Crowdfunding 'Scammer' Speaks Out At SXSW

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Ever wonder what happened to that Instacube Kickstarter project that raised over $620,000 before everyone disappeared? Well, read this and you'll know what happened.

As Peterson explained during a panel discussion at the South by Southwest Interactive conference on Sunday afternoon titled ‟I Ran an Extremely Successful Crowdfunding Scam,” that high was to be short-lived. Due to problems with the project over the next several months, Peterson saw her health fail, her family relationships suffer, her personal information get posted online, and her voicemail overflow with angry threats. The launch date given on Instacube’s Kickstarter page was March of the following year. To this date, not a single unit has shipped.
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‟Honestly, the product hasn’t shipped yet because manufacturing is hard,” she insisted.
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This is the problem with Kickstarters in general. Someone has a fancy idea that they might have even drew up to look awesome using some CAD/CAM software that they probably pirated, and somehow miss the, "Oh shit. How do I actually put my idea into practice?"

The separation between the "thinkers" and the "doers" has never been more obvious. Everyone worries about trying to be the "next big thing" and yet they don't put the time and effort into understanding what that really means. If you backed a failing Kickstarter expecting something in return you're as foolish as the guy who loses his money in the stock market. I'm sorry, but its a risk with absolutely no guarantees.

Meanwhile we have assholes like Spike Lee using the crowdsourcing platform to try and fund his next movie. Really guy? You have all the contacts and money to make your own damn movies and you turn around and say some corny statement like, "I'm giving the people a chance to fund the movie they want to see."

FFS
 
People get upset while crowdfunding because there really is no other recourse, if you "Crowdfund" a business (i.e. buy stock) you at least have some way to let that be known as shareholders in the company, hell you can even jump ship and take a loss if you get out quick enough. With kickstarter type things you're in it period, "here's some money I hope you can make good". There's a reason why companies often get LLC, to separate individuals from the company, maybe people should start learning about this when doing a kickstarter bit don't put your fucking personal info anywhere out there, to be fair though I'm not sure if this is possible as I never used Kickstarter to try and get funding.

She boasted that she’s raised about $4.5 million in funds since Instacube and every single project she has been involved with has been fully funded.
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The whole story about how stressful it is, is one thing but this makes it sound like she's done a bunch of these projects where she's been in the middle of everything. If so I'm not really finding much sympathy for her.
 
Liger88 said:
This is the problem with Kickstarters in general. Someone has a fancy idea that they might have even drew up to look awesome using some CAD/CAM software that they probably pirated, and somehow miss the, "Oh shit. How do I actually put my idea into practice?"

The separation between the "thinkers" and the "doers" has never been more obvious. Everyone worries about trying to be the "next big thing" and yet they don't put the time and effort into understanding what that really means. If you backed a failing Kickstarter expecting something in return you're as foolish as the guy who loses his money in the stock market. I'm sorry, but its a risk with absolutely no guarantees.
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So true, so true...

Liger88 said:
Meanwhile we have assholes like Spike Lee using the crowdsourcing platform to try and fund his next movie. Really guy? You have all the contacts and money to make your own damn movies and you turn around and say some corny statement like, "I'm giving the people a chance to fund the movie they want to see."

FFS
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Ugh no shit, if we want to fund a movie we want to see, we'll fund it like we always have, by forking out hundreds of dollars for a shitty seat, burnt popcorn, and flat soda
 
tbh, how hard can it be to develop the tech for such a simple thing? from what i understand it's just a display that connects to a wireless network and downloads images. someone can probably hack this together with an arduino on a weekend... i wouldn't dare to start a kickstarter campaign without a working prototype of some sort even if it looks ghetto as long as it's working. and why do people ask her for consulting after such failure? she should be happy that she recovered from that crashed campaign that well.
 
temujin987 said:
tbh, how hard can it be to develop the tech for such a simple thing? from what i understand it's just a display that connects to a wireless network and downloads images. someone can probably hack this together with an arduino on a weekend... i wouldn't dare to start a kickstarter campaign without a working prototype of some sort even if it looks ghetto as long as it's working. and why do people ask her for consulting after such failure? she should be happy that she recovered from that crashed campaign that well.
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This. I don't see how this is that hard to figure out from a technical aspect. Heck, you could go super easy mode and just marry a screen to an android stick and run an Instagram slideshow. Blamo .. Prototype in 2minutes.
 
She reads like a clueless noob who has no hard skills and never studied Intro to Business 101 or Systems Analysis and Design. Her resume ( at the talk ) reads like hyperinflated, marketing vomit.
 
Prototypes are easy to make. Building a finished, reproducible, easy to use product that can be sold at a profit is hard. Anybody who thinks otherwise either has never built something desirable or is full of shit. I can prototype a website in a few days, I can put out a minimum viable product in a month but it takes months to build an application somebody would actually want to use and would pay me money for. And a website, that is something that can be easily updated. An actual, physical product has to be right when it ships. Sure you can improve it over time and ship new versions, but if you're product sucks when you launch you have a long uphill battle. In the case of Kickstarter, if your product sucks at launch you still have a bunch of pissed off investors.

The problem with Kickstarter is people who don't understand the process of building something new invest in something thinking it is a risk free proposition. Its not. Silicon Valley is littered with the corpses of hundreds of startups that just couldn't make it. Most entrepreneurs fail multiple times before they get it right. It takes a high level of luck, skill and natural talent to get it right the first time - and even then it doesn't mean you'll be able to do it again. Kickstarter basically requires you to knock it out of the park your first time up to bat. Not to mention these are people, asking for funds, who either didn't try or failed to obtain investment from a VC - that should send up a flag right there.

I don't think she should be absolved from all responsibility for the failure of the company, however, I don't think she deserves the scorn she has received either. Of course she's receiving consulting opportunities. People aren't paying her to show them how to launch a product successfully. They're paying her to obtain funding - that much she was obviously good at.

Also, seriously, Instacube? Talk about the "Who gives a shit?" product of the day. I don't understand how something like that receives funding.
 
Liger88 said:
Meanwhile we have assholes like Spike Lee using the crowdsourcing platform to try and fund his next movie. Really guy? You have all the contacts and money to make your own damn movies and you turn around and say some corny statement like, "I'm giving the people a chance to fund the movie they want to see."
FFS
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You must not know how much it costs to make movies. Underfunded movies lead to incidents like James Cameron having a brain wave and asking Schwarzenegger to punch the window of a car ( they had no idea who owned the car and Arnie had no health insurance ). That scene never even made it into The Terminator. Darren Aronofsky only managed to raise two thirds of the funds that he needed, for The Fountain. That movie ended up being an epic waste of time. There is more politics in Hollywood than in congress. People who control the purse strings want creative control.
 
That product is stupidly easy to make and produce. It's her failure, it's not "hard." If I tried to fix a jet engine it would be hard, but it's not for a jet mechanic.
 
So,the backers are out $620,000 with nothing at present to show for it - and we're supposed to feel sorry for her? Somehow the logic of it escapes me. The potential for such abuses is too high for me to support any crowdfunding project.
 
‟Honestly, the product hasn’t shipped yet because manufacturing is hard,” she insisted.
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The link in the first post just points right back to the thread instead of the article.
 
michael.pa2 said:
So,the backers are out $620,000 with nothing at present to show for it - and we're supposed to feel sorry for her? Somehow the logic of it escapes me. The potential for such abuses is too high for me to support any crowdfunding project.
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Well, like any purchase you have to be careful how you spend your money ... I have bought into three PC software projects to date ...

the first, Grim Dawn, is from a small team and has been moving slow because of that, but it is moving ... it has been in Alpha since the middle of last year and they just recently released the second of three acts (so they appear to be on track to launch at the end of the year or early next ... about a year over their estimate, not that uncommon in the software world)

The second (Pillars of Eternity) and third (Torment) are both from established developers and both are moving forward like any professional development would ... I have yet to invest in a single individual's project (and I would be unlikely to put as much money on the table for a project like that with more risk)

Crowd sourcing certainly has risks for both parties and you have to be careful how you use your money on KS, but it does offer unparalleled opportunities for consumers and creators to collaborate and release products that benefit both ... I think with some additional maintenance by KS and public/professional shaming for the failed projects the situation should calm down some (definitely no sympathy for people that failed for lack of planning or hubris though)
 
As someone who has backed numerous Kickstarter campaigns, this thread is giving me a perfect opportunity to vent.

To make long stories short, I'm just about done with Kickstarter. While I have received several very nice "rewards", it doesn't take but one or two bad apples to spoil the entire batch and I seem to keep running into them.

I initially went into Kickstarter pretty wide-eyed and innocent. It seemed like a fantastic model linking creators to interested parties while skipping the middleman. All of the campaigns I first examined offered really interesting stuff at various pledge tiers. I thought the best of people (my bad) and never really considered that project creators wouldn't follow-through with their campaign promises.

Then it started. Late projects. Even later projects. Project creators promising one thing, then not delivering. Project creators being unresponsive to both public posts and private emails. And on and on.

In the beginning, I cast a fairly wide net. Now, I'm a LOT more wary and only support projects that genuinely seem legit. I'll often email project creators first to get a vibe of their character. The way their solicitations are presented is also critical. I always skip over drives that are mainly text with little to no mockups nor expanded tier descriptions. I also pass up campaigns where the project creator isn't active in messages and hasn't issued an update after four or five days into the drive. Red flags go up for drives asking too little or too much given their stated product goals.

Campaign failures and those in the process of failing are having an effect. I'm seeing a lot more drives not reach their finish lines. This is bad for two key reasons - 1) it makes project creators further hedge their bets and exposure by decreasing required revenue thresholds (since Kickstarter is an all-or-nothing system) and 2) grass-roots projects, which are Kickstarter's backbone, are finding it harder and harder to attract backers due to high-profile campaign failures and the subsequent supporter reticence (since Amazon offers zero protection to backers and equally zero accountability to project initiators).

Unless Amazon enacts some safeguards for backers, I fear Kickstarter will turn into just another funding solution for established companies, which is the exact opposite of what the system was suppose to provide. Kickstarter was never meant for Veronica Mars- or Spike Lee-oriented projects, where those people are already tapped into enormous funding streams, but instead for average people unable to obtain traditional venture capitalization.

Unfortunately, the sins of the fathers are more and more eroding confidence in their children.
 
fleggett said:
While I have received several very nice "rewards", it doesn't take but one or two bad apples to spoil the entire batch and I seem to keep running into them.
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And this story just happens to be about one of those 'bad apples'. I honestly can't fathom how she got work funding more than $4 million for other projects (supposedly), and that non-disclosure agreement is a load of shit.

Atleast she owned up to it, I guess? Even though this showing was more about advertising her supposed skillset for future work, rather than legit regret and apologies.
 
Aluisious said:
That product is stupidly easy to make and produce. It's her failure, it's not "hard." If I tried to fix a jet engine it would be hard, but it's not for a jet mechanic.
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michael.pa2 said:
So,the backers are out $620,000 with nothing at present to show for it - and we're supposed to feel sorry for her? Somehow the logic of it escapes me. The potential for such abuses is too high for me to support any crowdfunding project.
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This was my impression until I read the article. She wasn't the one making the product, she was hired to do marketing for the company D2M.

In that sense I do feel sorry for her, she did her job well and raised a lot of money but the company never delivered the product.
 
sfsuphysics said:
People get upset while crowdfunding because there really is no other recourse, if you "Crowdfund" a business (i.e. buy stock) you at least have some way to let that be known as shareholders in the company, hell you can even jump ship and take a loss if you get out quick enough. With kickstarter type things you're in it period, "here's some money I hope you can make good". There's a reason why companies often get LLC, to separate individuals from the company, maybe people should start learning about this when doing a kickstarter bit don't put your fucking personal info anywhere out there, to be fair though I'm not sure if this is possible as I never used Kickstarter to try and get funding.


The whole story about how stressful it is, is one thing but this makes it sound like she's done a bunch of these projects where she's been in the middle of everything. If so I'm not really finding much sympathy for her.
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Here is where you and most people make a mistake with kickstarter. It is the moral equivalent to being an angel investor in a startup, with similar risks, but on a smaller scale. I've mostly kickstarted manufactured things. I have yet to not get my product. However, the fact that I am acquainted with reality and so are those tryign to launch their product, it has always been clear and understood that launch dates are very rough guesstimates. If their kickstarter doesn't illustrate a basic grasp of the stages and difficulty of making said product, even if I find it painfully interesting, I don't hand them money. It's not hard sniffing out dreamers from doers.

As for a lot of the bitching about video game kickstarters slipping dates. Seriously, what kind of idiot would think they would be less prone to slipping dates than a 8 or 9 figure AAA title. You just look to see if they have a realistic plan to procure labor if the date slips.
 
As mentioned already the issue with Kickstarter is it's open to anybody.

It shouldn't be. To many dreamers with good intentions but...

Most of the people involved have zero clue about how to deliver or manage a project. Sure they have a good idea but no experience of delivering or just as important, managing investor/backers expectations.

I have seen several projects where updates were almost hourly in the run up to the funding deadline but once it's reached...silence.

All of a sudden at that point reality bites and they realise after the 5 bottle of champagne that they now have to deliver. And boy are those folks on the internet an unforgiving bunch of investors.

A lot of the hostility I've seen could have been avoided with basic expectation management and communication. A simple post every so often saying "Sorry guys just to let you know we may have a week's delay due to a flaw in the master batch that we need to do the initial production run again!"

You know even just basic acknowledgment for delays and frustration. We all know (well most of us) that even the best projects don't always go to plan but I've found in life and business if you manage expectations and communicate properly, most times folks really don't mind. They just like being in the loop.

But give them just silence and you will be burned.

Anyone thinking of starting a Kickstarter would be well served to look through some of the tech ones feedback to see how NOT to run and manage a project.
 
People just need to be careful about what they fund. There are a lot of things that LOOK cool, but who's running them?

I've only helped fund one thing, and that is Hero 101 (game from the Quest for Glory creators of former Sierra Online.) They've got a ton of completed and published games under their belt, and I have every confidence that they will finish the project.

I would have helped fund the Shadowrun game too if I hadn't been too late.

However, there are people on there with no proven track record, no decent plan, contingency, etc. People should just be smarter about what it is they're sending their money to. As far as manufacturing a new product, yeah, there seem to be a lot of people here that think it's easier than it is. A lot goes into making any new electronic device. Getting parts and components, industrial design, tooling for things like circuit boards, cases, panels, getting any custom components made, getting all of this stuff into the assembler's hands, certifying it for electrical safety, keeping track of the books, etc. etc. If one of these or even one part of one of these is late, the rest becomes late as well.

Not saying this lady deserves to skip out completely on responsibility, but getting threatening phone calls is a little over the line I think.
 
That's really a shame, I feel you guys who have been through the process of KS or were always weary, I know I was. I saw a few clone projects to pre-existing items (A10 Allwinner HDMI TV Dongles) and such.

It sucks because I'm one of those people who has skills and also ideas, but not a lot of support in terms of business or financial. I always have two dozen ideas burning in my brain or sketched out in my notebooks and they're usually legitimate projects... I'd put them on KS but well, as you said... only takes a few bad apples to ruin it for everyone else, y'know?
 
I've only funded two KS projects to date but I know what I will and won't do. I won't back anything that requires actual manufacturing unless that person has a background in logistics or seems to already have a business creating similar items. Most people vastly underestimate the supply/demand logic or don't grasp what is needed to actually make things on a timetable. It's much harder than it seems, particularly with electronics.

Software is something where you can make it once, ensure it works and poof! You have a replicatable product. Even then, I don't back it unless you have a background in the industry or the genre and only if you have some kind of proof of concept available. Also, I never back anything where the stretch goals are way too outlandish for the budget they are asking for. Small baubles are nice, but full orchestral music to your 3d motion captured, game running oculus rift support on what you expect is a $500k budget is laughable on a good day.
 
Spidey329 said:
This. I don't see how this is that hard to figure out from a technical aspect. Heck, you could go super easy mode and just marry a screen to an android stick and run an Instagram slideshow. Blamo .. Prototype in 2minutes.
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Bwaaahhaaa...This is why kickstarters fail. There is a big difference between prototyping something as a proof of concept, and designing and manufacturing products ready to ship to consumers.
 
I don't even fund kickstarters from well known people with track records. It's madness. You have like a 2.3% chance of getting anything resembling what you thought you were supporting and it'll miss every deadline regardless. Not to mention recently they had that security breach and exposed their users. Glad I only ever did one kickstarter... that after I looked it up, was actually IndieGoGo and not for any return of investment haha...
 
Why would you ever think a Kickstarter START UP FUNDING was anything but a total risk?

90% of all startups FAIL. So 9 out of 10 Kickstarter ventures are likely to fail just to stick with the normal odds of business creation.

I backed ONE, it was/is a success, run by a friend. But I "invested" knowing full well nothing may come of it.

I am very much in favor of the concept, but it is critical that backers understand this is NOT stock on a listed exchange, it is a chance to help get a product/effort that you are interested in, off the ground ... maybe.
 
Pringle said:
And this story just happens to be about one of those 'bad apples'. I honestly can't fathom how she got work funding more than $4 million for other projects (supposedly), and that non-disclosure agreement is a load of shit.

Atleast she owned up to it, I guess? Even though this showing was more about advertising her supposed skillset for future work, rather than legit regret and apologies.
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Yeah that $4M for other projects along with some of the stuff she said "manufacturing is hard" makes me think she has zero skills other than simply coming up with ideas that sound good on paper and get a bunch of people to fund her, then uses said funding to live off of because fuck it why do I need a job when kickstarter can fund my life. Then when she tries to do something "oh no it's hard to do".

Nothing says you need to have an assembled product ready to go, you buy off the shelf items in bulk, screen, ardino boards, etc, then you find way to package them up pretty and useful, then find yourself a manufacturer that will crank out that particular case, and you assemble them at home, or rent some work space and hire people to assemble the parts.
 
sfsuphysics said:
Yeah that $4M for other projects along with some of the stuff she said "manufacturing is hard" makes me think she has zero skills other than simply coming up with ideas that sound good on paper and get a bunch of people to fund her, then uses said funding to live off of because fuck it why do I need a job when kickstarter can fund my life. Then when she tries to do something "oh no it's hard to do".
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RTFA people. She wasn't the one making the product, she was hired by a company to do marketing and secure funding.
 
Success isn't defined back actually funding a Kickstarter. Success is defined by actually producing a product people want with the funds. Way too many academics trying to Kickstart stuff and can't convert it to actual product.
 
BHawthorne said:
Success isn't defined back actually funding a Kickstarter. Success is defined by actually producing a product people want with the funds. Way too many academics trying to Kickstart stuff and can't convert it to actual product.
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I have never funded anything on Kickstarter because the entire thing looks completely asinine. The world is not lacking for new products without it. But even then when I see someone trying to Kickstart something that should take $5k to prototype and design into plans you could CNC tomorrow, I wonder what the fuck is wrong with people. The people who think they need 100k or a million to "start" it, or the people who think that's a reasonable request.
 
Aluisious said:
I have never funded anything on Kickstarter because the entire thing looks completely asinine. The world is not lacking for new products without it. But even then when I see someone trying to Kickstart something that should take $5k to prototype and design into plans you could CNC tomorrow, I wonder what the fuck is wrong with people. The people who think they need 100k or a million to "start" it, or the people who think that's a reasonable request.
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That may be true for some of the physical products but there are software projects where KS is a nice alternative to publishers or other funding mechanisms with more strings attached ... Considering a complex game can easily run in the millions I don't see a problem with the 4.5 million that a project like Pillars of Eternity got ... that money funds a team of programmers, project managers, and artists for a couple of years ... and without publisher involvement the developer can optimize the game around their own design parameters (and those of their customers ... the funders) rather than to be forced into the funding mechanisms preferred by publishers ... they also don't have to lose the rights to their IP ... since you can choose whether to support the project (or not) I see nothing wrong with that model that helps break the publisher stranglehold on the software industry a little ;)
 
kbrickley said:
That may be true for some of the physical products but there are software projects where KS is a nice alternative to publishers/QUOTE]
I might be a bit pessimistic but feel that many of those kickstarter plans throw a number up that basically says "this is the salary I'm going to accept, now fund me" then if they hire others (big if) they'll have money for that. I dunno saying "I currently don't have a job, but would like you to pay me to do something I love" is the status quo for gaming kickstarters.
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sfsuphysics said:
I might be a bit pessimistic but feel that many of those kickstarter plans throw a number up that basically says "this is the salary I'm going to accept, now fund me" then if they hire others (big if) they'll have money for that. I dunno saying "I currently don't have a job, but would like you to pay me to do something I love" is the status quo for gaming kickstarters.
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I haven't supported one of THOSE projects yet ... although Paper Sorcerer was tempting in that vein ... the three projects I have supported are all developers ... two are well established developers (Obsidian and inXile) while the third was a new developer with former members of the team that developed another game I liked (Titan's Quest) ... I am less interested in supporting individual programmers and more interested in supporting larger developers so that they do not need to drink from the poison cup offered by the publishers or venture capitalists ... that is where I see KS benefiting software development (although I don't think any project needing a 5 million dollar budget or more will be crowd fundable) ... certainly the high budget AAA projects that cost as much as a blockbuster film will need to be done by publishers or VCs only
 
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