The Zano, the biggest crash in crowdfunding. (screen capture) © DR
Is an ill wind blowing on crowdfunding? In November 2015, the mini-drone Zano burnt its wings despite 3 million euros raised on Kickstarter. Can the bombs of participative funding obstruct the success of this new model?
Does the biggest fiasco of crowdfunding prefigure the end of an era? Launched in November 2014, the campaign for Zano, an autonomous, small, intelligent mini-drone, flying almost alone and returning home to recharge its batteries itself, made people dream and raised more than 3 million euros…before exploding in full flight less than a year later.
The British team leading the project, Torquing Group, “very talented developers and engineers”, specialized in drones for the “industrial, defense and police” markets, did look sensible and well established. “The risk is not if you get it, but simply when you get it”, was boasting the project leader Ivan Reedman. For €188, the “super early birds” were promised a first version of the mini-drone in July 2015.
The presentation video of the Zano project:
Zano burns its wings
You may know what happens next: the biggest success for a European Kickstarter campaign (3 million euros) and its 12,000 supporters are also the most broadcasted failure of participative funding projects.
On November 10, 2015, Ivan Reedman, CEO of Torquing group, resigns, “for health issues and irreconcilable differences”. On November 18, the company enters into voluntary liquidation and the British government agency Trading Standard launches an investigation. For its part, Kickstarter appoints a journalist, Mark Harris, to shed light on this failure.
“Kickstarter is built on trust, says the company in a statement. It is possible for the creators who take on big ideas to fail, but we expect transparency and honesty throughout the process.” For Mark Harris, “they didn’t just fail, they did not follow the procedure in case of failure. Kickstarter wants to understand what happened to ensure it was really a failure, and not an offense.”
In the still small new world of crowdfunding, the competition is already tough. The Americans Indiegogo and Kickstarter were the first, respectively in 2008 and 2009. France rapidly followed suit with Ulule and Kisskissbankbank in 2010. Europe is still far behind the United-States with regards to participative funding: 9.46 billion dollars in 2015 for the Americans against 3.26 billion dollars for Europe.on marché intéresse grandement Kickstarter, qui a ouvert sa plateformeKickstarter has a keen interest in its market and opened its platform to à la France and Germany in 2015 and to five other European countries in June.
The feel for business
“We are starting to see large projects fail, explains Mark Harris. The moment has maybe come to ask oneself if the model should be improved.” In fact, even though the Zano story was particularly broadcasted, it is far from being the only failure of the short story of participative funding platforms.
Video games, intelligent watches or connected objects… the lists of crowdfunding fiascos du crowdfunding is a popular theme for specialized media. Several weeks before Zano, another Kickstarter large project, the Coolest Cooler, caused consternation. Despite massive fundraising, the company, short of cash, was selling its Cooler on Amazon even before having delivered it to its first supporters!
However, according to a report from Ethan Mollick from the university of Pennsylvania for Kickstarter, only 9% of the projects funded on the American platform fail to deliver the promised compensations. Among them, the projects having raised less than $1,000 are the most at risk.
Failures can be explained by the fact that creators often neglect business to favor innovation, says the investor and business angel Alexandre Goujon. “The fundamentals of a company are not fundraising, but managing to live”, he reminds us. Participative funding is only a test market. And beyond that development stage, “you need acceleration, speed”.
“Kickstarter is not a shop”
The actors of crowdfunding agree: the risk in inherent to collaborative funding. “Kickstarter is not a shop”, is incidentally mentioned in the “trust” section of the platform. It is not sure however that the message comes across. Having announced he was investigating the failure of the Zano project, Mark Harris received around 400 statements of disappointed backers. “Many people are under the impression that by supporting a project they have a right to their reward. The perception that Kickstarter is more a shop than a casino game seems quite common”, sums up the reporter. Even though he points out the millions of contributors he hasn’t heard from “may have a different opinion”.
More than five years after the arrival of crowdfunding platforms, and as they got popular, their target has broadened. “Populations arriving on our platforms are less alerted, less informed of these mechanics, recognizes Mathieu Maire du Poset, assistant director of Ulule. We will need to adapt our communication and become educational. People will support projects without having much information.”
For example, the Skarp laser razor supposed to revolutionize shaving (with laser, you don’t cut or burn your skin). The campaign raised more than 4 million dollars on Kickstarter, that cancelled it at the very last moment, for violation of the platform rules. The following day, it reappeared on Indiegogo… and it presently gathering nearly $450,000.
The prototype contested by Kickstarter of the Skarp laser razor:
What responsibility for platforms?
On the serious side of the project, everything seemed sorted out on the other hand for the Zano mini-drone. Did Kickstarter have supervisory responsibilities? Which alert mechanisms were set up (or not)? “These questions will definitely be part of the story”, replies Mark Harris, the inquiry of whom will be published at the end of January.
On the French side, one likes to pass the buck to the Americans, arguing that most campaigns for innovation turn up over there. 95% of the projects on Kisskissbankbank are artistic or cultural, specifies Vincent Ricordeau, co-founder of the platform. And Kisskissbankbank as well as Ulule count on a stricter selection of projects and support for the creators. At Ulule, ten employees are dedicated to this task, against “a dozen” at Kisskissbankbank. At least during the campaign. After that, it’s the great leap forward. “It’s the big weakness of crowdfunding”, admits Vincent Ricordeau.
“2016 will be the year of the bad buzz. After the five years when we were all brilliant, new entrepreneurs who were creating “romantic capitalism”, we are seeing the first projects getting it wrong, the first swindles. It is important to say that the percentage of real problems is tiny. Even though it is true that it is less angelic that what was said at the beginning.”
Vincent Ricordeau, co-founder of Kisskissbankbank