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Kickstarter pledge fatigue, scams, and stalled projects

Kickstarter and other crowdfunding platforms have gone mainstream, attracting scammers, misuse, and many have complained of Kickstarter fatigue.

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Kickstarter and a waning crowdfunding movement

Kickstarter is the largest of the crowndfunding websites wherein inventors, artists, and the like can post videos and description of why they need financial backing, listing what they will give to people for pledging cash, and if enough people chip in and they meet the financial goal they set, they get all of the cash, but if they don’t get enough pledges, no money changes hands.

It’s a wildly popular funding option with Kickstarter projects alone raising $275 million last year, and is popular enough to have the attention of the U.S. Securities and Exchange Commission (SEC) which is reviewing what regulations they will impose on crowdfunding.

Crowdfunding seeing their share of scams

Facebook users know that they haven’t won free airline tickets just because they were tagged in a picture, email recipients know the Prince of Nigeria doesn’t really want to give them a bajillion dollars, and Vine users (as well as anyone with an internet connection) knows that pornographic material has made its way into the video service. The truth is that crowdfunding isn’t unique in being vulnerable, as the web makes it easy to scam people – it’s not like a dark alley with a creepy guy offering you Foakleys, Pravdas, or PRolexes from the back of a truck or inside of his coat.

Most projects posted on Kickstarter, Indiegogo and others are legitimate and often innovative, but as with all websites, the dark alley creeps have found their way in, and are quite convincing.

Two cases of bad crowdfunding behavior

According to Consumerist.com, one Kickstarter project is currently suspended, pending an internal investigation, as a man was selling $15 watches for $100, disguising them as “high-end” time pieces, raising $9,000 before the plug was pulled.

Recently, one Kickstarter investor sued over a Kickstarter project, as an entrepreneur who formerly designed projects took the leap into manufacturing and after what backers called endless stall tactics, Neil Singh sued for breach of contract as the simple iPad he “invested” in was never created or delivered, ultimately putting the entrepreneur and his company out of business.

These two stories are not the only cases involving questionable products being sold, or struggles with the manufacturing process leading to delays in delivery (with delivery never happening in some instances). The general attitude of people who have been backing projects from the beginning is that it is an investment which comes with risk, but others see it as a creative way to buy products, so the pledge mentality is certainly changing as crowdfunding goes mainstream.

Kickstarter in particular has been very responsive to questionable projects and products and suspends accounts for investigation rather than ignoring it. PCMech has published a useful guide on how to tell if a Kickstarter campaign is bogus.

Introducing Kickstarter fatigue

If you run in any technology or art circles, you’ve probably been solicited for pledges to various Kickstarter or Indiegogo projects ranging from “Artist X wants to make an album” or “Producer Y wants to shoot an independent film,” or even “Inventor Z wants to make a new thingamajig.” We have most certainly been inundated and rarely make any pledges in an effort to maintain objectivity as we cover Kickstarter projects, but what about the average person, or particularly the well connected person?

Sallie Wood, Creative Principal at redshoestudio tells AGBeat, “One of my talented musician friends used kickstarter to record a wonderful album of lullabies. Another was the narrator for a really cool animated film. I have lots of talented friends who all seem to have a project they want to fund. I can’t possibly give to all of them. Telling friends that you might give if only their project was more compelling is not a good idea if you want to remain friends. Who wants to judge their friends project?”

Wood added, “I have given to projects I believe in and I will probably give again but I am suffering from kickstarter fatigue. Just today I had a request via inde gogo requesting funds to send a friend’s kid to Europe for a school trip. This has gone too far.”

Crowdfunding isn’t a generic collection plate, people.

Not only is fatigue setting in, the actual projects requesting funding have gotten out of hand – one source tells us that they’ve been appalled at the projects found on crowdfunding sites as they search for gadgets or art projects, rather are met with people asking for money to build their own garden, open a second food truck, cut their thirteenth album, and even pay for their child’s summer camp or swimming lessons.

While crowdfunding is an effective alternative to traditional banking, it is unfortunately becoming some random peoples’ way to pass around a collection plate, is causing investor fatigue as they get endless requests for money, and in some cases, it’s being used by creepers’ passing of counterfeit products, or inexperienced entrepreneurs unable to ever deliver a project they intended to.

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Lani is the Chief Operating Officer at The American Genius and has been named in the Inman 100 Most Influential Real Estate Leaders several times, co-authored a book, co-founded BASHH and Austin Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

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5 Comments

5 Comments

  1. jesus fchrst

    February 2, 2013 at 1:21 pm

    I don’t care if KS is “flooded” with millions of useless projects (as you say), just go to Kicktraq and sort out the ones you want and don’t want. Somebody wants to send their kid to summer camp? Great, I’m not giving them any money, but hey look at that idiot woman who got “bullied” or whatever… people gave her a big stack of cash. Just because you don’t like a project doesn’t mean a thousand other people won’t.

    • truthandall

      March 23, 2013 at 4:01 pm

      Yeah and it just goes to show you how stupid americans are. No wonder bankers feel no shame about killing the economy, why would they if the kind of people they destroyed are the sort of idiots to give a feminist bigot money for being called out for her crap.

  2. Carlos Hoyos

    March 10, 2013 at 9:26 pm

    That woman who got “bullied” was a scammer that purposefully went to the worst places in the net and created controversy to fish for gullible idiots that would put money to see her “youtube videos”.

    • Humz tariq

      March 14, 2013 at 6:00 am

      what? are you kidding me? Neither the video nor the donation page was set up by her.

  3. Pingback: Clearly Canadian, Clearly a Rip-Off? - The American Genius

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Business Finance

You got an LLC and you’re ready to hire – 3 things lenders look for

(FINANCE NEWS) Yes, securing a small business loan of any kind is tedious and depends on varying lending organizations and business needs, but there is a list of general requirements small businesses should be aware of before getting knee-deep in conflicting information about lenders.

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Ready to lend a hand

If you are reading this, you probably have an LLC for your small business already, or money talk gets you going. If it is the former, let me say CONGRATULATIONS, and insist you pat yourself on the back in honor of your small business’s progression. Your arrival at a point where expansion is necessary is no small feat given half of small businesses fail in the first year. So, kudos to you.

Now, back to the money talk…

For LLC businesses looking to expand, please don’t fret about all of the information you’ve seen on the web. Yes, securing a small business loan of any kind is tedious and depends on varying lending organizations and business needs, but there is a list of general requirements small businesses should be aware of before getting knee-deep in conflicting information.

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The magic three

After some extensive research posing as the owner of imaginary businesses and annoying every loan officer who’d take my call, I’ve found three general lending requirements. I also provide a collection of the tangible information banks will likely review to meet those requirements. Take a gander:

Assets
Small businesses must have necessary assets: steady cash flow, financial reserves, personal collateral to support a variety of business fluctuations (i.e. unexpected employee loss), and a realistic pay off plan. These assets and financial safety nets are necessary for any lending organization to be confident in your business’s ability to support employee expansion in lieu of current expenses.

Proof of past
Just as you will come to expect from your soon to be employees, lenders want proof of the past and how you’ve managed past loans to align with your business goals. Historical evidence will further determine if your expansion is feasible, but also if it is worthy for the company to accept the lending risk.

Specific plans
Finally, be prepared to provide your small business’s explicit expansion plan, including how you arrived at your suggested loan amount and how you intend to divvy out the funds. It is important that you are as specific as possible in your projected numbers, seeing as one employee could make a $60,000 difference, and largely affect your expansion plan and financial need.

Before you go…

Now that you’re equipped with the magic three, you’re probably feeling empowered to walk into your nearest bank and demand your small business loan. Let’s first be sure you have all of the necessary information on-hand and ready to produce.

Lending companies that look for the magic three before investing arrive at their conclusion after collecting data from the following pertinent information:

– Proof of collateral
– Business plan and expansion plan
– Financial details
– Current and past loan info
– Debts incurred
– Bank statements
– Tax ID
– Contact info
– Accounts receivable information
– Aging
– Sales and payment history
– Accounts payable information
– Credit references
– Financial statements
– Balance sheet
– Profit and loss history
– Copies of past tax returns
– Social Security Numbers
– Assets and liabilities details

Now, my friend, do I release you as proud as a parent unto your nearest bank to secure your small business loan and begin growing your staff the way you’ve dreamed. I’m confident you will find the aforementioned information helpful in said quest, and would like to wish one last time (because it’s impossible to over-congratulate) a sincere CONGRATULATIONS on your businesses growth.

#LLCLending

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Business Finance

How cryptocurrency works – basic vocabulary and concepts

(FINANCE) Cryptocurrency is a concept that dates back a decade, but as it becomes newly mainstream, many are struggling to catch up – knowing the basic concepts can get you up to speed.

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One of the most exciting things to arise out of new technology is the idea of better ways to optimize and improve concepts that we already find in the real world. None of us should be surprised when that includes currency.

With cryptocurrencies such as Bitcoin, Ethereum, Ripple, Litecoin, Dash, NEM, Ethereum Classic, Monero, and Zcash (to name a few), it may be hard for the average consumer not to just keep up, but to know what’s going on in this revolution in our modern day economy. Knowing how crypto works makes you a better consumer, as well as investor in your future. Let’s get started with the basics.

What is a cryptocurrency?

To ask what cryptocurrency is, one should also contemplate what modern day paper or coin currency is. At its most basic, all currencies share this core trait: you can exchange a unit (or units) which has predetermined value for either goods or services. Whether it’s dollars, Yen, the gold standard, or Dogecoin, all of these currencies allow you to complete basic transactions.

Where cryptocurrency is different, is how these transactions are completed and how cryptocurrencies are processed.

How does crypto differ from common currencies?

Cryptocurrency allows you to send money directly peer-to-peer (p2p) electronically instead of operating through third-party systems like banks or governments.

The technology that makes this happen is called Blockchain. Blockchain technology is the primary difference between the dollars in your wallet and the virtual currencies in your crypto wallet. The Litecoin School of Crypto uses a great analogy to explain how blockchains work:

“In its simplest form, blockchain is data. It’s a list of recorded information called “blocks” strung together in a chain. Think of blocks as folders stuffed with information i.e. how much Litecoin was sent, who sent it, and who received it. The great thing about blockchains is that it’s public and anyone in the world can see it.”

How does a normal crypto transaction work?

Here’s an example using the fictional cryptocurrency, bitquarters: Karen owes Jamal 10 bitquarters for her movie ticket, so she’s going to pay him back. Karen first requests the transaction through her digital wallet. Because of the nature of cryptocurrency, she can’t send him bitquarters she doesn’t have (there is no “overdrawn” account status in crypto, like modern banks), so it’s a good thing she just got paid!

When Karen initiates the transaction, she uses her private key to virtually “sign” it. When a transaction is completed, an individual will “sign” their transaction with their private key – the reason why cryptocurrency is called as such is because of encryption, after all. The requested transaction is sent via peer-to-peer (p2p) sharing to a network of computers called nodes. These computers validate Karen’s key and verify the transaction.

After the transaction is verified, it is added to the blockchain, the virtual ledger, that all bitquarter users have access to. After that is finished, in only a matter of seconds, Jamal is paid!

What is this cryptocurrency “mining” thing I’ve been hearing so much about?

Mining is a vital part of the cryptocurrency transaction. Miners are the only individuals in the crypto process that can confirm transactions. Their job is to take a transaction, to verify that it is legitimate, and spread them p2p in the network.

To make it a part of the public ledger (the blockchain) every node has to add it to its database. Because mining takes a computer’s energy and electricity to perform, miners are rewarded with small amounts of cryptocurrency per transaction (like how you pay to pull money from an ATM). However, to prevent fraudulent transactions, a computer must solve an encrypted puzzle in order to add it to the blockchain.

What are other important crypto terms I need to know?

Address: the only piece of information that needs to be used for a transaction, similar to a user name or email address. Each transaction uses a different address.

Block: a unit of data in the blockchain that holds and validates transactions. A blockchain is where all blocks of transactions reside.

Double spend: the action of trying to spend cryptocurrency to two different recipients simultaneously. Mining as well as the blockchain prevent malicious actions such as this from taking place.

Cryptocurrency is held up by some as being the currency of the future, while many others think that due to over-speculation, that it will be a investment bubble with irrevocable consequences for brick and mortar institutions. Regardless of any market forecasters perspective on cryptocurrency, the technology is here to stay and knowing the basic vocabulary can help you understand where things are going.

Don’t be intimidated by all of the language around this concept – if you choose to dive into the crypto waters, you’ll learn as you go along. If you invest in stocks, you know a specific concept and vocabulary list, and crypto functions differently but is just another finance mechanism, both of which can be overwhelming but learning the parts necessary to your goals is all that matters.

PS: If you’re more of a visual person, there’s a short video available that has circulated that explains Bitcoing well, and applies to crypto in general.

This story was first published in February 2018.

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Business Finance

Private unemployment insurance exists – it’s limited, but it exists!

(FINANCE) Entrepreneurs – you know you’re supposed to have six months of income saved up in case of emergency, but another cushion is private unemployment insurance – it exists!

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Everyone knows that it’s important to have that reserve of funds stashed away in case of an emergency or a layoff, but it’s often hard to establish it—especially as a young professional or an entrepreneur. Even more daunting is building that reserve of funds to cope not only with a potential emergency, but a job loss.

If you lose your job, you may be eligible for unemployment benefits from your state — depending on a whole host of factors, including cause of termination and your classification as an employee. Often those state benefits are very limited in either duration or in payment, which doesn’t provide the newly minted job seeker with much in the way of time or funds to keep things afloat while they look for their next job. To offset that limitation, there are private unemployment solutions that do exist, albeit limited in scope.

For years, IncomeAssure, which began in 2011 and was issued by SterlingRisk and backed by Great American Insurance, was the largest private unemployment insurance policy. With about 1,000 active policyholders and over $1 million in claims paid out as of 2016, the policy is no longer accepting new applications for coverage as of late 2018, but is still insuring those with an active policy.

“It has been disappointing that we haven’t been able to find a cost-effective way to get the word out that this exists,” David Sterling, SterlingRisk’s Chairman and CEO, said, speaking to The New York Times in 2016. “It’s also understandable. If nobody is aware that something exists, it’s hard for people to find it if they don’t know to look for it in the first place.

With the closure of IncomeAssure as an avenue for new coverage, SafetyNet is another possibility for private unemployment insurance, depending on where one lives. Presently available in 10 states, SafetyNet provides their policyholders with a one-time lump sum payment between $750 and $9,000, depending on the coverage option selected at the time of inception. The monthly cost of SafetyNet varies by state and protection level, and is far less than the traditional policy that was offered by IncomeAssure, as the payment is correspondingly reduced as well. However, as a lump sum option, the ability to quickly access needed cash is a boon to those who may find themselves in need of it.

As with most insurance plans, there are certain exclusions to the SafetyNet policy. These include:
• A pending job loss that the client was informed of prior to purchasing the coverage, or job loss due to acts of war, criminal misconduct, or nuclear/natural disasters
• Job loss due to quitting or retirement, or are termination for cause, including for poor job performance and improper workplace behavior
• Any job loss within the first 90 days of coverage
• Any disability that starts within the first 6 months of coverage if caused by a pre-existing condition treated in the 6 months prior to coverage
• Any disability that occurs in the first 90 days of coverage, or any disability due to normal pregnancy, alcohol or drug use, or elective surgery
• Normal and routine downtimes and workforce reductions for seasonal and other jobs (like construction) or job loss because the task the employee was hired to do was completed or the time period covered by the employment agreement came to an end.

While no one would argue an insurer’s right to protect itself against issuing a policy to cover employment loss for those who sought to quit, retire, or get fired through poor choices on the job, some of these terms should be a caveat emptor for those who have medical conditions that may extend beyond FMLA coverage or whose workplaces are in areas prone to natural disasters, as neither of those conditions may be covered.

For those who are classified as independent contractors, however, the market for private unemployment insurance remains limited. In most states, independent contractors aren’t eligible for unemployment benefits, and neither IncomeAssure nor SafetyNet extended their protections to that segment of the workforce either.

For independent contractors, facing periods of unemployment is one of the hazards of the role. When such a period comes, the independent contractor should invest the time to review the conditions of the work that they did for their last employer to ensure that they were classified correctly as independent contractors, and weren’t mis-classified employees, who would be then eligible for state unemployment protections. (The IRS has simplified the independent contractor test to three broad factors with 11 conditions: behavioral control, financial control, and type of relationship).

Although the marketplace for private unemployment insurance appears to be limited, it’s worth it to ask your insurance professional of any options that may be available to you in your segment of the workforce as a part of your annual insurance review.

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