I got robbed by two men in masks. They made off with $139 of my money, and there’s nothing I can do about it, even though I have their contact information. The reason? These clever thieves robbed me on Kickstarter, the most popular of several crowdfunding platforms, and since there are no guarantees in the crowdfunding game I’m afraid I find myself, to quote the parlance, “up sh*t creek.” Fortunately for you, Sidney is here to give you a few bits of advice so you won’t end up in the same smelly canoe.
Think About the Concept You’re Buying
This is a quick rule of thumb to keep in the back of your mind: Is this a blazing innovation or just the next inevitable phase? Most of what you see on Kickstarter is billed as innovation, invention, or discovery. But not all of it really is. A lot of it is technology that is bound to be done by established manufacturers in the short term, and is probably not worth risking your money to get off the ground. For instance, a popular and disappointing Kickstarter campaign that recently caused heartburn was for a pair of completely wireless Bluetooth earbuds. They looked great, the price wasn’t too absurd and they had tons of good data and lots of transparency to show it was a promising deal. The only problem is that wireless Bluetooth earbuds have always been the endgame of Apple, Samsung, and a dozen other companies who are no doubt working on much more stable prototypes, so that by the time the Kickstarter project makes it to market, there will be a less expensive version with a warranty and all the bells and whistles from a known entity you can get your money back from.
Pay Attention to What Kickstarter Is and Is Not
This one’s a doozy, because trust me, when it blows up in your face, there’s going to be a lot of smarmy a holes throwing this back at you on message boards. Kickstarter is a place where you can support and gamble on innovation. Kickstarter is not a store.
When you support a campaign on Kickstarter, you are not buying their product. You are supporting their idea, and in exchange, based on how much you donated, you may get a gift from them, that might be the product they invented. But if they decide to take the money and run, this is exactly the response you’ll get from Kickstarter. This is their out. They didn’t promise you sh*t, so don’t complain to them when that’s what you get.
Pay Double Attention to the Campaign Video
As I mentioned, the two men who sold me on the product I backed were wearing masks in their campaign video. The video is a requirement of all crowdfunding campaigns, serving as the backstory to justify their existence—the sizzle that sells the steak. In this case, they cleverly made it seem like the masks were part of the marketing strategy and identity of the product, so the other backers, who along with me handed north of $1.4 million dollars to these hucksters, wouldn’t think anything of it. But after I awoke the other morning, along with thousands of others, to the sobering reality that we had been swindled, the first regret I had was not taking a moment to think about what kind of salesmen wear masks. Answer? The kind that don’t want you to know who they are. Again to quote the parlance, “derp.”
You should always pay close attention to the campaign video for tell-tale signs that might not be as obvious as the masks. For instance, if you never see any of “the team” behind a particularly technical breakthrough, you may want to consider momentarily if they even exist. Or if the video relies heavily on simulations and computer graphics, this is another sign the “inventor” hasn’t really invented anything at all. Shiny graphics can distract you from your objective.
Pay Triple Attention to the Risks Section
All the crowdfunding services have some sort of section wherein creators can ostensibly warn backers of the realities of innovation, namely that failures are more common than successes. What they don’t have is a layperson’s translation of this section. Frequently in crowdfunding campaigns—particularly with pie-in-the-sky concepts—the creators will use overly vague or overly technical jargon to explain the risks of their project, such that the average consumer would gloss over them like they’re the iTunes service agreement. That way, if/when the whole thing blows up they have a cushy net below them of citing the risks when denying a refund.
In my case with the masked highwaymen, they helpfully pointed out that in their “risks” section they had discussed the possibility of a technical decision from Apple, over a certification called MFI, could render their product completely useless. Not having a clue what MFI was, I did not understand this to be the red flag it was: when Apple denied their certification request, which people with any knowledge of the industry knew was nearly a sure thing to happen all along, they simply kept the money and walked away.
Sorry, no refunds, we posted this in the risks section, dummy. This was an even more polite version of the explanation I was given as to why I wouldn’t be getting my money back.
Crowdfunding Is Still Great
Sour grapes aside, the whole concept behind crowdfunding is still fantastic. And while this most recent experience backfired, I’ve backed three other projects that were all great experiences and whose rewards I love dearly. It’s just not the safe space many make it seem to be, and a lot of the campaigners on these platforms are misusing it as a place to drum up capital without having to pay back investors, rather than a place of incubation for amazing ideas.
Just remember, do your homework, keep your eyes open, and don’t believe everything you hear.
And make sure you’re not being held up by a couple of goons in masks. Trust me, it’s no fun.
By Sidney Reilly