Kickstarter Drama

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Kickstarter

Source: web

Kickstarter, the crowdsourcing site where business owners or would-be business owners go to pitch their ideas with the goal of raising start up funds. While Kickstarter isn’t the only crowdsourcing site, it is one of the most popular ones and partly because of its above-board policies. Unfortunately, it was on the verge of becoming the latest financial option in the sector that fell short.

It all began a few weeks ago, on May 14, to be specific when a group of people listed a project, “Kobe Red 100% Japanese Beer Fed Kobe Beef Jerky”. The goal was to raise enough money to get the company off the ground. Within a few weeks, it had raised more than $123,000 and in fact, was just hours away from closing the campaign as planned. In fact, it was one hour away from closing.

Rave Reviews

The scammers did well with their presentation. They included a video that showed rave reviews from testers who’d attended the SXSW festival as well as a personal anecdote of how the entrepreneur learned to prepare the jerky from his uncle. The anecdote was a mess. The few sentences had several grammatical errors, including misspelling the word “chunks”. Still, investors were right there with the group, waiting to see how their investments would soon pay off. There were more than 3,200 backers.

Before the June 13 deadline was up, a few of the backers had noticed a few irregularities. Specifically, one backer pointed out that the beef shown in the video had entirely too much fat to be considered an ideal cut of meat for beef jerky. By then, a documentary crew was already interested in showcasing the success of this startup company in its film. The documentary crew had attempted to set up a time to speak with the Japanese beef team, only to be cut short and several times being canceled moments before an interview. Finally, the crew suggested they meet via Skype. They agreed and then emailed the film crew and told them someone else had already captured video of them. They would prefer to edit the video and then forward it to the documentary team.

Kickstarter Documentaries

That never happened. Once the crew agreed to consider the already-filmed video, a message popped up on the Kickstarter page reserved for the team of jerky makers. It stated that a new video from “student filmmakers” was being made and that it would be included in the documentary, which wasn’t true. The filmmakers had simply said they would be willing to look at the footage to see if it would be suitable. By then, though, there were entirely too many inconsistencies in the updates and a lack of information was making some investors worry.

And then the house of cards began to crumble.

Investigations

An investigation kicked off and it was discovered that this group of people had an earlier project listed with Kickstarter. It failed miserably and consisted of a coffee table book (Does the word “Kramer” come to mind?). Two days after it failed to reach its target, the beef site went up.

For whatever reasons, the project went live and people began backing the project, despite not having the actual names of those who were behind the company. There was never a single photo of anyone associated with the project (something that Kickstarter strongly encourages) nor were there any other personal details released.

At this point, one can’t help but wonder why more than 3,000 backers happily added financial backing with their credit cards or bank accounts without at least a face to go with the company. Soon, though, a few of those backers had contacted the real documentary crew and asked if it was a legitimate project. These backers were under the assumption that the filmmakers would have first hand knowledge of the project since they were listed by the company owners as the documentary maker. The crew told those Kobe Red backers who asked that not only were they not part of the footage, but that every effort to make contact with anyone associated with the project proved impossible.

From there, as it began to unravel, many realized that they were backing people whose testimonials at the film festival were little more than iPhone screen shots, the names of those who sang the praises of the jerky were made up and the details – what few there were – served one purpose: to build some degree of authenticity.

Blind Faith

And here’s another interesting turnabout: As mentioned, there was $123,000 raised in that month. The initial goal? A mere $2,300 to buy a refrigerator for their Japanese beef.

Now, with a few days left, backers and visitors both began asking questions about production, shipping, preservatives, shelf life and other important details that anyone manufacturing food would know prior to seeking funding. When those questions weren’t being answered, things got a bit complicated. It’s now believed a host of fake profiles were set up to defend the company’s efforts. This resulted in efforts by the film crew to dig deeper. A website was found that was associated with the fake profiles. The website itself was mentioned in the project and then, the names that seemed so suspicious were also part of the website. This linked it all together. The email address was a gmail account (something that businesses never do – they use their website to direct their email).

And the truths keep rolling out: there was no jerky tasting at the SXSW festival, the camera man who was supposed to be the student documentarian for Kobe Red didn’t exist and other tastings the company said it conducted never happened. Nothing about the project was legitimate. No one knows who set the account up, either.

Fortunately, with just one hour to go, Kickstarter pulled the plug on the project and everyone who had made contributions were refunded their money.

So is this a big enough glitch to knock the wind out of crowdsourcing sails? Have you ever considered crowdsourcing as a way to finance your dreams? Let us know your thoughts.

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About Author

David is a CPA and has spent the past decade as a financial adviser helping clients meet their fiscal objectives. With an appreciation for journalism, he has spent the past few years overseeing several financial columns as well as writing two previous finance blogs. He resides on the East Coast with his wife and two sons and has guided many through the recent recession while providing a no-nonsense approach to spending and saving.


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