[TechJect] claims that payment processor PayPal and its funding platform, Indiegogo, refused to release funds.
Well not forever, but for much of 2012-13. I don’t understand how this can happen. Can PayPal simply decide “finders keepers,” or are there legitimate circumstances under which they can impound others’ money?
Well, look at it from their perspective. Thousands of backers and an R&D firm that apparently can’t (for whatever reason) deliver the goods. Will those backers be angrier if the firm gets their money and doesn’t ever deliver, or if the money finds its way back into their PayPal account because PayPal decided on their behalf that they invested poorly? I’m not saying PayPal is right to do that, but they do reserve the right to do so in their fine print.
Crowdfunding removes some of the uncertainty of whether something that makes it to market will prove profitable. But having worked for most of the oughts in the world of tech startups, I can say that there are no shortage of well-intentioned firms that lack the organization skills, business acumen and/or accounting prudence to get from a good idea to market. YouTube has plenty of videos of people raging out about their bitter Kickstarter disappointments. I suspect PayPal is trying to mediate. It could backfire if they’re seen as positioning themselves an unwanted gatekeeper, but maybe they think that’s a better risk than transferring money to vaporware projects.
No, that’s not it. The funds were eventually released in 2013, when the project looked pretty strong. I don’t think PayPal is still freezing any funds.
Moral of the story: When crowdfunding, especially for physical devices, keep a healthy aura of skepticism and a zip-tie around your wallet. (Until your skepticism’s satisfied, at least)
[quote=“Boundegar, post:4, topic:68924, full:true”]
No, that’s not it. The funds were eventually released in 2013, when the project looked pretty strong. I don’t think PayPal is still freezing any funds.
[/quote]The linked article makes it sound like that’s exactly what’s happening:
[quote]The company announced yesterday that it is in deep financial trouble. But it’s not their fault, the founders say in notes on Indiegogo. It’s PayPal and Indiegogo’s fault for not releasing funds. How much? The company didn’t release that information.[/quote]…which definitely makes it sound like PayPal is still holding onto a bunch of the investors’ money and not giving it to the project it’s supposed to have gone to.
[quote=“GulliverFoyle, post:3, topic:68924”]
I suspect PayPal is trying to mediate. It could backfire if they’re seen as positioning themselves an unwanted gatekeeper, but maybe they think that’s a better risk than transferring money to vaporware projects.
[/quote]The problem is that PayPal doing so will actually make it more likely that a project will fail.
If expected money doesn’t come in, you have to either cut corners or take out loans (and loans make you cut corners, too, as you now have to take the paid interest out of the budget). This can cause time being wasted looking for alternative lower-cost solutions (which may themselves fail after an investment of time and money), cause the company to have to do layoffs or delay planned hiring (which causes more setbacks for the product’s timeframe - which in turn translates into more costs), etc. etc.
True, but [citation needed.] There’s nothing on the TechJect site, that I can find, to support that.
There are all sorts of weird statements in the recent updates on that project. Like the claim that they “were under direct supervision and direction” from IndieGoGo and Paypal, which doesn’t really sound like something those companies do. Or the complaint that “Indiegogo and PayPal commissions were already extracted by them at the onset itself without regard for the principal to be released to get actual work done”, which, well, that sounds like how a payment processor works, shouldn’t be a surprise, and would have happened years ago anyways.
Couple that with their attempts to say that the payment processors are the only ones responsible for refunds, and things look awful fishy.
[Edit] From one of their comments 11 days ago, it sounds like the funds were held up for an unusual amount of time but were in fact disbursed:
“we had to find other avenues to funding since Indiegogo didn’t release our funds for 14 months”
It’s hard to untangle with all the finger-pointing, but it sounds like they’re saying that they lost the people they planned to use for mechanical engineering during that period, and blame the recent failure announcement on that event two+ years ago.
[Edit2] Ok, it also sounds like they are claiming Paypal had direct control over their budget through the entire project, choosing what they could or could not spend on. That’s… weird.
"We were allowed no engineers to come onboard. budgets were only getting approved for off-shore vendors and cheaper on-shore vendors by Paypal. We had no full time engineers that were hired because internal operations were not being allowed to be funded by PayPal. "
I agree, citation definitely needed… but at the same time I was on Regresty in 2011 when Paypal shut down and froze their account because Regresty decided to raise money for poor people on xmas. 1000s of people donated $5 at a time, and then Paypal just ate it. April was forced to issue individual refunds, with PayPal eating fees for each one, and THEN after the press got wind of it, reversed their decision. So Paypal has a reputation for this sort of thing, that part I don’t doubt.
Side note: gotdamn do I miss Regretsy! A nicer bunch of sarcastic assholes would be hard to find (present company excepted)
My God, sometimes they don’t even try to blend in among the humans, do they?
Ugh, I tried to find the posts but April scrubbed Regretsy when she shut it down and cache don’t go back that far… it was a clusterfuck. And everyone she spoke to gave a different reason, it was bonkers. Eventually they backed down (thanks in part to Wil Wheaton and Jenny Lawson tweeting I’m sure) - but maybe how about don’t shut down fundraisers because they raise money?
It was due to her using the Donate button instead of the Buy Now one, wasn’t it?
Thats what one person said on the phone, but the guidelines don’t support that at all. You can use the donate button for anything, a “worthy cause”, you don’t need to be a charity.
It got resolved and paypal did donate in the end, but it was insane to watch happen.
That’s all you need to read.
Any tech project that uses Indiegogo is only using Indiegogo because they don’t have a viable enough product to use Kickstarter.
KS isn’t perfect, but it requires some minimal semblance of believability, and cuts projects that fail to meet that semblance. Those projects then just move shop to Indiegogo.
Every ridiculous crowd-funded woo tech you’ve posted here on BoingBoing has been through Indiegogo. I don’t trust any new product being launched through them.
I remember all that. I never posted on Regretsy, but I read it pretty regularly and what paypal did was beyond the pale.
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