Indiegogo's "guaranteed shipping" is the beginning of the end for traditional crowdfunding

[Shawn Knight]

A hot potato: It’s concerning that crowdfunding may be taking the commercial route, seemingly pushing out independent creators and their ideas in favor of big companies that bring their own financial backing to the table.

Traditional crowdfunding popularized by services like Kickstarter and Indiegogo are inherently risky. Whether intentionally, through misfortune or via incompetence, some campaigns are going to fail and backers will be left empty-handed. It’s unfortunate but like playing the stock market, it’s a risk that supporters are aware of up front.

This fact has tarnished the reputation of crowdfunding which has prompted organizers to introduce some buyer protections. I’m all for that but when it disrupts the spirit of crowdfunding, it starts to become worrisome. Allow me to explain.

Indiegogo CEO David Mandelbrot tells The Verge that his company will soon be expanding a payment method called “guaranteed shipping” to crowdfunding campaigns (it has already been tested in Indiegogo’s Marketplace which resembles eBay and Etsy). Those who back guaranteed campaigns are guaranteed to get their item; if they don’t, they’ll get their money back. Sounds great, right?

Well, not so fast.

Indiegogo won’t be footing the bill for refunds. Instead, creators participating in this program will have their funds withheld until the product ships. But wait, isn’t the whole purpose of crowdfunding to generate revenue to help design, manufacture and ship a product? How is that going to happen if funding is tied up until after a product ships?

Welcome to the commercialization of crowdfunding.

As you may have noticed, large companies that already have the financial backing to create products on their own have been dabbling in the crowdfunding space as of late, using it as a sandbox to play with ideas. These companies can afford to foot the bill for development and manufacturing up front and thus will benefit from offering backers a “guarantee.” Small start-ups with little more than a vision for a great product don’t have that luxury, hence why they turned to crowdfunding in the first place. For them, this “guarantee” is a major roadblock.

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https://www.techspot.com/news/77429-indiegogo-guaranteed-shipping-beginning-end-traditional-crowdfunding.html

 

[fps4ever]

Sounds like a great scheme for Indiegogo to hold on to the money as long as possible to earn interest.

 

[mgwerner]

While I can see the point the author is making, and can agree to an extent, crowdfunding was already ruined by the campaigns that failed to follow through with their plan, and gave nothing but frustration in return for the money "invested." Yes, it is a gamble, and some projects just fall through. But the platform itself was allowing dodgy people with glitzy presentations and not enough know-how to put up their project for funding. Just being on a platform like KS or IGG should have meant they had been judged as probably. I found the failure rate on those I supported at closer to 25% than the 10% often quoted, which should have been addressed at the site level, not the user level.

The most frustrating thing, and what made me abandon crowdsourcing, is the lack of backbone from many of those who failed. I understand things happen, and that life is tough sometimes. However, it is never acceptable to hide from your supporters, fail to give updates on progress, refuse to answer questions, blame everyone but your own lack of business sense and know-how on your failure. I see it as a generational thing, with young folks who have an idea thinking the world owes them a break, when it really only gives an opportunity to succeed or fail on your own.

Good riddance to a bad model, in my books. Costly lesson for some, but if your idea is good enough, someone will back you. It just does not have to be me.

 

[Evernessince]

While I can see the point the author is making, and can agree to an extent, crowdfunding was already ruined by the campaigns that failed to follow through with their plan, and gave nothing but frustration in return for the money "invested." Yes, it is a gamble, and some projects just fall through. But the platform itself was allowing dodgy people with glitzy presentations and not enough know-how to put up their project for funding. Just being on a platform like KS or IGG should have meant they had been judged as probably. I found the failure rate on those I supported at closer to 25% than the 10% often quoted, which should have been addressed at the site level, not the user level.

The most frustrating thing, and what made me abandon crowdsourcing, is the lack of backbone from many of those who failed. I understand things happen, and that life is tough sometimes. However, it is never acceptable to hide from your supporters, fail to give updates on progress, refuse to answer questions, blame everyone but your own lack of business sense and know-how on your failure. I see it as a generational thing, with young folks who have an idea thinking the world owes them a break, when it really only gives an opportunity to succeed or fail on your own.

Good riddance to a bad model, in my books. Costly lesson for some, but if your idea is good enough, someone will back you. It just does not have to be me.

That 10% figure is likely accurate. I've personally never had a failed campaign.

It's also pretty callous to just throw away the idea of crowdfunding because you personally were burned. The benefits of creators being able to directly fund their projects cannot be understated. Just for an example, VR itself was crowdfunded starting with the Oculus Rift. There very likely would have never been VR at all if Crowd funding wasn't possible.

We are seeing more innovation now thanks to crowdfunding then prior decades. Instead of a select few wealthy investors deciding what to fund, you decide what to fund. I for one am happy we are not as bound to the whims of a few.

 

[D3z4R1]

...

That 10% figure is likely accurate. I've personally never had a failed campaign.

It's also pretty callous to just throw away the idea of crowdfunding because you personally were burned. The benefits of creators being able to directly fund their projects cannot be understated. Just for an example, VR itself was crowdfunded starting with the Oculus Rift. There very likely would have never been VR at all if Crowd funding wasn't possible.

We are seeing more innovation now thanks to crowdfunding then prior decades. Instead of a select few wealthy investors deciding what to fund, you decide what to fund. I for one am happy we are not as bound to the whims of a few.

I totally agree. I've backed a few campaigns on IGG and only one on KS; thus far only one campaign has failed me. I understand the risk of contributing to either platform and accept the loss. Admittedly, my only gripe with these campaigns is the lack of feedback and updates from the failed campaign; all others have been satisfactory in all manner for their respective project.

 

[mgwerner]

That 10% figure is likely accurate. I've personally never had a failed campaign.

It's also pretty callous to just throw away the idea of crowdfunding because you personally were burned. The benefits of creators being able to directly fund their projects cannot be understated. Just for an example, VR itself was crowdfunded starting with the Oculus Rift. There very likely would have never been VR at all if Crowd funding wasn't possible.

We are seeing more innovation now thanks to crowdfunding then prior decades. Instead of a select few wealthy investors deciding what to fund, you decide what to fund. I for one am happy we are not as bound to the whims of a few.

Not callous, a personal choice, as stated.

You are completely off-base with VR. Long before the creators of Oculus were out of diapers JPL and NASA were pioneering VR, in the mid-60s.

I suggest you do some reading on innovation and invention, and you'll discover the actual truth that little innovation has actually occurred in the last few decades. Outside of very specific and highly technical fields, there is really none to speak of. IGG and KS are not places where the next big thing will happen. Look to a research lab for that, where either blue sky research or the profit motive drive innovation.

 

[Evernessince]

Not callous, a personal choice, as stated.

You are completely off-base with VR. Long before the creators of Oculus were out of diapers JPL and NASA were pioneering VR, in the mid-60s.

I suggest you do some reading on innovation and invention, and you'll discover the actual truth that little innovation has actually occurred in the last few decades. Outside of very specific and highly technical fields, there is really none to speak of. IGG and KS are not places where the next big thing will happen. Look to a research lab for that, where either blue sky research or the profit motive drive innovation.

https://en.wikipedia.org/wiki/Virtual_reality

NASA didn't have anything VR until the late 70s according to wikipedia. Going to need to see your source on where you got that mid 60s number.

Second, bringing VR from experimental laboratories to the consumer space is a huge accomplishment. They aren't just one off gimmicks like Nintendo's virtual boy either.

No technical accomplishment? The display systems have made leaps and bounds, the optics are superior, the design is better, the controllers are better, the sensors are better, the price is good. Yeah, no technical achievement here, just better by every measurable metric of past VR systems that were either specialized systems or Gimmicks.

There is profit motive in a research lab or on IGG / KS. That is a moot point. The only difference is the funding source

 

[mgwerner]

Not callous, a personal choice, as stated.

You are completely off-base with VR. Long before the creators of Oculus were out of diapers JPL and NASA were pioneering VR, in the mid-60s.

I suggest you do some reading on innovation and invention, and you'll discover the actual truth that little innovation has actually occurred in the last few decades. Outside of very specific and highly technical fields, there is really none to speak of. IGG and KS are not places where the next big thing will happen. Look to a research lab for that, where either blue sky research or the profit motive drive innovation.

https://en.wikipedia.org/wiki/Virtual_reality

NASA didn't have anything VR until the late 70s according to wikipedia. Going to need to see your source on where you got that mid 60s number.

Second, bringing VR from experimental laboratories to the consumer space is a huge accomplishment. They aren't just one off gimmicks like Nintendo's virtual boy either.

No technical accomplishment? The display systems have made leaps and bounds, the optics are superior, the design is better, the controllers are better, the sensors are better, the price is good. Yeah, no technical achievement here, just better by every measurable metric of past VR systems that were either specialized systems or Gimmicks.

There is profit motive in a research lab or on IGG / KS. That is a moot point. The only difference is the funding source

My mistake, it wasn't JPL, the guy had just left the Navy and DARPA: https://vrroom.buzz/vr-news/guide-vr/sword-damocles-1st-head-mounted-display
1968.

Your list of accomplishments are tweaks enabled by Moore's Law, and thus a natural progression of the tech. Admirable, and impressive, but tweaks nonetheless.

 

[Evernessince]

My mistake, it wasn't JPL, the guy had just left the Navy and DARPA: https://vrroom.buzz/vr-news/guide-vr/sword-damocles-1st-head-mounted-display
1968.

Your list of accomplishments are tweaks enabled by Moore's Law, and thus a natural progression of the tech. Admirable, and impressive, but tweaks nonetheless.

The cited HMD was specific use, heavy and required mounting, didn't include Roomscale tracking or advanced tracking, no VR controllers, and had extremely limited display capabilities among many other limitations.

Saying that is a tweak compared to modern headset is like saying modern cars are a tweak of the model T. It completely ignores how literally every piece of the puzzle has been completely redesigned and greatly improved. Might as well start calling all modes of transportation a "tweak" on the wheel.

 

[Ravey]

I have always had an issue with this type of crowdfunding. Investors only get a few Items in return for thier Investment. For me that's not enough. If I'm going to invest in a product/company I want a share of the company or a share of the sales of that particular product.

It's no wonder large companies are now getting into this platform, it's the new "pre order" or "buy into the beta and get the game early" scheme.

 

[ET3D]

Sounds like a positive development to me, given that it's an option.

This will allow companies to offer a lot more experimental products, and judge market interest, while removing most of the risk from buyers. This means more people will be able to show interest, and more interesting products will arrive on the market.

Most big crowdfunding projects are done by established companies or creators anyway. The small ones can still draw on the old crowdfunding crowd, so I don't think it's a big issue.

Sounds like a great scheme for Indiegogo to hold on to the money as long as possible to earn interest.

Indiegogo is giving the money to the project creators. So no. If you said the same about the companies creating the projects, yes, it would be true.

 

[fps4ever]

Indiegogo is giving the money to the project creators. So no. If you said the same about the companies creating the projects, yes, it would be true.

"Instead, creators participating in this program will have their funds withheld until the product ships."

Um, what part of my original post was wrong, please point that out? We all know the companies will eventually get the money.

 

[ET3D]

"Instead, creators participating in this program will have their funds withheld until the product ships."

Um, what part of my original post was wrong, please point that out? We all know the companies will eventually get the money.

Sorry, my mistake. After reading the Indiegogo FAQ I thought this applied only to the market, but reading the Verge article now, I see that it will indeed be applied to crowdfunding, at least initially. It makes sense for the Market (sellers don't normally get paid for pre-orders until they're shipped; although buyers also normally don't get charged), but doesn't make much sense for crowdfunding.

I'm guessing that in this case this can indeed only apply to companies who want to get a large number of guaranteed pre-orders, and not for normal crowdfunding.

Indiegogo has always been somewhat predatory, IMO. The whole 'flexible funding' thing, and charging up front.