When Kickstarter goes bad

As a service website Kickstarter is very successful, it seems a day doesn’t pass without hearing about some new innovative Kickstarter project either being launched or getting funded. It has enabled some great new products which possibly might not exist without it. But what happens when a Kickstarter project goes wrong? Well, I thought I’d share an example of exactly that, to illustrate how it can happen and to also bring attention to what I consider an unethical element of Kickstarters modus operandi.

So far I’ve backed 16 Kickstarter projects, totalling US$2,014 with the highest single commitment being US$585 (for the excellent Rhino camera slider/dolly) and the lowest being US$1. Most have been delivered pretty close to the projected deadline, one (the Astro camera motion controller) was maybe 8 or 9 months later than their projected delivery date and while that was a little frustrating, great communication from the project creators meant that everyone was kept up to date with why it was running late, and the ramificiations. And they have since delivered a great product.

But there was one project which looked interesting in concept, a set of inflatable tracks for a camera dolly, which could be super useful when wanting to shoot in remote locations ie when you have hand carry all your gear. Interesting enough that on 26th October 2012 I committed US$375 to it. From my perspective that is a decent chunk of funds, but based on previous experiences I had faith in both the project AND in Kickstarter. But over the following year it turned out the guy who started the project simply disappeared with US$30k of other peoples funds. And Kickstarter? Well Kickstarter basically did nothing, NOTHING AT ALL.

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So Tom Baker originally estimated delivery for March 2013 and the last & final time he logged in to Kickstarter was August 2nd 2013, promising delivery 7 months late for October 2013. Then nothing…. No further communication. So this guy Tom Baker who did the runner with the $30k has been pursued, not by Kickstarter but by other people who lost their money to him. But one by one his contacts dried up – he disappeared from Facebook, so someone contacted the church that he attends. Someone else contacted a company he was partners in, only to find out he had done a runner from them as well. The local police were contacted, and credit card companies were contacted in the hope the payments could be reversed. But it seems there is no hope, I can basically kiss my US$375 goodbye and all that I am left with is a life lesson. But what is that life lesson?

Well, first Kickstarter is all care, no responsibility. As time passed many people who supported the project contacted Kickstarter support to no avail. At a certain point I got motivated & also contacted Kickstarter support – the reason for my motivation? Well as it turns out, the dodgy guy took off with most of the US$30k, but Kickstarter themselves ALSO took off with some of our money. See it doesn’t matter whether a project turns out to be an illegal fraud or a legitmate project, Kickstarter get paid regardless. When I discovered this fact I was appalled. Does it not mean that money is ‘dirty money’ and basically collected fraudulently? I can see no other answer than yes, YES IT IS! This was like rubbing salt & lemon on a cut.

I contacted Kickstarter support myself, explaining how we had been ripped off, and therefore can they please refund the illicit fee they took for the fraudulent behaviour. What I received was a series of platitudes, the first replies suggested I should contact the project creator asking for an update… My response:

Thanks for the reply.

This is clearly a case of fraudulent behaviour. Reach out to him all you like, he has not replied to any forms of communication – not just on Kickstarter, but anywhere online. There is no doubt in my mind that he has taken the money & disappeared.

> While we’re unable to issue refunds on behalf of creators

I appreciate this, but that does not include the fee that Kickstarter took, the dirty money I referred to & which your message does not address at all. As a first step I want to see that money refunded. If you do not refund it I feel Kickstarter is in effect complicit with his deception & dishonest behaviour. I have seen how banks who harbour illegal funds are forced to repay them – does Kickstarter want to be associated with that sort of behaviour?

Please do the right thing.

And their reply:

Thanks for the response. We’ve reached out to Tom to offer some best practices with regards to communicating setbacks and future production timelines to backers. I hope that this encourages Tom to break his silence and let his backers know what’s up – even if there’s no new news or good news to share.

I would recommend that you reach out to the creator again if you don’t hear from him in a while, but I would also encourage you to do so in a compassionate manner. Creators are only human, and being understanding and coming from an empathetic place may make Tom more receptive to letting his backers know about the project’s current situation.

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This, after there has been no response at all, after months of people asking polite questions??? I think its a bit late to be offering ‘best practices’ FFS!

 

So the moral of this story: if you are going to get ripped off by someone on Kickstarter, be aware that you are also going to get ripped off by Kickstarter as well. They will take their fee regardless of fraud.

But one has to wonder why?

- are they ‘tight’ for money?
Is the cashflow of the business so scarce that they simply can’t afford to spare the funds and ‘make good’ on fraudulent behaviour by people using their website? (Note I wasn’t asking them to refund the money Tom Baker took, I just wanted the Kickstarter fee refunded) Apparently not, this article mentions in 2012 they turned over $274 million, which if you calculate based on their fee of 5% (not counting the 3% payment processing fee) = US$13.7 million in 2012. Yet they still can’t bring themselves to refund the 5% fee of the stolen $30,000! Its US$1,500 of money they have no right to have. It seems such a small amount, especially when you consider the reputation damage instances such as this one create.

- is it because there is so much fraud they can’t afford to ‘make good’ on it?
One would hope not, but if thats the case then I doubt they should be considered a platform worth risking your funds with. To puruse this line of reasoning I asked google to search for ‘Kickstarter goes bad’ – there were 19,400,000 hits! Holy sh+t! Now some of them would be Kickstarter projects that didn’t make their target (although the first few pages of results that I checked were almost all Kickstarter scams/fraud) so I tried a search for ‘Kickstarter fraud’ – 723,000 hits!

Amongst those 723,000 hits was the answer to my question, in an investigation into Kickstarter and how it handles disputes, this article provides the answer:

‘Kickstarter advisor and board member Sunny Bates doesn’t deny the risks of pledging but argues the price of individual Kickstarter pledges is so low that even if fraud did rear its head it wouldn’t be worth the legal action from a backer.’

So I interpret this to mean: we don’t have to do the right thing, because your pledge won’t be big enough in value for you to come after us via legal action. Its a bit like saying: Ethics? We dont need ethics, unless they are legally enforceable.

And one of the comments on that article nails another aspect of their facade:

“it’s funny how they say they’re not a business. Your 5% cut says otherwise.”

As I quoted above they made US$13.7 million in fees in 2012, if they aren’t a business with a US$13.7 million turnover then what are they? And how come they are allowed to make & keep some of that money when it is made via fraudulent Kickstarter Projects?

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For me losing US$375 totally sucks but who knows, maybe the guy was a crack addict? Or was run over by a bus & killed or something. But surely if the latter was true, it would have been discovered by now. But what bugs me even more is the 5% fee Kickstarter took, it is a matter of principal and responsibility. But it appears Kickstarter are a bit sketchy on the principals part, and responsibility? Well, they are effectively complicit with the fraudster, thank you very much, call again!

So I guess thats it for me, I won’t be using Kickstarter ever again. And I strongly advise you to fully investigate the background of the individual people behind any Kickstarter project you might consider putting your funds into. And if you can’t find out much of their history online, do not back them.

Know this: if you get ripped off, there is nothing you can do, and Kickstarter will be of little help (but they will still profit from you)

 

 

5 Responses to When Kickstarter goes bad

  1. rene says:

    Hey Tim,

    While I understand your position, I think the solution proposed has workability issues from Kickstarter’s point of view.

    –I’m going to play devil’s advocate here–

    Everyone involved knows that any kickstarter backing undertakes an amount of risk.

    Kickstarter knows this, the people running the projects know this, and the backers know this.

    Kickstarter is best viewed as micro venture capitalism. They offer no guarantee of return on investment – and while they have a reasonable amount of safeguards in place (humans oversee applications to begin a project, projects must communicate risks and challenges, etc) they don’t make (and have never made) guarantees that any individual project will actually come to fruition.

    if they HAD made such a guarantee, you’d have a much stronger point to make here, but the fact is that they are explicit in stating the risk that backers undertake when they choose to back any given project.

    Kickstarter would argue that the fee they take does not have anything to do with the products delivered on the back end. – The fee they take is to cover the costs of the FRONT END of a project – web and video hosting, construction and maintenance of the kickstarter platform, legal negotiations with amazon and various countries, etc…

    In that respect they have delivered what you’ve paid for, and are therefore not entitled to a refund.

    Further, who is to determine when a project has failed? In this case it seems clear, but in many others that’s not really how it goes. As youv’e seen, some projects run waaay past deadlines, but eventually deliver. If Kickstarter pulled the plug on those projects just because they had run too long, it would be to the detriment of everyone.

    It would also put them in the business of guaranteeing the projects that posted to the platform, which as we’ve discussed, they are not currently in.

    When philip bloom posted about the digital bolex kickstarter he stated how hesitant he was to do so. This was because he is aware of the reach of his influence, and he didn’t want to encourage people to make a bet that this product would come to market given the limited manufacturing and design backgrounds of the principals in that project.

    look as his warning at the top of this post: http://philipbloom.net/2012/03/13/digitalbolex/

    —-

    my conclusion is that if someone posts a fraudulent kickstarter then you have a right to be angry with the fraudulent party, but an objective realization of the fact that kickstarter does not guarantee projects means that your anger should not extend to the platform that they used to defraud you.

    If someone committed mail fraud on you, would you stop sending mail?

    thanks for the indulgence. :)
    -Rene

    • tim says:

      I think how a business deals with their worst case scenarios is almost more important than how they deal with their best. Kickstarter are very good as singing the praises of their successes, but when it comes to their failures they do nothing & still get paid. For them a failed project, even a fraudulent one, generates the same revenue for them as a sucessful one. This is ethically wrong.

      I think your comments are fair up to a point. But that point does not include projects where it is very obvious to everyone that someone has committed fraud.

      “kickstarter does not guarantee projects” – this was never part of my issue, so it is pointless to bring it up in their defense. Everyone knows that.

      “an objective realization of the fact that kickstarter does not guarantee projects means that your anger should not extend to the platform that they used to defraud you”

      They are not a platform, they are a business that generates tens of millions of dollars each year. Calling them a platform somehow inferrs they are not responsible for the service they provide. And that service is not delivered if the project is fraudulent.

      As for your concerns about the cost of KS providing their service, a project can have a minimum total of even US$100, so US$5 would seem to cover the costs of running a project.

      But your conclusion is a straw man argument, as I already said I am not asking KS to guarantee the project. I am asking them that when a project has failed & been found to be fraudulent – and it would not be hard to set up parameters to assess when that has happened, then rather than send sanctimious emails a year too late, they should also acknowledge the loss for everyone including themselves.

      To use your mail reference, if I bought a product AND paid for shipping, and the product was never shipped do you think it would be fair to still pay for the shipping?

      And to again use your mail reference; if a courier company did receive a product for shipping and did not deliver it, I would DEFINITELY not use them again, ever. Unless they handled that bad situation ethically. If they did not, I would find another company & use them.

      While Kickstarter cannot guarantee any project, they do have the choice of whether to profit from fraud or not.

  2. WTF indeed. It is a damn shame. It is infuriating to hear you got ripped off, Tim. And a souring experience that would deter you from investing in future projects with creators who’d turn out to be legitimate in hindsight.

    Was the issue with issuing a chargeback with the credit card company one of time limits? (I.e., you can’t chargeback a transaction older than 90 days.)

  3. George says:

    Tim,

    All the points you make are valid. Refunding their fee is the least thing that KS could do, but it would probably create an unwanted precedent.

    However, this is nothing compared to what’s going on right now on KS. This is a project that’s close to getting funded and is so obviously a scam that it screams to high heavens: https://www.kickstarter.com/projects/1577656602/areal

    The owners of the project have ripped off footage from existing games, Unity packs, artwork etc. and when people wised up to it they just flooded the comments area with spam. Lots of people have contacted KS but so far the project has not been taken down.

    I think Kickstarter is far from the platform that they set out to be. So what if a few fraudsters get a few other people’s money? They still get their cut, right? And when pledging you agree to their conditions so their hands are clean.

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