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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.

Lani is the Chief Operating Officer at The American Genius - she has 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

Succession planning: Your options when not allocating to dependents

(ENTREPRENEUR) We’ve all heard the phrase “You can’t take it with you,” but succession planning provides peace-of-mind when leaving behind personal assets.

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Two silhouettes of people looking out over the sunset

Succession planning is a forward-looking strategy to ensure the “next in line” is prepped for what is to come. Within an organization, executives or management create a blueprint in hopes of a seamless transition of operations to “partners, future generations, or successor owners,” as Patrick Hicks, the Head of Legal at Trust & Will, states.

Succession planning can be useful in both professional and personal environments, including handing off entrepreneurial businesses or assets of any value. It’s important to create an Estate Plan for whom you plan to replace you in regard to property ownership.

Hicks says that, “Property rights are the cornerstone of modern society.” Property rights include the authority to determine how a resource is used or disposed of after death. This can include giving in a neighbor, a charity, or the most common choice, your family.

“Giving it all to family is typical but giving it all to non-relatives gets second looks. An estate plan is the manifestation of your wishes. It doesn’t matter if anyone else approves.”

It can come as a shock to hear if your assets are undesired by family- or even worse- if it comes as a surprise to them after a loved one’s death. Some choose not to communicate succession plans during one’s lifetime as it could damage familial relationships, but on the other hand, it could also provide a smoother transition. If an heir does not wish to take on the property, there is a chance for contest or litigation that could reduce the benefits of having a succession plan in the first place.

Another scenario is if your dependents do want a hand in property assets after death, but your wishes are to relinquish it elsewhere. Hicks says, “Typically, children do not have a right to claim their inheritance, unless some special rule applies.”

An example is if you leave behind a minor child or surviving spouse, where in that case, they may be entitled to receive support. This could include at least of share of property if no estate plan was in place. However, the necessary support can also be provided by the dearly departed through life insurance or another means.

“When it comes to estate planning, there are societal norms and bounds,” Hicks says, but ultimately, no matter the wishes, having a succession plan can provide peace-of-mind when thinking of the future.

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Business Finance

Tips on setting a more accurate freelance rate

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Setting a freelance rate can be difficult given that any industry has conflicting norms regarding an appropriate billing amount – a fact made more difficult by about a billion other factors such as experience, location, and so on. Whether you prefer to determine your rate the long-form way or you just want a calculator to point you in the correct direction, here are some tips for figuring out how much you should be charging.

Jennifer Bourn, business guru and freelancer extraordinaire, eschews the general “start with the salary you want and work backward” approach. Under this model, you would theoretically determine the amount of money you want in a year, divide that number by the number of hours you plan on working in a year, and charge whatever the quotient is (for example, $100,000 divided by 2080–which is 40 hours per week times 52 weeks in a year–is roughly $50 per hour).

The problem with this model, Bourn posits, is that it doesn’t actually get you what you want to earn. Once you take into account things like your overhead spending, vacation time, insurance, profit margin goals, and actual billable time versus the time you need to do administrative things, you’re looking at a substantially smaller figure at the end of the year.

Bourn’s solution is to start with the salary you want, add all of your expenses, multiply that result by your desired profit margin (e.g., 1.10 for a margin of 10 percent), and then divide by a realistic look at your billable hours for the year–not just the standard 2080 work days in a year (which is already problematic due to the aforementioned vacation time and potential for sick leave).

If all of that sounds like way too much effort, there are a myriad of rate calculators that you could use instead. Each of our following picks has a variety of applications:

  1. Clockify is a simple, straightforward calculator that looks at your industry, location, and experience level to generate an average hourly figure.
  2. Nation 1099starts with your desired salary and then gives you an hourly rate and a daily rate based on many of the factors espoused by Bourn.
  3. Your Rate asks for your desired annual income, your number of weekly billable hours, and your anticipated time off per year to come up with a set of rough figures for weekly, daily, and hourly rates.
  4. Freelance Rate Calculator is a Google Sheets template that takes into account your goals, expenses, billable hours, and more.
  5. All Freelance Writing is a more intensive calculator with an advanced option to determine all of your costs, goals, billable hours, time off, and so on, making it a pleasant option somewhere between Bourn’s long-form calculations and something like Clockify.

You should test your salary calculations in a variety of spaces if you have the time. This will ensure that you end up with a solid, well-corroborated result that you can quote to clients rather than having to fall back on one website’s opinion. Whichever option you choose, though, remember that you deserve to be paid what you’re worth–not just what your services are worth.

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Business Finance

How should freelancers be saving for retirement (is it even possible)?

(FINANCE) Adulting is hard, but retirement looms no matter your age – here are some ways to start squirreling money away so it’s less stressful later.

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Freelancing is a tenuous approach to employment, made all the more so by a profound lack of amenities usually offered by more stable arrangements – chief among which is a retirement fund. It can feel impossible, especially when your business suffers amidst a pandemic, so some of what follows can be ignored until the ship isn’t sinking, but don’t wait a minute longer than that – deal?

So there are several schools of thought regarding the best way to start saving and where you should put your money, but the bottom line is that, if you’re a freelancer, you should be allocating your own retirement funds. Here are some ways to do just that.

Before you can even get into the weeds of how to invest in retirement, you should have a parachute in case things go sideways. My Bank Tracker suggests starting with an emergency fund of $1,000, adding to it as you can until you have anywhere from 3 to 12 months of expenses covered.

This serves two purposes: ensuring that you’ll have the luxury of time if you need to perform an abrupt job hunt, and establishing how much you can safely put away each month without jeopardizing your business or standard of living (within reason).

Having a relatively large sum of money on hand for emergencies is always good, and if you never have to use it for the purpose for which you set it aside, it can supplement your retirement whenever you decide it’s time to cash in.

My Bank Tracker also suggests storing your emergency fund using a “high-yield” bank account, such as an online savings account, rather than sticking with traditional, low-interest savings options.

You also need to plan for taxes, which in addition to whatever your tax bracket percentage is, includes allocating 15 percent of your income to pay Social Security and Medicare. This means that you’re probably putting aside a pretty hefty sum (at least 30%) each month.

Once you’ve established your emergency fund and planned for taxes, you should have a general idea of what your wiggle room looks like vis-a-vis saving for retirement.

The actual saving part of retirement entails investment in a retirement account such as an IRA, Roth IRA, a 401(k), or a pension plan (referred to as a “defined benefit plan”).

Each of these account types has benefits and drawbacks depending on your situation.

  • A Roth IRA will allow you to contribute a certain amount each year, and you can usually set up an account quickly from a variety of online locations. The money that goes into a Roth IRA is post-tax, meaning you don’t have to pay tax on the retirement funds you pull out. Your income, however, can disqualify you from investing – if you earn above a certain threshold ($140,000 in 2021), you won’t be able to use a Roth IRA.
  • Other IRA options exist as well, each with a cap on how much you can contribute per year and varying tax requirements. For example, a traditional IRA account requires you to pay taxes when you withdraw the money, and there’s an upper limit on how much you can contribute.
  • A SEP IRA is similar, but the upper limit on investment is substantially higher – and you need to be self-employed (or an employer) to have one.

Nerd Wallet also points out that a 401(k) is a reasonable option for self-employed people who don’t employ anyone else, especially if you plan on saving “a lot in some years — say, when business is flush — and less in others.” 401(k) accounts allow you to put up to a certain amount ($58,000 in 2021) in each year pre-tax, and you pay taxes on withdrawals whenever you start pulling out money.

More eccentric retirement options exist as well. Taxable Brokerage Accounts let you invest in stocks and securities through a brokerage, and you’re able to use the money whenever you please – but you’ll have to pay taxes on your gains each year, which can become expensive in the long run.

And defined benefit plans are expensive and entail high fees, but they allow you to set up a pension with high investment opportunities as opposed to some of the lower-investment options.

Whichever option (or options – you can always invest in multiple accounts) you choose, make sure you’re saving for retirement in some capacity. And remember that these accounts represent exponential growth, meaning that the sooner you start saving, the better off you’ll be when you begin your retirement journey.

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