Crowdfunding

Buyer beware: What happens when crowdfunding kills Christmas?

By Oliver Smith 5 January 2017
image: istock/RapidEye
Summary

How to fail gracefully.

Kickstarter and Indiegogo are full of awesome creations, from smartwatches to the latest flying drones, projects created by entrepreneurs that need your backing to get off the ground.

But rewards-based crowdfunding – just like equity crowdfunding which we’ve covered before – isn’t free of risk.

Things don’t always go as expected, sometimes with horrible results, even at Christmas.

In the last few weeks we’ve seen three examples of Kickstarter and Indiegogo projects that have turned sour, but have dealt with the problems in vastly different ways. Here are three good, bad and ugly ways companies handled failure.

The good – Orbitkey

I fell in love with Orbitkey’s slim key organiser at first sight, with its promise to transform your cluster of keys to a beautiful, silent and organised stack.

The company had prior form, the first version of the Orbitkey was a hit on Kickstarter and one of the top funded crowdfunding campaigns of 2013, so this new version shouldn’t hit too many problems… should it?

With a Kickstarter launching in July 2016 and a delivery date of November 2016, I and 10,000 other backers supported the project with over $500,000, putting down $30 or more for what should be a great Christmas present.

The first sign of trouble came in November – yes, they were supposed to be shipping in November – when Orbitkey posted an update saying that a manufacturing delay would push back dispatch of Orbitkeys “until the second week of December”.

Still, just in time for Christmas…?

But by the end of November Orbitkey disclosed a second manufacturing problem, this time one that would push delivery of most people’s Orbitkeys into the new year – ruining chances of them being used as presents.

Despite the delays Orbitkey gave great weekly updates throughout the project, making sure all their backers were kept up-to-date with the latest production timeline.

Orbitkey designed some lovely gift cards to appease backers who'd hoped to use their Orbitkey as a present.

At this point Orbitkey went even further and created some beautifully designed gift cards – with a sneak peak of the Orbitkey – that could be printed and given to friends and family to apologise for the slight delay in their present this Christmas.

My Orbitkey is now due to arrive in the next week, but I have nothing but praise for the company which has kept me informed every step of the way and has gone above and beyond to support its backers.

Anova's Christmas deliveries were a textbook case of bad customer service.

The bad – Anova Precision Cooker

I had my eye on Anova’s futuristic internet-connected cooking device since it popped up on Kickstarter back in 2014 writes The Memo’s Editor in Chief Alex Wood. 

Anova’s precision cooker is a tool for Sous Vide, a way of replicating high-end restaurant food by cooking in a temperature-controlled water bath.

Fast forward two years, following rave reviews, it was finally time to get one. On Dec 5, I emailed Anova and the company confirmed – I could get one delivered to the UK in time for Christmas.

Once ordered, I heard nothing by email from the company for weeks, but checked Anova’s website and found the company changed its own shipping schedules without any explanation

I wasn’t alone, I found disappointed customers who had ordered all the way back in November, forced to boil their Christmas sprouts the old-fashioned way:

To be clear – I, and by the looks of social media and Anova’s own support pages, received no direct communication from the company whatsoever.

Christmas Eve came round.

Success! I received an automated email confirming my device had reached the UK and was out for delivery.

But as the hours ticked by I waited for the van to arrive.. and was disappointed. A quick call to the courier confirmed my worst fears, yes – they had my package, but Anova hadn’t paid for Saturday delivery so they were holding it till December 28.

Things can go wrong with companies both big and small.

But Anova’s behaviour online was a textbook case of what not to do. The company gave the same oh-so-personal response to every angry Tweet or Facebook post:

“Currently working on a solution for all those affected by the delays” a classic case of corporate guff with no meaning whatsoever.

Any company that can find a solution at 10pm on Christmas Eve is frankly, a miracle worker. Just admit you’ve screwed up and move on. Anova made the situation even worse by creating false hope and sending people (literally) around the houses.

Different stories appeared including “free upgrades to expedited delivery with different courier”, which turned out to be untrue. And right up until Dec 25, it continued to promise delivery in time for Christmas.

Worse still, the company dodged calls and emails until finally acknowledging deliveries would not make it in time for Christmas on….December 26.

I did receive my device on Dec 28. But true to form, despite promises, I still haven’t received any email communication from the company or direct apology.

It’s a real shame as it is a fantastic product. With millions of dollars in the bank after successfully crowdfunding on Kickstarter in 2014, I thought this company was ready to play with the big boys.

But with chaotic customer service like this, I simply can’t recommend it to Memo readers.

The ugly – Vinaya

Last year Vinaya, creator of mindful wearables led by CEO Kate Unsworth, launched an popular Indiegogo campaign for its latest smart bracelet called Zenta.

In July 2016 the campaign ended, soaring past its target by 239% and raising over $270,000 from hundreds of backers.

While many backed the project with just $150, four people gave nearly $5,000 for a Digital Detox Retreat with the Vinaya team and 20 others gave $1,000 with the promise of 10 Zenta bracelets by March 2017.

The last public update from the project came in August, where Vinaya promised to email backers directly with monthly updates, emails that apparently never came…

On New Year’s Day the company sent out a surprise email to its backers, bearing bad news:

“In short, the business had some unexpected, and unfortunately detrimental, cash flow issues mid-December and as a result, we had to close the company.”

Vinaya said its plan is to restructure the company with the hope of becoming a new company in the future, of which they hope to gift a new product one day or offer shares in the company.

Vinaya told its large financial investors, on the other hand, that they would be guaranteed equity in whatever company Vinaya becomes.

For backers, their money, some of which was only taken from bank accounts two weeks before Christmas, and the hope of anyone ever receiving a Zenta bracelet… is all but gone.

Dozens of furious customers, some of whom are likely out hundreds if not thousands of dollars, took to Indiegogo’s discussion boards in anger at Vinaya’s actions.

I’m hoping that some kind of investigation takes place to prove the company really died and that they just didn’t scam us all and taken our money,” wrote one angry backer on Indiegogo.

Zenta - the latest wearable from Vinaya.

New Year’s resolution

Any crowdfunding campaign is a risk, whether it’s from an established business or a plucky upstart.

Campaigns can, and often will, end in tears.

So our advice, as with equity crowdfunding, is the same: buyer beware. And if you’re ordering a crowdfunded gift for Christmas next year… maybe it’s best to have a backup.