Reminder: Sometimes Crowdfunding Campaigns Go Wrong

Many products are launched via crowdfunding campaigns, and in theory, both the business and end-users benefit from the opportunity. It helps companies evaluate the demand before committing to large expenses, and reduce their financial risk, while end-users pledging in a crowdfunding campaign will be the first-ever to get the product, and often at a significant discount compared to the eventual retail price.

But the flip-side is that they are risks for backers, they did not just buy a product online, but bet on the developers to deliver the products. Sometimes the project fails due to incompetence, unexpected challenges, or even fraudulent behavior from the developers. I remember one project where one of the developers just decided to buy a house with the funds raised instead of developing the promised 3D printer.

crowdfunding campaigns fail

I was reminded of this important point by email this morning, as I covered TAIHE Gemini 15.6″ full HD or 4K portable display last year, with the project ending up raising over one million dollars from around 3,600 backers on Kickstarter.

Sadly, it did not end well, and it appears most backers did not receive anything and at least some who did, received a defective unit. The company stopped writing updates with the last one entitled “Update after a period of silence” being dated October 8, 2019, and the website trytaihe dot com is now offline.

taihe october 2019 update

We can also see a long list of complaints in the comments section of the crowdfunding campaign.

I have sent numerous emails re not receiving my order nor being able to submit the survey. I am requesting a full refund.

I invoke my rights under Kickstarters terms of use

Section 3 states (redacted to the relevant section):

Don’t lie to people. Don’t post information you know is false, misleading, or inaccurate. Don’t do anything deceptive or fraudulent.

Section 4 states (redacted to the relevant sections):

* they’re able to demonstrate that they’ve used funds appropriately and made every reasonable effort to complete the project as promised;

* they’ve been honest, and have made no material misrepresentations in their communication to backers; and

* they offer to return any remaining funds to backers who have not received their reward (in proportion to the amounts pledged), or else explain how those funds will be used to complete the project in some alternate form.

Some will try to recover their money, but it will be hard, as the police are limited to what they can do, especially when international money transfers are involved, the cost of recovering the funds are just too high, due to the legal work, translations, and intergovernmental communication needed. The funds raised on Kickstarter probably went to China a long time ago, and even lawyers won’t be able to help due to the low amount per victim, and complexity of the case.

Kickstarter is an intermediary, so there’s little they can do once the money has been released. However, they do have the incentive to avoid this type of issue occurring too often, as many of the victims in the Taihe Gemini display case will never use a crowdfunding platform again.

The risk is especially high when a company was just set-up for a given project, as they can just close with little to lose if something goes wrong. If they have existing products and an existing customer base, they’ll be more inclined (and financially capable) to take a temporary hit and reimburse their backers for the long term viability of the company.

So it’s best to treat any pledge to a crowdfunding campaign as a small investment that can go down or up as a stock would, or simply be patient and wait until the product retails.

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