Eric Markowitz writes a cautionary tale about Hanfree, a Kickstarter-backed project to create an iPad stand, but which led to the bankruptcy of the designer behind it, and the loss of the #35,004 raised from 440 backers. What went wrong? Everything.
For one, Quest did not have contracts already in place before he went on Kickstarter–a novice mistake. Once the Hanfree was funded, Quest says, he began contracting with accessories manufacturers in China, Singapore, and Los Angeles. But because those manufacturers were able to see precisely how much money Quest had raised on Kickstarter, Quest says they gained too much leverage in negotiations, chipping away at the product’s margins. It soon became too expensive to create the product with the funds raised.
At the same time, Quest’s relationship with his Hanfree team began falling apart. “One of the people in my team demanded 50% of the company, and held the design files hostage,” Quest says. Ultimately, though, Quest says that Hanfree “failed because of complications with engineering.”
He was unable to raise outside investment because of the turbulent relationship with his team.
But what about Kickstarter? What’s their role in this? There is a lot of confusion among some of the folks that think they are buying a product and not just crowdfunding a scheme to make one. This has led to the founders of Kickstarter to write a post, announcing changes to the way that kickstarter projects are described and managed:
Perry Chen, Yancey Strickler, and Charles Adler, Kickstarter Is Not a Store
It’s hard to know how many people feel like they’re shopping at a store when they’re backing projects on Kickstarter, but we want to make sure that it’s no one. Today we’re introducing a number of changes to reinforce that Kickstarter isn’t a store — it’s a new way for creators and audiences to work together to make things.
New Hardware and Product Design Project Guidelines
The development of new products can be especially complex for creators and seductive to backers. Today we’re adding additional guidelines for Hardware and Product Design projects.
- Product simulations are prohibited. Projects cannot simulate events to demonstrate what a product might do in the future. Products can only be shown performing actions that they’re able to perform in their current state of development.
- Product renderings are prohibited. Product images must be photos of the prototype as it currently exists.
Products should be presented as they are. Over-promising leads to higher expectations for backers. The best rule of thumb: under-promise and over-deliver.
We’ve also added the following guideline for Hardware and Product Design projects:
- Offering multiple quantities of a reward is prohibited. Hardware and Product Design projects can only offer rewards in single quantities or a sensible set (some items only make sense as a pair or as a kit of several items, for instance). The development of new products can be especially complex for creators and offering multiple quantities feels premature, and can imply that products are shrink-wrapped and ready to ship.
These guidelines are effective for all Hardware and Product Design projects that launch starting today.
We hope these updates reinforce that Kickstarter isn’t a traditional retail experience and underline the uniqueness of Kickstarter. Thanks for reading, and thanks as always for using Kickstarter.
Sounds to me like the backlash against incredibly late product deliveries is growing: like the Pebble Watch which raised $10 million (still no announced date for shipping) and Flint and Tinder (three months late, and this is just underwear).
The Bottom Line
The notion that Kickstarter and other crowdsourcing outlets are going to totally upset the way that new products come to market may work out to be true, but just as products flopped, and projects wound up in the trashcan in the old days, that can still happen today, but more publicly and involving the cash of casual “dumb money” investors who don’t think they are gambling. They think they are buying a product. As the changes in the wording on the projects pages won’t cure that, really.
My bet is that either Kickstarter or someone else will add on to the current model. Instead of standing to the side and taking their 5% commission, Kickstarter could change the program. They could create a placeform (marketplace + platform = placeform) that starts upstream of where they are today, and goes further downstream, too. They could connect the designer of a plausible product with a manufacturing consultant, early on, to check out the issues involved in manufacturing before prices and thresholds are set. Once a project is funded they could create a marketplace for manufacturers to communicate with the Kickstarter teams, and they could maintain the reputation of all parties, and block bad actors. In essence, they could level the playing field and counter the market advantage that the manufacturers have.
I hope they consider that idea. It’s better than just adding legalese to cover their own potential liability.