Earlier this week, we shared with you how Peak Design became Kickstarter ninjas, crowdfunding numerous products and – so far – delivering on every last one of them. But that’s not always the case with crowdfunding projects.
Just look at TriggerTrap’s Ada, a Kickstarter project that failed a year after it successfully raised over £290,386 in funds. Or, more crushing, look at Zano, a handheld drone whose manufacturer went under, even after raising a $3.4 million on Kickstarter.
It’s for these failures that those who pre-ordered the Lily drone should be severely concerned that their drone might never come to fruition. Thursday, the San Francisco-based drone manufacturer announced that its production schedule has been delayed, citing a problem with the flight software that controls the autonomous drone.
According to Lily, the drone underwent numerous technical changes after its initial pre-order campaign, each of which required extra time for testing before final production. Currently, over 200 drones have been produced and Lily is focusing on putting them to the test in rough conditions that they expect Lily users to commonly use the device in.
Lily co-founders Antoine Balaresque and Henry Bradlow seem sure that failure isn’t an option, stating, ‘we’ve hit some challenges [with development], but rest assured, it’s nothing our team can’t handle […] we just need more time.’ Still, it’s hard for backers to ‘rest assured’ when so many previous projects, particularly more technical ones, have failed after months of delays.
While Lily’s particular situation isn’t rooted in an online crowdfunding platform, it still points out an often unassessed risk in when pre-ordering or crowdfunding new technologies online—little is guaranteed.
Online crowdfunding platforms such as Kickstarter and IndieGoGo are neither stores nor official investment platforms.
Instead, they fall in a grey area of sorts, where the meaning and value of a ’pledge’ vary from project to project, leaving much of the responsibility on consumers to read over every single detail and take in production information based on spoon-fed updates from the project creators.
In the case of Lily, who decided to create and manage their own pre-order campaign, the creators have funded the company via private investors, led by a $15 million funding round led by venture capital firm Spark Capital. Smaller investors have gotten in on the Lily action too, including EDM musician Steve Aoki, the Stanford-StartX Fund and historic NFL quarterback Joe Montana.
What this means is that even if Lily were to crumbles from the inside out, those who have pre-ordered a drone wouldn’t be in any danger of losing their money, since ‘[Lily has] no plans to use a single cent of that money until your Lily Camera goes into final production,’ according to the Lily co-founders.
This method of crowdfunding a project is the safest for the end consumer, but isn’t the one most often used by companies to get a project off the ground—quite literally in this case.
Most creators opt for Kickstarter, whose guidelines mention the topic, but leave it up to the creators to set the rules. Kickstarter’s Terms of Service state:
The creator is solely responsible for fulfilling the promises made in their project. If they’re unable to satisfy the terms of this agreement, they may be subject to legal action by backers
The key phrase in the above term is ‘fulfilling the promises made in their project.’ Every project makes different promises and so long as a creator doesn’t promise any refunds, or worse yet, explicitly state they’re not responsible for returning any money if a project fails, they’re technically in the clear.
This is precisely what happened with Torquing Group, the company behind the failed Zano drone. After Kickstarter backers had rallied and raged against the company for delivering only 600 of the more than 15,000 drones funded, their liquidator Gary Stones said to Ars Technica, ‘[backers] are not debts owed by the company nor are they equity investments.’
To this day, though, Torquing Group is in hot water, with the UK Trading Standards looking into the matter.
All of this said it comes down to one simple fact—whether backing a crowdfunded project via Kickstarter, Indiegogo or through a private pre-ordering process, it’s never a guarantee that you will receive a product. Take it upon yourself to adequately research the company and product, and figure out who’s liable if the project doesn’t come to fruition.
Maybe Lily is right—they just need more time. But, as previous incidents have shown, it’s a statement that needs to be taken with a spoonful of salt.
Thankfully, considering how Lily has set up its financial structure, even if it does fall through, all backers will receive a refund. In fact, if the delay has dissuaded you from buying one, you can cancel your order and receive a refund now.
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