The big problem with hardware crowdfunding? The overpromise

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Pando has an interesting piece about a fitness wearable startup killing it over on Indiegogo called GoBe.  It’s not surprising the device is doing well early on because it sounds like quite a little miracle, doing things that, if it delivers, would be leaps beyond today’s commercialized consumer wearables.

But in the end, it probably won’t be better than what folks like Fitbit can do today. Why? Because GoBe is just doing what so many tech startups who crowdfund do: they’re overpromising.

Overpromise at your own peril

As I wrote last week, if a crowdfunding campaign promises something miraculous, chances are you will be disappointed. And if the founders are mysterious or don’t have any real track record, hide your money.

And while GoBe may have more problems than just overpromising what its technology can do (like possibly a scam), I think the biggest fundamental problem with all hardware crowdfunding is the practice of exaggerating what the company and product will deliver.

But why then, do so many do it? Because they feel they have to.

It’s basic marketing, after all. Your goal in a hardware crowdfunding campaign is to gin up excitement to bring in a crowd of backers. You do that by telling them exciting thing about the product. Sometimes that means stretching the truth. 

And unlike in the world of, say, mass market consumer products, companies can do this when crowdfunding because there are very few repercussions.  Sure, Kickstarter’s terms of service says creators must refund backers if they can’t deliver, but in reality  how often does that happen? And what if the product delivered is a mere shadow of what was promised?  You can ask for your money back, but there’s a good chance the creator won’t have anything to give you, becomes non-responsive, or disappears into the ether.

As for their own part, Kickstarter saw the problem with hardware a while ago and took a harder line about accepting projects (which is why some of the shadier projects are heading to Indiegogo). That’s because they saw that delivering hardware was much harder than say, a creative work like webcomics or a movie. 

Unlike these digital or creative works, making successful hardware often means having to deliver on so many unknowns. Unknowns like can the company actually make some hoped-for technological breakthrough, or can a successful proof of concept be commercialized into production hardware?

These are the hard questions.

And of course, overpromising is not just the sin of crowdfunders. Venture funded startups do it just as well, often resulting in disillusionment down the road.

But unlike venture funded startups, a crowdfunding campaign’s backers are true fans, not sophisticated venture capitalists.