Kickstarter Should Do More to Protect Backers
Late last week, one of the creators behind a Portland-based Kickstarter campaign announced to his 1,246 backers that, despite his best efforts to produce the project he raised $122,000 to create -- a Vaudeville-esque board game called The Doom That Came To Atlantic City! -- he had failed. No game would ever be shipped.
"The short version," Erik Chevalier wrote, is that "the project is over, the game is canceled."
Naturally, several backers were furious -- a handful had kicked in over $1,000 in exchange for 'special' rewards -- but first it's important to get some context.
Plenty of Kickstarter campaigns dissapoint their backers.
Of the 44% of projects that are successfully funded, most projects end up getting delayed and plenty of others fail to meet the quality expectations of their backers. Certainly, this latest Kickstarter campaign was particularly egregious, considering the sum of money raised and the promises broken. ("All things are on schedule," Chevalier wrote in March 2013. "Still on the same schedule," he wrote in May 2013. "The project is moving along," he wrote in June 2013.) But it's hardly an anomaly.
Failure to Launch
I won't speculate on what Erik Chevalier did or did not do with the $122,000. Plenty of his backers have alleged fraud, and some have even claimed to file official complaints with the Oregon Department of Justice. On the other hand, it's very possible that Chevalier made a legitimate run at getting this thing off the ground, but encountered unforeseen costs. There are few hard facts at this point.
I reached out to Chevalier via e-mail, but he declined to speak over the phone. "Unfortunately I've decided to postpone any interviews or further public statements until after I've secured new, specialized legal counsel," he wrote late last night. "I have many meetings with firms scheduled this week and will hopefully have one selected in the next few days."
I'm not really sure what "specialized legal counsel" means (are there actual Kickstarter lawyers?), but it wouldn't be surprising if he ends up getting sued.
Last year, I wrote about Seth Quest, another Kickstarter project creator who raised $35,000 from backers to create the "Hanfree," a quirky iPad holder. Quest, a product designer, had no experience as an entrepreneur, and quickly ran out of money before any product could be created. One of his backers decided to take him to court.
"When you fail on Kickstarter, it's a very public failure," Quest said at the time. "It definitely derailed my career substantially. Your backers can give you massive support, but they can also tear you down if you fail."
Quest went bankrupt and decided to move to Costa Rica.
Satisfaction Not Guaranteed
Kickstarter, itself, has made it very clear that it has no legal liability in any dealings between backers and project creators. Their view essentially boils down to this: Backers must recognize that there are risks of supporting a project creator and backing any project. And Kickstarter will do its best police outright fraudsters, as they did last month with a phony beef jerky project. But there's no "satisfaction guaranteed" on the end-result of any particular project.
If you're unhappy with the "reward," or if the project never gets created, well, tough. Take it up with the project creator.
From the company's FAQ section:
Kickstarter does not investigate a creator's ability to complete their project. Backers ultimately decide the validity and worthiness of a project by whether they decide to fund it.
And from its Terms of Service:
- Kickstarter does not offer refunds. A Project Creator is not required to grant a Backer's request for a refund unless the Project Creator is unable or unwilling to fulfill the reward.
Kickstarter's Worst Nightmare
The problem, as I see it, is that despite the company's best efforts, many backers simply don't understand the risks involved in backing a project. Kickstarter knows this is a problem. Last year, they announced they had "allocated more staff to trust and safety." They issued a blog post titled "Kickstarter is Not a Store" and added a "Risks and Challenges" section to every single project page on the site. The Risks and Challenges section forced the project creator to list out all the potential risks the project may encounter, sort of an S-1 for crowdfunders. The section also linked directly to the company's accountability section.
This morning, I spoke with a Kickstarter representative who said the company has a policy against commenting directly on failed campaigns or disputes between users. He acknowledged the company's continuing efforts to educate the user base about potential pitfalls of supporting a backer. And he hinted at future blog posts down the road, but no structural changes in how Kickstarter vets project creators. Which is somewhat concerning.
Kickstarter is at a critical moment. Four years after their official launch, there is no doubt that Kickstarter has gone mainstream. It's become a trusted brand for launching new products. The OUYA, for instance, was backed by more than 63,000 people and raised close to $8.6 million.
There is no doubt in my mind that more entrepreneurs and more companies -- some with little-to-no experience -- will be attracted to Kickstarter to raise money and launch their projects. Besides the money, it's a fantastic vehicle for pre-promotion and marketing. At the same time, there will be more and more backers that see the site as a place not only to back "creative projects," but essentially as a market to pre-order cool products.
Of course, that should be Kickstarter's greatest dream, to become the defacto launchpad for new projects -- but I also wonder if it might quickly become their worst nightmare. So far, the Kickstarter failures --like The Doom That Came To Atlantic City! -- have been relatively modest in scale.
But imagine if the OUYA failed to deliver and closed up shop. There would be 63,000 outraged "customers."
It makes you wonder: Can Kickstarter keep up with its own success?