Tuesday, August 13, 2013

How not to play on Kickstarter

My regular readers know that I love the Kickstarter concept and get excited when I see the enthusiasm from ordinary people when they support young entrepreneurs when they have a great idea.  But those who solicit funds through Kickstarter also have a moral obligation to deliver what they promise, in a timely fashion, and when they cannot, to be utterly transparent and clear with their funders as to why not.

One of the most successful Kickstarter solicitations was this one by Formlabs in the fall of 2012.  Aiming to raise $100,000 to introduce a new line of 3-D printers, the company ultimately raised almost $3 million from over 2000 backers.  Most backers were to receive one of the printers, and here's what was said about delivery:

We are already working hard to plan our supply chain and manufacturing operations to make sure you get your Form 1 as soon as possible. We feel comfortable targeting February 2013 for our first full-production shipments in the USA/Canada, and March 2013 for our first International shipments.

The Formlabs team noted:

Many Kickstarter campaigns can encounter problems when taking their prototypes to production. This includes issues finding suppliers and engineering products for mass-production. Smooth execution is absolutely essential to overcoming such risks. We take this lesson seriously and have been working for months negotiating with suppliers, testing component quality, and building a team that can execute on our promises. Our plans are nearly in place, and we now mainly require the resources to execute them.

Well, that didn't work out as planned.  Complaints started to arise, and Formlabs posted a story on their blog on June 30 suggesting that there were quality control problems from their manufacturer:

We won’t let a printer out the factory door if it hasn’t passed our exhaustive calibration and test procedures. This commitment to quality has caused delays in our shipping schedule, but the Form 1 will be better for it.

While there were supportive comments, there was also frustration expressed, including these thoughts from Austin on July 4:

I was slated for March delivery…still waiting. I haven't recieved anything except an email saying my tier was being shipped. But I still haven't recieved any shipping info. Even if they shipped now, I still wouldn't see a printer till August.

On July 21, vinnivanhood said:

It’s time for another update isn’t it?!

And Karen noted this week:

We too are trying to be patient but the replies to our emails don’t give us any more information about shipping than this blog.

We paid for the backing in October 2012 and then was asked to pay shipping in February. Our shipping date was originally April 2013 and our number is #1972. We do not know what tier we are?

Everything just seems to be shrouded in mystery. We have all backed Formlabs and put our faith and trust in you maybe we should have something a bit more concrete like what number you have shipped so we know where you are up to at least.

Meanwhile, the topic has been on the airwaves on Formlabs' community forum, too.

I have a theory that the manufacturer used by Formlabs did not meet the performance specifications set out by the firm and promised by that manufacturer.  I am guessing, but do not know, that this manufacturer was not based in the US, but was probably in Asia somewhere.  I am further guessing that our young entrepreneurs did not have sufficient experience in production processing--and perhaps commercial negotiation with their vendor--to ensure timely and high quality deliveries at the price agreed upon.

The end result is that a great concept and great people have now taken a marketing hit.  I hope that they will work it all out and be successful, but I think there is an object lesson here for others.  I also think this would be a great case study for Harvard Business School to prepare, to show the trials and tribulations that can occur in the new Internet economy.


Anonymous said...

Your theory may be true, but it doesn't excuse them from transparently communicating with their customers/supporters now, does it? If you screw up, admit it. That would be so refreshing, people would actually appreciate it.


Caroline said...

Not sure I understand the point about Asia. Why Asia? When Ex-USA started to mean Asia? And when have we decided that poor quality and potential scam must be associated to Asia? A bit shocking not to say inappropriate... Who is producing more engineer? Asia or the US? Where does your iPad come from? :)

Paul Levy said...

Perhaps they are being produced elsewhere, but the vast majority of electronic products imported into the US now come from Asia.

While there are many engineers in Asia and while many good things are produced well there, my colleagues have also often faced examples of where low-cost suppliers there have cut corners and produced sub-quality goods.

Perhaps the company would tell us who their supplier is.

Mark Graban said...

Don't they also have a LEGAL obligation to deliver what they promised?

Do Kickstart companies ever get forced to give refunds?

Paul Levy said...

I don't think it is a legal obligation. Beside, enforcing it would cost much more than it's worth.

But it does create a reputational problem.

BTW, they have not responded to my request for a comment. Not very savvy.

Mark Graban said...

Really? There's no contract between kickstarter "buyer" and the person promising to create whatever film or iGadget?

In most jurisdictions, wouldn't it be fraud to "sell" something and not deliver? I'd assume the credit cards get a lot of charges challenged -- that's what I would do if I got screwed by some kickstarter... I'd ask the credit card company to overturn the charge.

Paul Levy said...

This comment from an article in July: http://www.bizjournals.com/boston/blog/startups/2013/07/3d-printer-formlabs-form-1-kickstarter.html?page=all

"It's really a completely new class of product," Lobovsky said. "There aren't known techniques for doing these things — we're inventing them as we go along. These kind of things take longer than expected."

He didn't say how many printers have shipped so far, but said it's "not the majority yet." The Form 1 uses components from the U.S. and China, and final assembly is done in California.