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| The idea |
According to Kickstarter, one of the most popular crowdfunding platforms, their success rate is 44% - with success defined as meeting the project's original financial goal. Considering that failed projects can be restarted with altered funding goals, development plans and marketing materials, this number might be somewhat higher in reality.
On the other hand, "success" is highly relative in this case. Money collection is merely one part of the process - and not necessarily the hardest one. Delays are a very common issue, with larger projects often taking months longer than their initial release date. The reasons may vary - initial funding goal might have been too low, or scope of the project might have been too ambitious.
"Why 84% of Kickstarter's top projects shipped late?"
Some projects have been abandoned entirely - in which case the creator is required to refund the backers. Unfortunately, the actual process is not dependant on the crowdsourcing platform and not guaranteed in any way. There are also cases where delays are largely indefinite, with no projected release date or status update. While it's impossible to declare project a scam without thorough investigation, it is sometimes a possible option and a potential risk to be considered.
As such, "Are Crowdfunding Sites the Future, or a Bubble Waiting to Burst?" - is quite a legitimate concern for many potential investors.
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| The reality? |
1. What's your opinion on crowdfunding when compared to traditional financing methods?
2. Have you personally invested in a crowdfunding project? Why/why not, would you consider it at any point?
3. What do you think about projects that "succeed", but still fail to deliver the product at any point?
4. What if the project changes during development and the end result is different from what was promised?
When I first heard about the idea of crowdfunding I was not a fan of it. It seemed that it was just another way of tricking you into buying promises - products that you don't know when will be delivered to you, whether their quality will meet the one shown in the promotional material and on top of that, all these things were usually done by companies that were new on the market and didn’t have much experience. So I was far from being convinced about the positive outcome of this new trend.
ReplyDeleteBut as with many things my initial impressions changed when I learnt more about them. When I heard that many kickstarter projects have become a huge success I realized that there is a big potential in this way of financing projects. Looking at application development I could clearly see that after the kickstarter reached the planned goal most of the people that invested in the project became active followers, provided valuable feedback and shared their own ideas and suggestions with the developers, which (in my opinion) hugely impacted the quality of the final product. Now, just days from starting my own company, I really appreciate initiatives that promote entrepreneurship and help small companies (that don't have big initial capital) allowing them to initiate projects that otherwise would not be possible.
It is true that there have been many successful kickstarted campaigns that did deliver products to their customer's satisfaction. If we look at this from this perspective, it is an excellent idea that is vastly superior to traditional development, as well as allowing the people to become more invested (literally) in the project and support ideas that otherwise wouldn't be possible.
DeleteHowever, it is also a fact that many finished projects had significant delays, had to remove some features in the process, or didn't turn out to be exactly what they promised. And while advertisment and grand plans are a natural part of crowdfunding process, it can also result in some of the investors feeling disappointed and/or cheated.
In some cases, Kickstarter was also used by the otherwise rich and famous people to launch some campaigns that could be described as frivolous. More often than not these fail to attract the attention of public, but it still serves as a reminder that the crowdfunding idea can be abused in a way. Potential investors might become annoyed with such projects and lose interest in the kickstarters entirely - even if it's merely a small minority of bad ideas.
Two years ago I was a supporter of crowdfunding (I helped in several campaigns) but now I am against these platforms. The idea of this funding was to help people in the development of projects but now these platforms are nothing but huge online shop. Because this changed now many projects are over 100k USD... Also many projects despite the funding didn't materialize. People have lost a lot of money because they bought the product for even tens of dollars or more. It happened that the PayPal which handles the kickstarter began to block the money of suspicious projects.
ReplyDeleteSorry for typos but it's hard for me to browsing the blog and write the post ;)
Did the projects you personally supported fail to materialize as well? Perhaps this is the usual case of delays that is fairly common with crowdfunding projects? While something that is immensely displeasing to investors, it is the unfortunate reality of this process and doesn't always mean that the project has failed for good.
DeleteHowever, I agree that this is a big problem and probably the biggest challenge of crowdfunding in the future. The process should be more similar to pre-orders, rather than a gamble, and properly protect the customers from both negligence/lack of creator's experience, as well as simple scams which were supposed to fail right from the start.
I've never met with such a form of financing; this is curious case for me and seems to be promising. On the other hand, I wonder whether this new form of financing so much different from the old solutions in the form of a sale of shares on the stock exchange by a limited company.
ReplyDelete1. I have not reviews yet about this, but I'm interested in this form of investment activity.
2. Perhaps I should take a chance, to convincing himself whether it is not just gambling.
3. Is something is successful depends on the previously adopted criteria, if it was anticipated that completion date may change, I think it that is acceptable.
4. In this case, all people which invested they should accept (or reject) the project.
Buying shares is different - even if you look at it as supporting the company, you're supporting everything the company does. There are no separate shares for Project A and B, what happens to your investment is independant from you.
DeleteWith crowdfunding, you spend your money on a very specific goal, aiming for the finished product that you specifically choose. Now, whether it is completed successfully is another matter entirely, but the idea is sound.
4. Currently, there is no accept/reject option. Once the initial funds gathering stage is complete, the money is in the hands of the project author. Granted, if the end result is completely different from what was promised, this could probably be grounds for legal action, but if the differences are "significant but not crucial" it probably still counts as "successfully completed project".
It is potentially abusive, as cutting out features because of "financial constraints" could be used to simply scam people out of their money.
1. I think that crowdfounding seems to be a quite interesting method both for collecting money for starting a new project and for investing money. In my opinion this way of financing project is not a quite new one – some time ago I heard about funds which invested their money in projects. I suppose that the Internet “only” allowed private people to invest their money more efficiently and with better control. And, of course, the new name for such method had to be created ;-).
ReplyDelete2. Personally I have never invested in any crowdfounded project. The cause is I do not have enough money for investing and I do not look for “new” methods of investing – bank placements are all what I need nowadays.
3. I agree with Slawek that the term success is often depended on acceptance criteria.
4. I work as computer programmer in a department which types programs on client orders. I often meet situations when project requirements and goals change during development process. Thus such situation is nothing new for me. The problem is reacting to changing requirements. About exceeding deadlines I always mention the idea of the cone of uncertainty http://msdn.microsoft.com/pl-pl/library/hh765979.aspx#Hard. And as I read in one of presented articles – everyone have to remember that they do not buy a ready product.
1. While the idea itself is far from new, its popularity and accessibility is certainly different from similar concepts from the past. Whether this is ultimately good or bad, remains to be seen.
Delete4. It's true that delays are to be expected, this is nothing new after all. However, traditional projects are rarely paid upfront and in some cases there are severe penalties for major delays. This is compounded by the fact that some crowdfunding projects were complete failures that didn't refund anything to the investors.
1. What's your opinion on crowdfunding when compared to traditional financing methods?
ReplyDeleteI think that it it good idea and easy way to find found for realization of some ideas and doing new businesses. Crowdfunding seems to be easy way to find founds for realization some project it looks like that it is much more easier to get funds than in traditional way In traditional way you should prepare very good businesses plan you need to convince your investor for you project and what is more they wont much more of the shares from profits
2. Have you personally invested in a crowdfunding project? Why/why not, would you consider it at any point?
I never invested in crowdfunding because I don't know people who are responsible for that project and I don't have knowledge about them I rather want to know if that people will use my money in good way if they are hardworking and so on.Before I will invest my money I also want to know business plan to show if that investment can be successful
3. What do you think about projects that "succeed", but still fail to deliver the product at any point?
I agree with Slawek and Grzesiek that the term success is often depended on acceptance criteria.
4. What if the project changes during development and the end result is different from what was promised?
I think that changes in the project aren't problem as long as project is successful at the end. It is normal and very often situation that when we are working on some project there can be some changes. The problem is when because of changes that project fails, then all investors should have the right to get back their money which they invested
2. Some "serious" project creators provide more background information about themselves, their previous projects, could offer previews and demonstrations. While there is still a significant element of risk involved, "professional" kickstarter project can be very different from random person having a sudden epiphany while watching tv. Granted, it's still much less involved than in traditional projects, but if people want their ideas to succeed, they have to work for it.
Delete4. It is worth remembering that quite often, project creators offer special bonuses for their donators - with biggest contributors receiving the most significant ones. If said rewards cannot be delivered because project no longer offer such functionality or there are other issues preventing it, even a "success" can feel like failure to some.
Crowdfunding seems like a great way to enter the market - you get cheap funding and your first (very dedicated!) customers at the same time. From what I've seen it works best for production ready ideas which actually have a lot of development behind them already and could even be brought to the market any other way (with normal investment), but crowd funding is used instead as a marketing strategy (free viral advertising).
ReplyDeleteI'm not inclined to take part in such projects. These limited production, first gen products often have issues or defects. For example: the wrong kind of plastic is used, or something isn't ergonomic enough. These are unavoidable problems that can only be ironed out after the product is released. Personally, I don't like to beta test products, so I prefer to wait for the mass produced and improved version. On the other hand, some people want to be the first to own a new product and I get that, it's a different experience to be an early adopter.
The question about the success rate is a tricky one. I have read some horror stories about failed Kickstarter projects, but as far as I know those are isolated cases, for example:
http://money.cnn.com/2013/06/17/technology/kickstarter-scam-kobe-jerky/
And then there's this ongoing saga, with people actually trying to track down the project creator and make his life miserable, which is just sad:
https://www.kickstarter.com/projects/baker/airtracks-inflatable-all-terrain-camera-slider/comments
I'd have to agree with most of your comment. I consider Kickstarter to be a cross between pre-order, beta testing and wishful thinking. If it succeeds - great, more power to the project creators and I'll buy their finished product. I did just that few times, when I learned that something I bought originated from Kickstarter and was just as good as its traditional counterparts.
DeleteCrowdfunding scams are rare, but so are traditional ones. In general, the anonymity offered by the Internet, combined with general naivety of its users, ease of creating supposedly viable projects and "expected delays" that mask lack of any progress - all of that makes it somewhat easier to perform such act online than offline.
I wonder if people will get refund their money. They are really determined to find a cheater and it looks like a serious public/social media investigation. What's interesting the site with a product offered by him is still on Kickstarter:
Deletehttps://www.kickstarter.com/projects/baker/airtracks-inflatable-all-terrain-camera-slider/
1. What's your opinion on crowdfunding when compared to traditional financing methods?
ReplyDeleteI think it is a very interesting alternative to traditional financing methods. It semms to be easier and faster way to get sources to materialize some promising projects.
2. Have you personally invested in a crowdfunding project? Why/why not, would you consider it at any point?
I have never invested in a crowdfunding project but the reason is not that I do not belive in such ideas or I think that it is to risky, it is only because I don’t invest at all- I am just not an investor type of person.
3. What do you think about projects that "succeed", but still fail to deliver the product at any point?
The term success is very subjective thus project that succeed can fail to deliver product and one that doesn’t succeed can deliver satysfying product but one day later than previously assumed or slighltly more expensive.
4. What if the project changes during development and the end result is different from what was promised?
I think it’s pretty common that project changes during development and main assumptions should aloow some lever of flexibility.
3. "Success" as defined by Kickstarter means successfully gathering the funds to begin the project. Whether it's actually completed, meets the deadline or folds along the way - that's responsibility of project's creator.
Delete"Slightly more expensive" isn't an option, as it's not allowed to alter the funding after the project begins. I'm not sure how this relates to various "top 100 contributors get 5 copies for free" or similar offers, but I assume that it has certain limitations as well.
4. It is a part of development process, yes. However, offering something and providing 50% of it, for the same price? In traditional projects, the "crowd" loses nothing, since it didn't pay for the development. It can also lower the trust in crowdfunding as a viable method of delivering high quality products and services, and thus deny the funding for future projects.
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ReplyDeleteIt seems to me that the idea of crowd-funding is very nice. I never invested in such projects, and it seems to me that a majority of people do not invest in them for profit but they rather treats it as a form of charity. It works rather like "I like it so i will found it to feel better and have something unique". I believe that is unfair if project "succeed" but still fail to be delivered but project changes during development are to me quite natural and even I would prefer that if someone can do something better even if it was not agreed.
DeleteI suppose this is a reasonable explanation for some people. Smaller donations can certainly be considered "gifts" and serve more as a sign of liking the idea, rather than actual investments.
DeleteHaving projects change for better would be great. Unfortunately, this is usually a fantasy - successfully completing the original design in a timely manner is already challenging enough. Even if that happens - who knows, perhaps the creators would prefer to keep the extra money to themselves instead of trying to expand the idea and run into potential problems. They can always do that later, using funds from sales or as a part of another crowdfunding project.
I had an opportunity to support few Kickstarter projects, so I know the platform and the idea. One thing that I would like to point out is that crowdfunding is not about “investing”, as you mentioned, it’s about buying or supporting a product. Investing is buying shares in a company, that’s not the case with Kickstarter.
ReplyDeleteThere is a new crowdfunding platform in Poland which allows you to actually invest in in a company (that means buying shares in a company not a product), it’s a http://www.beesfund.com/
I would also encourage you to support polish startups going on KS or other crowdfunding platforms.:) We already have few great successes like Intelclinic or BeSteady, let’s hope that there will be more.
1. What's your opinion on crowdfunding when compared to traditional financing methods?
It’s a great opportunity for some small/new companies (startups) to acquire funding needed to create their dream project. Crowdfunding is a great supplement of others forms of financing. Many startups are not able to gain an investor (usually because of not big enough ROI), get a credit in a bank (no financial history) or financing from FFF is not enough (it’s usually small amount of money).
So I believe that crowdfunding is a good, but not only, form of gaining money for completing your product.
2. Have you personally invested in a crowdfunding project? Why/why not, would you consider it at any point?
Yes, I did, and I’m waiting for results at the moment. I don’t consider it as a financial gain for me but as a help for a company that is working hard to make something new done.
3. What do you think about projects that "succeed", but still fail to deliver the product at any point?
It’s an option. From the beginning everyone is informed that those projects are not done yet. It’s quite obvious for me that not every project is done on time and in budget. Some fail because they underestimated money needed to create the product. Especially that if you look at Kickstarter, you can see many hi-tech initiatives, there’s a big chance of not delivering.
Other very important thing about Kickstarter, that many people don’t know, is that money that is gathered by startups are way smaller than it appears to be. It’s a common mistake made by startups going on KS, and at the end they end up with not enough money to accomplish their product.
Where the money is going? KS is taking few percent, Amazon payments is taking another (it gives you almost 10% less money for the project) but that is nothing. Around 20-30% (!!!) of money cannot be drawn from payers bank account (variety of reasons) and Amazon payments is totally ignoring that. Now imagine that. You are going on KC thinking that $100K is enough to end your product. You make $105K so you are now responsible to deliver. In few days you realize that you got $65K… great, but I need around $100K to make it done – what now?
4. What if the project changes during development and the end result is different from what was promised?
There should be an option to get money back (which is not there…). On the other hand, Kickstarter and other crowdfunding platforms are not “regular shops”, you’re not buying bread or socks. ;) The idea of final product is shifting all the time, for me it’s obvious, so I’m prepared for changes.
That's great you mentioned about how actually look tghe situation with real amount of money which are gathered by KS. Many people don't realize that and for startups it's a really big problem.They need to take this into account when planning the project budget.
DeleteA very good post particularly directed to a group of specialists. I think that it will be used in the future, but or it will popular this time will tell. With such a financing hard to identify the resources allocated to project. Quantity funds may change with the duration of the project. By asking the question "Is it not sometimes gambling" you were right. According to me it is in a sense gambling. We invest the money with high risk. Because we do not know whether we receive reimbursement of or whether it will be profitable. The subject is a very interesting for me. I fear that in most countries, crowdsourcing is not regulated by law. Therefore, until the introduction the rights associated with crowdsourcing. Personally at the moment I will not invest in such projects.
ReplyDeleteI believe the crowdsourcing is a very good idea. It gives a lot of new
ReplyDeleteopportunities to those who can't get financing by traditional methods, for
example through bank loan. I have invested with Kickstarter one year ago
into a company planning to make "glow-in-the-dark" plants, by genetically
modifying regular plants. I paid $ 250 and they promised to send me seeds
of fluorescent rose, once it is ready. They couldn't get the project of
the ground for 2 years looking for the traditional investor. With the help
of Kickstarter and crowdfunding they were able to get the first positive
results in 6 months !
At the moment they had to delay promised February 2014 delivery, but I
think is't not big deal. I was waiting so long that 2 or 3 months longer is
not going to make much of a difference. On top of that they were very open
and honest about the delays. They have sent email to apologize and offered
their sponsors 2 options to choose :
- deliver plants as is now (glowing but not very bright)
- wait few more months for improved version
Majority of the crowd have selected the second option.
That proves that if a Company is honest and stays in good communication with
it's sponsors, some delays and unexpected technical problems will not derail
the project , even a crowdfunded one.
Another interesting crowdfunded project is mentioned in the excellent
article on the new 3D printing technology, which is going to revolutionize
the world as we know it http://www.cnbc.com/id/101638702 . I highly
recommend reading it.
Have you heard that Kickstarter bans project creators from giving away genetically-modified organisms?
Deletehttp://www.theverge.com/2013/8/2/4583562/kickstarter-bans-project-creators-from-giving-GMO-rewards
Regarding crowd funding the big issue is the coming out with the idea you want to have money for.
ReplyDeletePresenting the project you must be aware that big corporations can easily steal your idea, improve it and produce in shorter time to market. They have enormous power and economic base that is why they can always do things faster.
I hope that organisations which constitute crowd founding are ready to mitigate that idea stealing risk. They can offer some compliance help to protect the true inventor from taking over his work and ideas.
Recently I had a chance to see Indiegogo campaign backing the build of the first fully open source and community based hardware cell phone from Canonical/Ubuntu.
The campaign Ubuntu Edge was introduced by Canonical (http://www.engadget.com/2013/07/22/ubuntu-edge-smartphone/).
It was one of the most widely calculated aiming to raise $32 million.
Canonical that is a base for Ubuntu could easily found that amount of money but they decided to do the opposite. They wanted to give the community a chance to agree about the shape and the future of the device and platform (Ubuntu Edge).
The campaign did not meet the full target but the amount raised reached $19 million which shows the potential.
It is a good sign that people and the community are ready to take part in backing and moving forward with financial responsibility for bold technological ideas.
1. What's your opinion on crowdfunding when compared to traditional financing methods?
I think that it is a valuable alternative.
2. Have you personally invested in a crowdfunding project? Why/why not, would you consider it at any point?
No I have not. It is probably because I did not find time to read more about the whole process and to compare available projects.
3. What do you think about projects that "succeed", but still fail to deliver the product at any point?
Delivering a final product is a complex problem. There are many caveats on the way. It is very easy to miscalculate time or money.
4. What if the project changes during development and the end result is different from what was promised?
I think the rules of the crowd funding provides some guidelines how to cope with situations like described in the question.
It is a question about the causes of the change and if they are acceptable to the community.
1 What's your opinion on crowdfunding when Compared To traditional financing methods ?
ReplyDeleteI really like this method of raising funds . This gives you a chance to build projects that under normal market conditions will probably not be able to stand . Many of them may not be particularly super innovative, but it responds to the needs of a society that large companies often neglect .
2 Have you personally Invested in a crowdfunding project ? Why / why not , would you consider it at any point ?
Yes, I invested in two game consoles based on Android (Ouya and GameStick ) :
https://www.kickstarter.com/projects/ouya/ouya-a-new-kind-of-video-game-console
https://www.kickstarter.com/projects/872297630/gamestick-the-most-portable-tv-games-console-ever
I did it more out of curiosity and because of desire to get something unique, which is not available in typical store.
I had to wait for these products (about half a year or so) but I like them and they met my expectations. Unfortunately I do not have much time to use them ;)
3 What do you think about projects that " succeed ", but still fail to deliver the product at any point ?
In my opinion, as colleagues wrote earlier, it is inscribed in the nature of the project. I invested in products that were actually already created and only had to wait for their production in its final form. I think that people who invest in doubtful projects should be aware of the risk of failure .
4 What if the project changes during development and the end result is different from what was promised ?
It is also natural for me, because in most cases we do not buy the finished product. We only support idea and its development. This gives you an incredible opportunity to observe how the product is being created, and that you usually do not see in normal market situations.
In my opinion if changes in the product cause it's not completed they should return the money to investors.
What's your opinion on crowdfunding when compared to traditional financing methods?
ReplyDeleteCrowdfunding this is a very interesting platform for launch of new concepts and ideas.
2. Have you personally invested in a crowdfunding project? Why/why not, would you consider it at any point?
Kikstarter is unfortunately not available in Poland. Crowdfunding platform in Poland is not effective and are uninteresting projects https://wspieram.to/.
3. What do you think about projects that "succeed", but still fail to deliver the product at any point?
Projects on the platform Kikstarter are very revolutionary, fresh and innovative. Have the right to a failed lar part of them.
4. What if the project changes during development and the end result is different from what was promised?
Many of the projects varies during development it is not amazing that change. The bottom line is that the most revolutionary ideas can arise is that Crowdfunding platform.
Nice Post thanks for sharing this post..
ReplyDeletecrowdsourcing