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Project backers kick for refunds

Diaper book delay presents a dilemma for Web funding sites


by: PHOTO COURTESY OF LEAH NASH - Portlander Mike Davis-Yates builds custom wooden boom boxes called the 'Jammy!,' a project that he tried to fund three times using Kickstarter.A Portland mother has attracted a “mob of hating stalkers” after using the popular crowdfunding website, Kickstarter.com, to raise $7,000 for a photo book on cloth diapers.

That’s according to Jamie Wilkinson, the 30-year-old mother, who admits she failed to deliver her project on time and did not communicate that to her “backers,” as they are called.

Some backers, 52 to be exact, created a private Facebook group to discuss what actions to take after Wilkinson said she would no longer be able to complete the book within the year, as she had expected.

“If she’s still doing the book, I would still be happy to be a sponsor,” says Lisa Carey, owner of the California-based Green Diaper Store, who is one of the Facebook group leaders. She donated $500 to what she thought was a “wonderful project.”

“But I feel like I lost $500,” Carey adds. “That’s a lot of money for a small business.”

Carey says there was little communication after Wilkinson received the pledged money, and now she is unsure whether she wants a refund.

Wilkinson, who works in Northeast Portland, declined the Tribune’s requests for an interview, but instead posted a statement on her Kickstarter page explaining that she was unable to complete her project due to a lack of funds and personal issues. She still wants to complete the project, but isn’t sure when that will actually happen.

“Honestly, I’m just an everyday struggling mom who was genuine in trying to launch this project,” Wilkinson wrote in her statement.

The conflict between Wilkinson and her Kickstarter backers raises an issue in today’s crowdfunding world: Who’s accountable when a project is delayed?

Crowdfunding — raising money for a project by using the Internet and having many people make small contributions to achieve that goal — is growing in popularity. There are about 926 Portland Kickstarter projects, compared with 903 in Seattle, 1,200 in San Francisco and 3,100 in Los Angeles.

Since it started in April 2009, Kickstarter has helped match more than $450 million donated by 3 million people with 35,000 successful projects. About 50,000 proposed projects failed to raise their goals and received no money through the website.

“We’re really just focused on creating a platform to be able to allow creators and backers to connect,” says Justin Kazmark, a Kickstarter spokesman at the company’s New York City headquarters.

On Kickstarter, project creators either raise their goal amount and get all of the money, or they don’t raise enough and get nothing. Kickstarter has no control over whether projects are completed.

Kickstarter requires creators to either fulfill all “rewards” of their projects or provide refunds. Rewards are incentive for people to donate, such as a signed copy of the product.

Backers beware

While there have been some cases of creators attempting to take ÿbacker’s money without fulfilling their rewards, the Kickstarter community is usually good at spotting frauds, says Ethan Mollick, assistant professor of management at The Wharton School of the University of Pennsylvania.

One example: a project proposal to create a video game was discovered to be a lie. Backers discovered that pictures used by the project creator had been taken from other websites. The project was shut down.

Wilkinson insists that she is not a “scammer.” She says she is very dedicated to completing the project, “The Dirties on Diapering,” one day.

“I had tried to fund the project three different times,” Wilkinson wrote in her online response to unhappy backers. “Each time lowering the amount needed, even though the need was still there in order to have the project succeed.”

Because Wilkinson failed to raise enough money her first two tries, on her third attempt in January 2011 she lowered her goal to $6,000, less than what she actually needed to create the book. However, with dedicated backers who felt passionate about her project, she was able to collect $6,902.

With the money she raised, Wilkinson says she paid for a self book-publishing kit and bought photography and interviewing equipment. However, she soon learned the money she raised was not enough to complete the work and had to delay the project, upsetting many of the people who donated.

One of them was Carrie Wells, owner of Bitty Bottoms LLC of Rome, Ga., an online cloth diaper business that opened in 2010.

“At the time I was a new business and I had a very small advertising budget,” says Wells. “I was hoping that if I allocated my funds, that would be a really easy way to get my business out in the public eye.”

Wells donated $250 to the project, and while she hopes Wilkinson’s book is eventually finished, she doesn’t feel that will actually happen. She isn’t alone.

The Facebook group created by backers of Wilkinson’s project has allowed the group to communicate with one another and vent about their frustrations. Because they didn’t want to overwhelm Wilkinson by individually asking for updates and refunds, they formed the group to discuss how to handle the delayed project.

Wilkinson was recently invited to join, but has not yet done so.

Creating a platform

Who’s to blame when a crowdfunding project gets delayed? No one, Mollick says.

More than 75 percent of so-called “creators” who attempt crowdfunding deliver projects later than expected, says Mollick, who has conducted studies on crowdfunding. There are lots of reasons for the delays, from failing to raise enough money to being overconfident with timelines.

“People are never realistic about the projects they intend to make,” Mollick says. “It’s very common to see extreme delays.”

Mollick has also found evidence to show that people typically work hard to make products happen, but often end up spending more than expected. They are then driven simply by the obligations to backers to finish the project.

It’s common for backers to be disappointed — but they shouldn’t be, he says: “You’re not buying from Amazon. You’re buying a product that does not yet exist. It’s often much more complicated than people think.”

Portlander Mike Davis-Yates agrees. He tried on two different occasion to raise Kickstarter funds for his “Jammy!,” a wooden boom box, and failed both times.

However, Davis-Yates is happy he didn’t raise the money after receiving a few wholesale orders and learning more about the challenges and obligation that comes with crowdfunding.

“I hate dealing with customers,” Davis-Yates says. “I’m glad I didn’t get funded because now I can focus on things I want to do.”

So, if a project is unfinished or delayed, who provides the refunds, if any? Although Kickstarter requires creators to provide refunds, the site has no enforcement power and isn’t involved in the financial transactions between backer and creator.

But in cases where funds are spent before creators realize they don’t have enough to complete the project, it can be difficult for creators to refund all the backers.

“If Kickstarter had a way to let me refund the money and make payments back to them, it would be easier,” Wilkinson wrote in her online response.


JOBS Act could spur more Web funding sites

More crowdfunding websites should be popping up in upcoming years after President Obama signed the JOBS (Jumpstart Our Business Startups) Act into law in 2012.

The goal is to increase jobs and wealth without adding to the deficit, and part of this process encourages entrepreneurs and small businesses to grow and access capital by expanding crowdfunding opportunities.

The hope is that it will also lead to creators being able to offer equity for funds, letting anyone invest in projects in exchange for stock.

Other popular crowdfunding websites that exist include Indiegogo.com, Causes.com, Razoo.com and RocketHub.com.

Each is directed toward different types of projects.

Kickstarter is focused on creativity, while Razoo and Causes are geared toward nonprofits. Indiegogo and RocketHub are broader and allow for a variety of crowdfunding projects.