Some of Europe’s biggest startups began with a crowfunding campaign. Monzo might not exist today if the London-based challenger bank, which is now valued at £2bn, had not turned to Crowcube to raise £1m back in 2016.
The European Commission is exploring ways to push even more money onto crowdfunding platforms, publishing a set of policy proposals last year. Around €50bn was been raised worldwide through crowdfunding between 2010 and 2017, and this only seems to be growing.
But despite their draw, crowdfunding sites can also be a dangerous meeting point for hyped technologies and over-enthusiastic crowds. Every promising new technology spawns a swathe of hopeful kickstarter projects (Blockchain sneakers, anyone?).
Lots of products are suspiciously ambitious. Some even seem to defy the laws of science (the promise of artificial human gills, for example). Many just fall flat and leave thousands of people seeking refunds. A surprising number are actually just a rebranding of existing products.
Even the successful ones can introduce troubling conflicts for startup founders, who are forced to choose between pleasing their backers or focussing on the broader market.
Sifted have compiled a list of five top crowdfunding fiascos (with thanks to shitty kickstarters, the reddit community hunting out the best of the worst in the world of crowdfunding).
- The Dragonfly futurefon. This flashy laptop idea looked like it might be the future of portable devices. Run by a startup called IdealFuture, it promised to be a laptop, tablet and phone all in one. It received around $650,000 in funding before winding up at the centre of a fraud case when the product still hadn’t materialised 5 years later. Read this by the Verge for the full story.
- The Coolest cooler: Advertised as a “portable party disguised as a cooler,” this kickstarter came up with the innovative idea of a portable fridge that tripled as a stereo speaker, blender and phone charger. The chief executive behind it was nick-named the “King of Kickstarter” after raising $13m for his design from over 60,000 hopeful backers. But after months of delays, the “coolest cooler” started looking less cool. The product did eventually get manufactured and shipped, but only after being investigated by the Oregon state Department of Justice when 873 customers complained.
- The Lumzag: There’s nothing like an everyday object being pimped out with techy features for drumming up excitement on kickstarter. But hype is easier to generate than a real product, and the cracks are starting to show for Lumzag’s “smart bag,” which is said to feature “7 cool features”, including an inside light, a missing-item reminder, wireless charger, global WiFi hotspot, GPS tracking and a backwards-facing camera – all for £239. The Lumzag raised £693,728 and has 3,642 backers. But the bag has now been delayed by everything from faulty components to the Chinese New Year, and the comment section is saturated with angry backers asking for their money back.
- The “Be Toothbrush”: 5,340 backers pledged $423,143 to help bring this wind-up electric toothbrush to life (“Be” stands for “Beyond Electric”). So far, so good. But a few months before the toothbrush was supposed to be finished, it emerged that the demo video showing a working prototype had been faked. It has now been launched on indiegogo where its makers are promising “full transparency”, but many of its original backers aren’t convinced. The lesson here is that, when it comes to crowdfunding, fakery doesn’t go down well.
- The “Narrative click” wasn’t a disaster in the traditional sense. In 2012, a Swedish startup called Narrative raised $550,000 to make a tiny camera that documented the life of its wearer by taking a snap every 30 seconds. After the kickstarter, Narrative raised millions of dollars from VCs and angel investors. Success! But four years later, it had filed for bankruptcy. Its co-founder Oskar Kalmaru later admitted that, despite its outward success, the decision to run a kickstarter may have been a huge mistake. He calls it the “crowdfunder trap”: entrepreneurs are lured in by the prospect of market validation and funding, but they actually end up with high marketing costs and a high volume feedback from a niche crowd of kickstarter enthusiasts. CEOs find themselves facing a conflict, he says, between what is best for their company in the long-run and fulfilling the wishes of their crowdfunding backers.