In the last couple of days you might have heard about the "Ring" by Logbar. It was supposed to be a bluetooth ring that could charge wirelessly and control anything with gestures from your finger, emphasis on supposed to. This is a product that was successfully Kickstarted to the tune of $880,998 ($630,998 more than the initial goal of a quarter-million) by promising the world, by promising "this is the future". Now that it has launched, it appears the future is a lot like the present, there are bugs, people lie and sometimes things simply don't work.
The product from every indication, is terrible. Quinn Nelson of Snazzy Labs released a popular video (below) labelling it the worst product ever and after seeing the video and his grievances it's hard to disagree. The ring is massive, apparently uncomfortable to wear, does not charge wirelessly, is buggy from a hardware standpoint, works only 5-10% of the time and requires the companion app to be open and running to even attempt a gesture. The result of which is spending significantly more time getting your shiny ring to gesture the volume up than you would simply pressing the volume button.
So yes. Ring is terrible, you shouldn't buy one, especially considering the $269 price tag for what amounts to gaudy jewelry. Unfortunately stories like this aren't nearly as rare as you would hope. Everyone has a heard of or been part of one of these stories, where the product is pitched as a cancer cure and is delivered as a cough drop, if it even delivers at all. Products like myIDKey; a login manager USB and projects like Yogventures! are just a couple examples of crowdfunding success stories that turned into disasters when it came time to deliver. And it sucks, it sucks to see good ideas fail and it sucks to buy into something (literally) that turns out to be nothing but smoke. So what is it about crowdfunding that creates these disasters?
Well it's a symptom of appealing to consumers for money rather than true investors. When you pitch to venture capitalists or banks you are proving that your business can be profitable, that you know what you're doing and you won't waste their money. When you're crowdfunding you're not pitching a company or selling the potential earnings potential, you're advertising a product directly to the consumer. You need to impress the potential customer to such a degree that they pay you months, even years in advance for the promise of a product. So where logic or expertise gets you through the doors at Andreessen Horowitz, the way to gather capital from the people is promises, big ones. So we see exaggeration, we see massive amounts of hype and too often we see lies; because "We think we'll be able to do this but we're not sure, maybe we can't do all these features" is not the way to separate people from their money. Telling people that with your product you can wave your hands like a wizard and control every device in your world, that is another story. While this is an incredibly effective fundraising method, it means that when your product is released you face expectations that are difficult to live up to, to say the least.
Another major issue with this sort of of crowdfunding is that it makes the internal issues of budget, problem solving and company politics into potential scandal. Developing technology, games and video series is difficult, there are issues that arise and sometimes the allotted budget isn't enough to work through the problems that crop up. These are difficult to deal with without the scrutiny of public pressure but the presence of thousands of contributors mean your business is constantly under a microscope. When a project is funded privately this is only a problem for the project itself. When the money has come from the people then mismanagement of money, failure to deliver on features or promises are a much bigger deal. This is the responsibility taken on by anyone who seeks funding via a community, when you have 5,000+ funders you've given yourself 5,000+ people to report to. Thus when these projects stumble (and they will) they face an angry court of public opinion rather than a quiet shutting of the doors.
If the Ring wasn't Kickstarted it wouldn't have been a big story, it would have just been a bad product that people would rightly choose not to buy. But because of the massive amount of hype, because regular people gave Logbar almost a million dollars to make this glorified paperweight, its lack of quality isn't just unfortunate, its unbridled terribleness feels much more personal.
None of this is to say that Kickstarter is inherently awful, it can be a great way to get funding for products that otherwise would never see the light of day. The issue is that in order to be successful, crowdfunding projects often have to promise far more than they are capable and subsequently experience the backlash of inevitable public dissatisfaction. It would be great if potential crowdfunders saw how toxic these situations can become, but as long as projects like Ring can triple their goal by promising the moon, we will probably see a lot more IOUs for celestial bodies.
Is crowdfunding viable as a business strategy? Do you have any Kickstarter horror stories? Let us know in the comments!