What are “crowdfunding projects”?
According to Wikipedia1, crowdfunding projects are “the practice of funding a venture by raising small amounts of money from a large number of people, typically via the internet”. So, if you have a brilliant idea for an invention – or you have already created a product prototype – and you are in need of some capital to “get it off the ground” commercially, you can look for collaborators online to help fund the venture.
Think of an online version of TV’s “Dragon’s Den” where, instead of getting financial backing for your idea from Lord Sugar or (the now-US President) Donald Trump, it’s up to the general public to contribute to the success (or not) of the project.
One in three
This concept seems great, right? Instead of seeking huge bank loans with crushing interest rates, entrepreneurs now have a more amenable and accessible way to go about launching their products and realising innovation within their respective sectors.
What’s more, popular web-based platforms like Kickstarter2, IndieGogo3 and Crowd Supply4 reach a worldwide audience of millions of starry-eyed innovation fanatics desperate to own the latest tech.
As a consumer, this is clearly one of the leading benefits: (potentially) having privileged, early access to products of the future. One can contribute anonymously in the hope that other like-minded people will put their hands in their pockets to support the same cause and make the creator’s vision a reality.
Sadly, the initiative’s success is also its Achilles heel. According to crowdfunding expert and financial consultant Zack Miller, only around one in three projects posted on Kickstarter end up reaching their financial targets.5 The rest are ultimately abandoned and, if you are a contributor, either receiving the final product or getting your money out can prove to be near-impossible.
My top 5 failed crowdfunding projects
1. Skarp Laser Razor
Brilliant in principle, but terrible in practice. The Laser Razor was set to revolutionise shaving technology in 2016, with some 20,000 backers pledging over $4 million to make it a reality.
However, the fibre transmitting the laser is extremely fragile and breaks if there is any contact with the skin, rendering the shaving tool completely useless unless you have endless patience and the steadiest of hands.
Apparently, using the prototype was more concentration-sapping and fraught with danger than playing the wire loop game6 and was not a pleasurable grooming experience!
The Zano drone project amassed $3.4 million in contributions and, in September 2016, did actually make it to market. However, instead of the 12,000 pledgers receiving their orders, the company, Torquing, shipped units out to pre-order customers first and – owing to the poor quality of the drone and tendency to crash inexplicably – went bankrupt later that year.
Needless to say, the huge sum of money that was raised sank with the ship and pledgers never received their orders.
In 2012, the Ouya project promised to deliver its pledgers the next major, high-powered, Android-based games console. People were so taken in by this that 63,416 contributors came forward to pledge, with over $8.6 million raised on Kickstarter.
With all that money to go towards production, you’d have thought the miniature-sized console, conceived by American businesswoman Julie Uhrman, would live up to its hype.
Guess what? It bombed. Poor-quality hardware, a lack of power for game play, too much competition from existing consoles and going to the retail market before the platform was adopted by developers (to ensure future game programming) were the main reasons for its demise.
While many contributors will be seething because they are still empty-handed, Uhrman’s greatest success over the course of the project was unloading the brand to gaming hardware company Razer in 2015 for an “undisclosed amount”.
4. Coolest Cooler
I can get on board with the name of this product – it is, indeed, cool. But less cool is the fact that, two crowdfunding projects, two years and over $13.2 million later, an estimated one third of total pledgers (over 20,000) are yet to receive their refrigeration device, which was the brainchild of American Ryan Grepper.
Some backers are being told to chill out as they should expect to receive their coolers “at some point in 2020”. Refreshing news, I'm sure.
5. Wengash Silver Anti-Radiation Underwear
My personal favourite. Not because I like the product, but because I can’t believe anyone actually fell for this blatant scam. Call it a dark, British sense of humour, but being swindled out of your cash for wanting 100% silver-lined pants is more or less what you deserve.
The creator's justification for this project, which took 2,100 Canadian dollars and ran back in 2016, was supposedly to block “harmful” radiation from mobile phones, laptops and Wi-Fi: a hypothesis which has since been rubbished by the scientific community7.
While it may seem from this blog that I'm fervently against the concept of crowdfunding projects, I'm actually not. I am, however, quite cautious by nature - something that I'm sure any blog readers who are saving up for a second home in Spain or intend to retire to the Costa del Sol will also appreciate - and there is nothing worse than being scammed by someone wanting to make a quick buck.
As time goes on, technology continues to advance, and confidence in traditional banking systems declines, I wonder whether initiatives like crowdfunding will become more commonplace... providing, of course, there is more protection for contributions that facilitate and fund said innovation.
Have you ever contributed to a crowdfunding campaign before? If so, did it have a happy ending? If you haven’t done so, would you consider doing so knowing the quantity of ventures that fail? Leave us a comment below!