Crowdfunding is Serious Business, Even On Kickstarter

Neil Singh didn’t understand Kickstarter or rewards-based crowdfunding when he donated to the Hanfree campaign in late 2011.

He isn’t alone. This kind of crowdfunding isn’t anything like your typical preorder. If you were to land on a Kickstarter campaign page without having any experience in crowdfunding, you may assume your “purchase” is guaranteed. It isn’t.

Kickstarter is not a store, after all, although this incident happened before their now-infamous blog post. Incidents like these drove Kickstarter to be more vigilant in their efforts to educate backers of how the platform works.

As for Hanfree, Inc recently ran a profile of Singh’s experience with the product, a hands-free iPad stand. He “donated” $70 to a Kickstarter campaign for the accessory assuming he was guaranteed delivery. The product never came.

Coincidentally, Neil Singh also happens to be an insurance lawyer based in Phoenix, Arizona. Now he’s suing Seth Quest, the creator of Hanfree.

Seth QuestSeth Quest is now bankrupt and in Costa Rica trying to figure out his next move in life. He said finding work has been difficult since his very public lambasting, and legal fees have rendered him broke.

This brings up some interesting questions and concerns…

  1. Crowdfunders: PROTECT. YOUR. ASSETS. If you’re going into business, protect yourself! Spend the money and file for some sort of legal business entity. If it isn’t business rule number one it’s awfully close.
  2. Is Neil Singh a jerk? Quest was likely to pay for his mistakes for a long time to come anyway. Should a lawyer be allowed to bankrupt someone over $70? Quest was planning on refunding everyone, too. (Read more: Singh sets the record straight)
  3. Is this what crowdfunding is all about? This entire story speaks a bit to the concern I raised in a post earlier this week. Obviously this isn’t what most crowdfunding stakeholders would like in the public narrative, but it’s happening. Will the nonsense that happens in the rewards-based crowdfunding space have any effect on equity and lending crowdfunding when it becomes legal?

I think the entire situation is a reminder that crowdfunding is serious business, even on Kickstarter.

People do give money to rewards-based campaigns expecting goods, although the reality of that expectation is becoming more transparent with time. If you’re launching a product or “promising” anything on Kickstarter, protect your assets.

In entrepreneurship, failure does happen. Just don’t fail with no protection and with Neil Singh in your list of contributors.

More coverage…

Neil Singh Sets Record Straight on Kickstarter Lawsuit

Inc: When Kickstarter Investors Want Their Money Back

Business Insider: How One Stupid Mistake And $35,000 From Kickstarter Made An Average Guy Bankrupt

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