Published August 06, 2013
What happens after a kickstart?
Nearly 3,000 people pledged $199-$279 to get a discount on the Memoto, a small device that clips to the shirt and records videos and photos throughout the day. For $5,000, the team even promised to fly people to Stockholm for a three-day design session. The gadget launched on Kickstarter, which helps people fund project and offers enthusiasts first dibs when the gizmos they fuel finally ship.
There’s only one problem: the Memoto was supposed to come out last spring. It has yet to be released.
“The major technical issue has been related to the GPS antenna,” said CEO Martin Källström, explaining what has caused the delays since the original February ship date. While Källström has updated customers on the delays, there is no obligation for Kickstarter to make sure the product comes out -- Kickstarter's terms of service are clear about that.
In fact, a report from last year by The Wharton School showed that 75 percent of all Kickstarter gadgets end up missing their ship date, some by a wide margin.
The site has raised $734 million in funds for budding product designers, including 2,600 tech products. While there are many success stories -- including the Kickstarter-funded Ouya game console -- there are also hundreds of delayed shipments. The InstaCube, for example, is a picture frame that shows Instagram photos. The company raised $621,049 with 3,434 backers but is trying to raise more money, according to Engadget.com.
And other gadgets never meet their funding goal. The gStick, a mouse that works like a pen, came up about $10,000 short. According to the Kickstarter rules, the company has to forfeit the funds and no one is charged. Backers are only charged when the goals are met.
Gordon Stewart, the gStick creator, told FoxNews.com that Kickstarter is a great way to gain consumer feedback and exposure. While Kickstarter itself is under no obligation, the creator should “do everything possible to see a project through, until delivered,” he said.
What are you really funding?
George Deeb, the Managing Partner of Red Rocket Venture Consulting & Capital, said that Kickstarter is not a funding site at all. There’s a misconception that it could replace the well-known venture capital model.
“Kickstarter is no different than Facebook or Twitter that do not police its users,” Deeb told FoxNews.com. “That said, if Kickstarter does not do a good job ensuring a good user experience, ill-will will spread and they will tarnish their brand.”
Deeb explained that creators want funds for the creation process, but there is no guarantee to backers that the product will ever see the light of day.
That’s why at least one former Kickstarter user is wondering about whether the model makes sense. Joel Townsan is the founder of Flipout Screwdrivers. After a failed campaign, Townsan says he thinks his product was not a good fit. It is more complex, had a long lead time before release (about seven months), and is fairly expensive.
“There’s so much that goes into a product launch beyond designing the actual product – assuming the product is manufacturable,” Townsan said. “Unfortunately, there’s no way to tell ahead of time which projects are going to launch as planned and which ones are going to be an absolute disaster."
"But that’s kind of the fun of it all,” he added.
The FTC has not conducted any investigations into Kickstarter; the website has an “F” rating with the Better Business Bureau, after failing to respond to some of the only seven total complaints received (Kickstarter is not accredited by the BBB and is under no obligation to seek it).
So what can be done? Most of the experts said part of the issue is perception -- the site is not for “crowd-funding” but “crowd-donating” for a new product. Yet companies need to do a better job of showing they have the manufacturing, marketing, and distribution lined up.
For its part, Kickstarter declined to comment on the frequent delays.
And Källström says the Memoto will ship, and the company will provide a full refund for any upset customers.
“In the hypothetical case we weren't able to ship at all we would provide refunds to all of our backers,” he said.