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The ugly afterlife of crowdfunding projects that never ship and never end

posted Oct 27, 2014, 12:29 AM by J Shaw   [ updated Oct 27, 2014, 12:30 AM ]
The public life-cycle of a Kickstarter rarely ends in tragedy. Often, if a Kickstarter manages to get covered by the media before its funding round end, or even starts, it can meet its goal within days, and superfluous funds continue to roll in over the next few weeks. By the time its crowdfunding stage closes, the creators, backers, and media alike are excited and proud to have ushered this new project so quickly to a place of prosperity, eager for it to continue to grow.

Plenty of projects manage to deliver the goods, even if the timeline slides a bit. That was the case with Tim Schafer's Kickstarter game Broken Age. If creators miss deadlines, backers typically continue to receive updates via e-mail and the Kickstarter page. But sometimes the end of funding is the beginning of a slide into radio silence, which ultimately turns into few or no backer orders fulfilled, and no satisfactory explanation for why the project didn't pan out according to the orderly delivery schedule the creators promised.

A project can go off the rails and fail even after its funding succeeds for a number of reasons. There can be unforeseen costs, or design problems, or a team member quits or fails to deliver their part of the project. Often, when a project skids to a halt, the final updates are obscured from the public and sent only to backers, which may be part of the reason failures are often not well-publicized. Occasionally, backers who receive them pass them on or post them publicly on forums, which is as good as it gets in terms of letting the outside world know a project did not ultimately pan out.

Why burn out when you can fade away

"A few weeks ago, on a Thursday night, we had a board meeting, and our plan called for an additional funding round. For me and the team, everything seemed on track, but on that Friday morning when we were expecting our next set of rocket fuel, I was told by our lead investor that the investor syndicate could not agree on financing terms and hence we would have no more funds coming in.MyIDkey, a password manager dongle, raised $473,333 on Kickstarter and $3.5 million overall. The team decided to change the design of the product and many of its features midstream. In his second-to-last update to backers, which was sent privately rather than posted publicly on the project page, creator Benjamin Chen wrote about how his company's funding situation very suddenly changed:

This was a complete shock for me, and I have never been in a situation this dire in my professional life. We had ZERO notice, and no funds left in the bank, I had to immediately notify the entire staff that we were going to have to layoff everyone from payroll as well as myself. We also had to notify all of our contractors and manufacturing partners of our situation and to immediately put everything on hold. This was a huge emotional setback for the team."

Three months later, Chen privately updated backers again that the myIDkey website had been taken down, claiming a cease and desist over a UK trademark. A reader passed Ars the September update:

"Please know that we are in the final rounds of securing a strategic partnership. It is extremely frustrating, but we are unable, legally, to disclose any additional information at this time. Many of you may have noticed the take down of the myIDkey website. We recently received a cease and desist letter from a UK company that has the trademark rights to MYID. Because of this, we are working to rebrand the website.
We would also like you to know that our team is intact, and we are working diligently to get operations back underway. Thank you for all your support, and please continue to hang in there."

A high-profile Indiegogo campaign for the Kreyos smartwatch, which raised $1.5 million on a $100,000 goal in the sumkmer of 2013, crashed and burned over the course of the following year. In a Medium post, the founder, Steve Tan, blamed most of the failure on the Chinese manufacturer Kreyos engaged to make the product:

"What I don’t understand till now is, with the success of Kreyos, and the amount of money we paid him, why didn’t Pro [CEO of Viewcooper Corp] invest in talent or hiring the right people. The total amount of people working on Kreyos from his end was only around 4 people, some of whom we realized are just working part time. We wouldn’t have minded him pocketing so much money if he at least delivered something that we can fix for our backers and customers and continue selling for a few more months until we conceptualize a new and improved version.
He constantly bragged that we will impress our backers by shipping earlier then the promised date. But things started to look bad after numerous delays.
We wanted to hire our own firmware guys, but he wouldn’t send us the firmware’s source code, and insisted we won’t be able to manage it. He said he will hire more people in his Taiwan office to help speed things up, but apparently those people are working on his other projects and not Kreyos."
In a separate section, Tan asks himself why Kreyos did not engage a different manufacturer. His answer, in four parts:

"i) We do not have working relationships with any other solutions company
ii) We do not know any other EMS factories in China
iii) Most importantly we already paid him more then 50% of our money (50% of the 20k Units and also the 64150 units of LCDs), so we are held hostage with virtually no way out. We are not going to be able to raise enough money in time to push through with the project if we dropped Viewcooper at this point.
iv) We are a marketing team with very limited hardware experience."

In the end, the few Kreyos watches that shipped met few of the team's original goals: they were not at all waterproof, they batteries did not last the promised amount of time, and the firmware was buggy. The Indiegogo page is filled with dissatisfied comments, many of whom wanted refunds. "We won’t be able to refund any more orders is because we are not financially capable of doing so," Tan wrote.

Smaller-sized Kickstarters are not immune to failure, either. One project for a "quantum… science fiction and fantasy RPG" raised over $47,000, nearly three times its original $13,000 goal, for Infinite X Studios early three years ago in December 2011. After 83 updates, in May 2014, creator Joshua Frost posted a backers-only update saying that "this project is dead. For now. Possibly forever." He went on:

Frost went on to blame Solis, the project's artist, for holding up the project by failing to deliver his end of the project. Solis responded on the forum where Frost's update was posted, saying that "less than 5% of the total funds raised on the campaign was [sic] used to pay for artwork, and... some of the artwork that was delivered was never paid for." Solis also wrote that much of the project wasn't complete, even in 2013, and that there was no contract in place that would have prevented Infinite X Studios from engaging another artist, if needed.
"I've spent the better part of the last two years trying not to throw anyone under the bus regarding the project's tardiness. I've been non-specific about details, taken the blame for it, watched people compliment the reason the project was late and is now dead as being a hard worker while I'm some asshole slacker.

Now, I haven't been perfect. I've made key mistakes—mistakes born of inexperience running an entire company and mistakes of trust.

I built an amazing business plan and budget with the help of a non-profit in Seattle that does just that for new small businesses. I hired what I thought were the right people, and for the most part, they were. Though there were complaints, we released the Beta on a timeline I was comfortable with.

And that's where the problems broke the company.

See, Hugo Solis has a problem with deadlines."

A lack of recourse for backers

When a Kickstarter does start to fail, even if the final updates are invisible to anyone other than the backers, it can be identified by its commenters, who start to mobilize against the creators. In the case of the quantum RPG, commenters confirm to one another that they haven't received anything. A handful mention reporting the project to the Washington attorney general, who organized a consumer protection suit in May.

On a Kickstarter for an "all-terrain camera slider" that never delivered its rewards, a few of the commenters began tracking the creator's whereabouts and activities, which inevitably didn't involve being studiously at work on the product. "Tom still apparently has spending money and/or free time, possibly having gone to a Christian rock/music concert last month instead of getting Airtracks manufactured and delivered," wrote a commenter named Jonathan F. The same commentercomposed templates for other backers to submit complaints to their credit card companies about the projects' charges.

When a Kickstarter for the "Montrex watch" did not ship on time, commenters began tracking the creators' activity on eBay, saying that he appeared be unloading watch parts. Another noted the creator had appeared to move to Las Vegas, and posted a phone number the commenter said belonged to the creator.



In the wake of Neal Stephenson's failed Kickstarter game, terms get an update.

Kickstarter used to vet each project by hand, but has since written itself out of the approval process completely. The amount it pays itself on successful funding completion, five percent of the total amount raised, remains the same. The company continues to re-write its policies and guidelines to draw attention to the harsh realities of a project that doesn't deliver the goods: Kickstarter is not responsible nor beholden to backers, but project creators are. If the creators declare a project dead and can't produce either the promised rewards or refunds, they may be subject to legal action.

But beyond the Washington lawsuit, organized legal action against project creators is still unusual. In part, this is because it's difficult for backers to organize; by default, no one has anyone else's contact information, and there is little transparency as to who actually received their promised rewards or whether they are happy with the products. The comment section of each Kickstarter page, unlike official project updates, do not ping backers' e-mails to remind them the project exists and is still in progress.

Many projects appear to slide into a kind of development hell where they drag on for years, neither ending and issuing refunds, nor shipping. Instead, creators continue to post updates every few months, and commenters respond, some still angry, some resigned to the project's fate. While the crowdfunding cycle so often presents a neat and happy package, that arc often turns out to be just a beginning, with no apparent end.

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