When is a crowdfunding project a scam, vs a normal project run by humans?

There’s a new wave of crowdfunding efforts in the last year or so, changing the dynamic in a sense. There are some reasons to be concerned about pitfalls in your crowdfunding adventure, but other reasons not to be.

Let’s take a look.

Disclosure: While I have backed over 90 crowdfunded projects across platforms (not including projects that did not “finish” and thus took none of my money) in the past 10 years, and I have had professional relationships with two of the companies mentioned here (VAVA and ZMI), nothing in this post has been reviewed or approved or otherwise influenced by them or any other company or entity. For the crowdfunding projects, they took my money like everyone else’s, and delivered the products like everyone else’s.

A not-so-brief history of crowdfunding

It used to be that a designer or developer or artist would come up with an idea they couldn’t get commercially adopted, post a crowd-funded campaign on Indiegogo or Kickstarter, and hope to make enough money to produce it on their own. This led to some amazing projects and companies.

LunaTik (by MNML / Minimal Design) was the first huge kickstarter (just short of $1 million), and my first backed campaign back on December 12, 2010. They made what became the precursor to the Apple Watch design. It took the square iPod Nano and put it in a beautiful machined aluminum enclosure with a wrist strap (pictured above), giving you a portable music, exercise, and timekeeping device that looked stunning on the wrist without being overwhelming. Mine still sits on my desk, in red to match the PRODUCT(RED) Nano I’d bought just before the campaign. They’ve gone on to make a number of other products, and I’ve backed their touch pen and bought other items here and there.

Kano, the Raspberry Pi-based educational computer project, started around 2013 on Kickstarter. Manual Coffeemakers, Pebble smartwatches, Articulate wallets, Dash wallets, DASH and Omni batteries, Unihertz’s tiny phones, and others came along afterward, as well as the Pine, CHIP, CHUWI, and Zodiac computing devices, and the entire Nomad Goods brand began with their ChargeCard wallet-friendly charging cable back in 2012 (another brand I follow and buy from to this day).

Somewhere along the way, established companies discovered that they could take advantage of the platform to gauge interest, handle pre-orders and pre-release publicity, and give their fans an opportunity to save money and get in on the early stages of product development. Waterfield Designs (sfbags.com), Barsetto, Hyper, ZMI, VAVA are among these.

What’s the problem, then?

There has long been an issue with crowdfunding messaging, in that many buyers assume that they are purchasing a product guaranteed to be delivered in a certain time frame. And certainly, almost nobody would back a project if they didn’t expect it to be fulfilled.

But with crowdfunding, there’s no guarantee that a product will be possible, much less produced in bulk and delivered. For the established companies, you get a much stronger prospect of the product being delivered, as they’ve done this before.

Both leading crowdfunding platforms have repeatedly tried to reinforce this risk factor, and to impose whatever constraints they could on the creators so they know not to just throw their hands up and run off with the money (as some creators have, including a few I’ve backed over the years).

Still, you have creators who don’t communicate well, don’t understand the intricacies of production and fulfillment, don’t plan ahead for natural disasters and pandemics, or just throw their hands up and run off with the money. This leads to distrust among backers when communication slips even a couple of hours, and can be pretty frustrating to the more seasoned backers.

Crowdfunding is relatively safe, and the rewards can be worth the risk. I’ve backed 91 projects in the past decade (including every brand named above, some more than once), to the tune of about $7,000. By my tally, 9 of them (a bit short of 10%) have failed to deliver and/or are unlikely to deliver, for a total of about $600. One project, at $297 and just over 3 1/2 years out, purports to be finally delivering by the end of the year, so we’ll see if they fall into the success or failure bucket at Christmas. If my efforts at the slot machines in Vegas had a 90% success rate I’d be pretty happy, and the same goes for the occasional lottery ticket.

So what brought this to mind?

The latest project I backed was a fingerprint security portable SSD from VAVA, part of the Sunvalley Group (also known for their RAVPower, TaoTronics, HooToo, and several other brands). I have two of their sister brand RAVPower’s non-fingerprint SSD drive, which work very well, so I figured I’d get a good deal on the new enhanced product.

They launched their project in September, with a prototype in hand and five years of experience in producing and fulfilling orders for products. The product met its modest funding target in five minutes, and business rolled on.

The estimated shipping date listed was October 2020, and the inquiries as to where the product was started rolling in on October 2nd like clockwork. When the company clarified that they’d have an update mid-month, that moved the starting line for crying foul and accusing the company of scamming to about October 12. An update of “we’ll have clearer dates tomorrow” brought up a few “Scam!” bleats about 15 hours after that “coming soon” warning.

As of this writing (October 17), the products are shipping from the overseas factory already, and should be shipping to customers by the end of the month (except for the 2TB model which had supply chain issues on the larger flash chips). For a project from an established company, scheduled for shipping in October, that’s pretty reasonable (especially considering what the pandemic has done to electronic supply chains even for huge companies).

I will be testing out this SSD, putting it up against the RAVPower analogue as well as a Thunderbolt 3 NVMe drive and an older Samsung portable SSD… stay tuned for that review in the coming weeks.

So what can I learn from this?

If you’re fairly experienced with crowdfunding mechanics and how things are made and sold, and the general concepts of time and physics, probably not a whole lot (except relief that you’re ahead of the mob).

But if you’re new to crowdfunding or don’t understand how it works, I’m hoping you can pick up some pointers that will help you make the right choices and show the right level of patience.

Risk: There is no guarantee that a crowdfunded project will succeed. It might not make its funding goal, or it might not be technologically possible for the product team to make it happen.

Response: Don’t treat crowdfunding as a retail outlet. Only pledge what you’re willing to lose, and don’t use crowdfunding (except so-called In-Demand campaigns for items already shipping) for things you have a firm time frame that you need the item for.

Risk: Production and shipping may be delayed, by technological issues, natural disasters, strikes, lawsuits, pandemics, elections, and so forth.

Response: Take the time frames with a grain of salt and an eye to the company’s history. If this is the first thing they’ve ever made, add a couple of months to your expectations. If theyre promising delivery in February, add a month or two due to the Chinese New Year holidays. If they’ve been in business for decades, they’re probably accurate but still might have issues. Also, see previous response for your time expectations, and don’t back a project on Halloween for your Christmas present shopping.

Risk: Products may be outdated by the time they’re released. I backed an ultra-thin battery pack for the iPhone 7, and by the time it shipped I had moved on to a newer device.

Response: Keep phone makers’ (and other companies’) release schedules in mind. If you know Apple always releases new iPhones in September or October, don’t back form-fitting accessories for them right before those months. And be prepared for the above responses as well, as even a project in the spring might overrun the time frames for the device in question.

Risk: People insisting that “shipping in October” means “will be in my grubby little paws on October 1st by noon or else they’re evil scammers” may cause painful head-desk interactions.

Response: Ignore them, or if you can’t, just politely remind them that October is a whole month with 31 days, and it doesn’t make a company a scammer or a fraud if they take advantage of the other 30.5 days in the month.

Where do we go from here?

Have you had any fun, or stressful, or head-desk inducing experiences with crowdfunding? Share in the comments. Watch for my top five and bottom five backed campaigns in an upcoming post – there are a couple that have been pretty amazing and memorable, and yes, I have had a couple of fraudulent “entrepreneurs” among those 90+ campaigns.

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