backers, as well as the role of third-party partners in supporting the manufacturing process.

Takeaways
  • 😀 Crowdfunding platforms like Kickstarter and Indiegogo are often used by creators to raise funds for new products, but they come with inherent risks and challenges.
  • 🚀 Kickstarter requires campaigns to be innovative and untested, and creators only receive funding if they meet their goal, while Indiegogo allows for more flexibility and sometimes funds projects even if the goal isn't met.
  • 🐱 The Mousr project, an automatic cat toy, was successfully funded on Kickstarter but faced significant delays in product delivery, highlighting the complexity of hardware manufacturing and fulfillment.
  • 💼 Hardware projects are particularly challenging due to the complexity of manufacturing and shipping, which can lead to delays or failure in delivering the product to backers.
  • 💰 Crowdfunding is a popular method for raising capital for product development, but creators must be prepared for the financial and logistical demands of bringing a product to market.
  • 📈 Despite the risks, some projects like Mousr have managed to overcome delays and successfully deliver their products, even expanding to retail platforms like Amazon and Best Buy.
  • 😔 The iBackPack case illustrates the potential for crowdfunding projects to fail, with backers left without their promised products and little recourse, leading to investigations by agencies like the FTC.
  • 🤔 The responsibility for product delivery in crowdfunding campaigns is a complex issue, with some arguing that platforms should protect backers, while others believe it's the creators' obligation.
  • 🛠️ Crowdfunding platforms are beginning to partner with third parties to support creators through the manufacturing process, which can help mitigate some of the risks and challenges.
  • 📚 Entrepreneurs are encouraged to thoroughly plan and prepare for manufacturing and shipping challenges before launching a crowdfunding campaign to manage expectations and reduce the risk of failure.
  • 🌟 Ultimately, the success of a crowdfunding campaign depends on the creators' ability to deliver on their promises, and backers must be aware of the risks involved in supporting such projects.
Q & A

  • What was the initial intention behind launching the Mousr product on Kickstarter?

    -The creators wanted to launch a product that would only come to life if a group of people got behind it, treating Kickstarter as a tool to energize backers who were interested in seeing the new concept become a reality.

  • Why did it take so long for Mousr to start fulfilling their Kickstarter and pre-orders?

    -The fulfillment process was delayed because hardware is notoriously difficult, with complex manufacturing and shipping challenges that took longer than anticipated.

  • What are the main differences between Kickstarter and Indiegogo in terms of crowdfunding?

    -Kickstarter requires campaigns to be completely new and creators only get to keep the funds if they reach their goal. Indiegogo allows creators from other platforms and sometimes they can keep their money even if they haven't reached their goal.

  • Why do creators often turn to crowdfunding platforms like Kickstarter and Indiegogo?

    -Creating a gadget can be very expensive, and crowdfunding platforms provide a way for creators to raise the necessary cash to bring their products to life.

  • What is the role of crowdfunding platforms like Kickstarter and Indiegogo in ensuring that products are delivered to backers?

    -Kickstarter and Indiegogo have traditionally stated that investments come with risks, but they are changing their business models to provide more support and protection for backers, such as Indiegogo's guaranteed delivery program.

  • What was the issue with the iBackPack campaign and how did the founder respond to backers' concerns?

    -The iBackPack campaign faced delays and uncertainty, with the founder making retroactive changes and upgrades that led to confusion and uproar among backers. The founder, Doug, responded with hostility and defensiveness, eventually going silent.

  • What actions have crowdfunding platforms taken to address the issue of unfulfilled products?

    -Platforms like Indiegogo have started guaranteeing delivery for a subset of campaigns, ensuring backers that the product will be delivered or they will get their money back. They have also partnered with third parties to support creators through the manufacturing process.

  • What responsibility does Kickstarter feel it has towards backers?

    -Kickstarter's obligation is to be stewards of the system, ensuring transparency and mechanisms are in place for backers to vet campaigns and understand the risks involved.

  • How did Mousr overcome the challenges of manufacturing and shipping their product?

    -Mousr took a long time to ship their product, but they were able to overcome challenges by being transparent with their backers, focusing on communication, and eventually shipping to all backers and expanding to retail stores like Best Buy.

  • What advice does the script give to creators who want to launch a product through crowdfunding?

    -Creators should ensure that their dreams are grounded in reality, think through the bill of materials, manufacturing, and shipping process before setting a price for their product in the campaign.

  • What is the ultimate responsibility of creators when it comes to shipping products to backers?

    -The ultimate responsibility lies with the creators to ensure that their products end up in the hands of backers, despite the inherent risks and challenges of crowdfunding.

Outlines
00:00
🚀 Kickstarter's Role in Crowdfunding Hardware Challenges

This paragraph discusses the complexities of launching hardware products via Kickstarter, highlighting the unpredictability of product development and fulfillment timelines. It emphasizes the creators' use of Kickstarter as a tool to energize backers and bring new concepts to life. The narrative also touches on the inherent risks in hardware manufacturing and the potential for delays or unfulfilled promises. The responsibility for product delivery is questioned, pointing to both founders and crowdfunding platforms as potential culprits. The story of Mousr, a cat toy that took four years to ship, exemplifies these challenges.

05:00
🛠 The Reality of Crowdfunding and Platform Accountability

The second paragraph delves into the responsibilities of crowdfunding platforms like Kickstarter and Indiegogo when a product fails to deliver. It recounts the story of iBackPack, a campaign that raised funds but failed to deliver the product, leading to an FTC investigation. The paragraph explores the platforms' traditional stance on risk and the changes they've made to protect backers, such as Indiegogo's introduction of guaranteed delivery. It also addresses the difficulty platforms face in evaluating an entrepreneur's ability to fulfill their promises, using the example of FlowHive's successful delivery despite the creators' inexperience.

10:03
🎨 The Passion and Peril of Independent Crowdfunding Success

The final paragraph celebrates the success of Mousr after overcoming years of delays and delivering to all backers, now even expanding to retail platforms like Amazon and Best Buy. It reflects on the immense effort, passion, and creativity that independent creators invest in their projects, comparing the process to creating a piece of art or a rock and roll album. The paragraph concludes by emphasizing the importance of realism when pitching dreams to backers and the ultimate responsibility of creators to ensure their products reach the backers, inviting viewers to share their thoughts on who should be held accountable for undelivered products.

Mindmap
Keywords
💡Kickstarter
Kickstarter is a crowdfunding platform where creators can raise funds for their projects by offering rewards to backers. It is central to the video's theme as it showcases how creators use the platform to bring their ideas to life. The script mentions Kickstarter as a tool to energize a group of backers and discusses the challenges faced by creators who successfully funded their projects on the platform but struggled with fulfillment.
💡Fulfillment
Fulfillment in the context of crowdfunding refers to the process of delivering the promised rewards to the backers once the funding goal is reached. The video highlights the challenges of fulfillment, especially in hardware projects, where creators may face significant delays or even fail to deliver the product, as seen with the Mousr cat toy example.
💡Hardware
Hardware refers to physical products or devices, as opposed to software. The script emphasizes the complexity and difficulty of manufacturing hardware, which often leads to delays in delivery. The creators of Mousr faced such challenges, which contributed to the extended timeline for their product's release.
💡Crowdfunding
Crowdfunding is the practice of raising small amounts of capital from a large number of people, typically via the internet. The video explores the dynamics of crowdfunding, including the risks and responsibilities involved, and how platforms like Kickstarter and Indiegogo are evolving to address these challenges.
💡Indiegogo
Indiegogo is another crowdfunding platform mentioned in the script, which allows creators to keep the funds raised even if they do not reach their goal. The video discusses Indiegogo's business model and how it is changing to include guaranteed delivery for certain campaigns to protect backers.
💡Backers
Backers are individuals who support crowdfunding campaigns, often in anticipation of receiving the product or service being offered. The video script discusses the role of backers in the success of crowdfunding campaigns and the risks they take, such as the possibility of not receiving the promised rewards.
💡iBackPack
iBackPack is a specific crowdfunding campaign mentioned in the script that raised funds but failed to deliver the product, leading to controversy and an FTC investigation. It serves as a cautionary example of the risks associated with crowdfunding and the responsibilities of creators.
💡Manufacturing
Manufacturing in the context of the video refers to the process of producing physical goods, which is highlighted as a complex and challenging aspect of bringing a hardware product to market. The script discusses the unpredictability and potential pitfalls of manufacturing, which can lead to delays or failure in product delivery.
💡Risks
Risks in the video refer to the potential for loss or failure associated with crowdfunding campaigns. The script explores the various risks backers face, such as not receiving the promised product, and the responsibilities of crowdfunding platforms to mitigate these risks.
💡Transparency
Transparency is emphasized in the script as a key aspect of successful crowdfunding campaigns. It involves clear communication from creators to backers about the progress and challenges of the project. The video mentions Kickstarter's mechanisms to ensure creators are transparent and identifiable to backers.
💡Entrepreneurs
Entrepreneurs are individuals who start businesses or initiate new projects. The video discusses the role of entrepreneurs in crowdfunding, their optimism, and the challenges they face in bringing their ideas to fruition. The script also touches on the importance of entrepreneurs being realistic and well-prepared before launching a crowdfunding campaign.
Highlights

Kickstarter was used as a tool to gauge interest and gather an energized group of backers for a new product concept.

Hardware fulfillment is notoriously difficult, with complexities in manufacturing and shipping that can delay product delivery.

Crowdfunding platforms like Kickstarter and Indiegogo are aware of the risks of unfulfilled products and are adapting their business models to protect backers.

The creators of Mousr, a cat toy, successfully funded their product on Kickstarter but faced significant delays in product delivery.

Kickstarter requires campaigns to be innovative and only allows creators to keep funds if their goal is reached, unlike Indiegogo which offers more flexibility.

Effective communication and transparency with backers is key to maintaining support during product development delays.

The emotional impact of long development times can be profound, with backers experiencing the loss of pets they intended the product for.

The iBackPack campaign raised funds but failed to deliver, leading to a loss of trust and an FTC investigation into the company's practices.

Indiegogo has introduced a guaranteed delivery program for some campaigns, offering backers a refund if the product does not ship.

Kickstarter's role is to be stewards of the crowdfunding system, ensuring transparency and helping backers make informed decisions.

Partnering with third-party manufacturers and support services can help creators navigate the manufacturing process more effectively.

Entrepreneurs must consider all aspects of production, including materials and shipping, before setting campaign prices.

Manufacturing challenges can include factory issues, changing quotes, and quality control problems, which can delay product delivery.

Entrepreneurial optimism can lead to underestimating the complexities of hardware production, requiring careful planning and risk assessment.

Mousr's journey from crowdfunding to retail success demonstrates the potential for independent creators to launch and grow their businesses.

Creators must invest significant time and passion into every detail of their product, from design to marketing, to achieve success.

The responsibility for delivering products ultimately lies with the creators, who must ensure their promises to backers are fulfilled.

Transcripts

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CrowdfundingKickstarterIndiegogoProduct DevelopmentEntrepreneurshipHardware ChallengesFulfillment DelaysInnovationBackersStartups