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Today, many people (myself included) donate money to Kickstarter, Indiegogo or other crowdfunding platforms to get a product or service on the market. Whether it be the revival of a well-known TV show that has been off the air for a while (such as Mystery Science Theater 3000, which has raised $2.2 million as of this writing), card games (Exploding Kittens, a project involving popular web comic artist Matthew Inman aka The Oatmeal) or even something as simple as a cable manager (Bagl, which already raised nearly 300% of its $1,000 goal), crowdfunding is generally the way to go when it comes to getting something people want to market.

However, as with all things, there is a dark side to crowdfunding. One such project, Zano, a mini-drone created by The Torquing Group, had nearly 12,000 backers, but no product has yet been launched—in fact, the project was shut down. The project raised over £2.3 million (almost $3.5 million). Backers finally got somewhat of an answer when lead engineer Ivan Reedman resigned from the project. “We are now considering the company’s position on how best to move forward,” the company said.

Kickstarter has rules and regulations in place for those wanting to use their platform for crowdfunding. “Creators who want to make and distribute hardware must include a demo of a working prototype on their project page,” said David Gallagher, director of media relations, design, technology and games at Kickstarter. However, those rules seem to not give adequate protection to backers, where it devolves into a caveat emptor (buyer beware) situation. “Creators are responsible for their projects, and backers decide whether those projects should be funded. We encourage backers to do some research on the creator and their project before backing, and to evaluate their ability to complete the project. There will always be an element of risk in a crowdfunding project,” he said.


Kickstarter’s rules for creators, however, are more stringent than their competitors. For example, the project creators’ identities have to be verified, and CGI is not allowed—promotional videos have to show real footage. In addition, the backers’ money only goes to the creators when the funding period is over. Kickstarter also stated that project creators have to communicate with their backers to make sure the product is delivered.

While Reedman did regularly communicate with Zano’s backers, his departure disconnected The Torquing Group from their backers. Additionally, Kickstarter does not have the staff to fully verify a creator’s claims—fewer than 20 Kickstarter staff members examine each new product. Kickstarter said that the final recourse of action against crowdfunding projects gone wrong is to take legal action, which will ultimately cost far more money than what the person pledged in the first place in legal fees alone.

A Facebook group of Zano backers have expressed anger at both The Torquing Group and Kickstarter. “My view is that Kickstarter allowed a misleading promotional video or advertisement to appear on their platform without any due diligence,” said one backer. “By allowing this and by actively promoting it as a staff pick, they encouraged people to invest,” they continued. “If KS doesn’t care about enforcing their own terms and conditions, how could I possibly use them again? Once bitten,” said backer David Black.

Another Facebook post reported that the company is being liquidated. “I just got an email saying: ‘Having explored all options known to us, and after seeking professional advice, we have made the difficult decision to pursue a creditors voluntary liquidation. All creditors will be contacted by an insolvency practitioner next week,’” said Facebook user Georg Eberle.

In an era of entrepreneurship and innovation, Kickstarter and other crowdfunding platforms have allowed anyone to invest in projects that they are interested in. However, one has to be aware more than ever where to invest their money, as some of these projects that fail to deliver a product or service can still fall through the cracks.

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