Kickstarter is the most well known “crowd-funder” and Indiegogo (pronounced Indi-go-go) isn’t far behind. Do the strangers get their money back if the product doesn’t succeed? Good question, for which the answer is: sometimes and mostly no. The answer is blowing in the crowd. Here’s our experience.
We were wowed by a new tablet called “Jolla,” with a brand new operating system called “Sailfish.” It raised over $2.5 million on Indiegogo eight months ago. It was one of the most successful Indiegogo campaigns. We were one of the early bird investors who paid $209 for a fancy-schmancy Sailfish tablet to be delivered in June. It’s nearing September and we’re still waiting. The latest update says we’ll get our tablet by mid-September. The factories in China are still working things out, they say. If for some reason, we don’t get the tablet, Indiegogo’s rules say we should contact Jolla, not Indiegogo. In other words, they throw up their digital hands and say “not us; we didn’t do it.”
These so-called “crowd-funding” methods have been a great deal for companies trying to introduce new products. On Indiegogo, for example, companies get to keep whatever they raised after paying a nine percent fee, even if they don’t reach their funding goal. (If they do reach their goal, the fee is only four percent.)
On Kickstarter, which is the older and larger of the two crowd-funding operations, they have pretty much the same policy — if you can call it a policy. Over 91,000 projects have been funded by several million people. Whether or not they ever got a refund, a product or a get well card, remains a mystery in the cloud. As you might expect, both funding services get a lot of complaints. We don’t want to shock anybody, but scams and scammers do exist.
Starting a successful business is just plain hard, even if you raise the money. Using Kickstarter, for example, a game called “Code Hero” received $10,000 each from two donors, with hundreds more donations flowing in for a total of $170,954. Code Hero was a game designed to teach children how to program computers. The money vanished quickly into programmer salaries, and years later, investors are still waiting for refunds, which seem unlikely. Some states may provide relief to investors under a deceptive trade practices law, but that’s aimed at the company, not Kickstarter. If there are no assets to forfeit, investors are out of luck.
Even success stories require patience. Oculus Rift, makers of a virtual reality headset, met their $250,000 goal on their first day and quickly raised another $2.4 million. Yet their first headsets won’t go on sale until Spring of 2016. We hope the customers who ordered products in 2013 have other toys to play with.