Switched On: Higher stakes, higher ground for crowdfunding, part 1

Each week Ross Rubin contributes Switched On, a column about consumer technology.

DNP Switched On Higher states, higher ground for crowdfunding, part 1

The power of crowdfunding is that, by aggregating relatively modest donations from what is often hundreds or even thousands of backers, consumers can help artists and inventors turn ideas or concepts into reality. The Pebble smartwatch that set the record for funds raised on Kickstarter was noteworthy for breaking the $10 million barrier. That money, though, came from nearly 69,000 backers.

Today, the two biggest crowdfunding destinations, Indiegogo and Kickstarter, offer different approaches to what gets presented on their sites. Indiegogo is a completely open site; there is virtually no screening of projects. Kickstarter, on the other hand, is a curated site. Projects must meet a range of criteria. As co-founder Yancey Strickler recently explained at Engadget Expand, the roots of Kickstarter were in the funding of creative and social pursuits. Kickstarter has been a haven for artists such as photographers looking to create a photo book or musicians seeking to cut a first album or create a music video.

Over time, though, through escalating successes such as the Glif iPhone tripod accessory, the Twine connected sensor and the Elevation Dock all preceding the Pebble tsunami, Kickstarter started to become better known for physical products and the pre-orders that came as perks for backing them. Tech and design projects now account for nearly $120 million of the $532 million raised via the site. Eventually, though, the question of liability came into focus; what happens if a backer doesn't receive the item they were promised?

DNP Switched On Higher states, higher ground for crowdfunding, part 1

On one hand, Kickstarter has taken measures to protect consumers by disallowing photorealistic renders that would imply a product is further along than it actually is. It has also disallowed ordering multiple units of a product (although certain projects have found ways around that) and that restriction may not make sense in some cases such as, say, a pair of video chat cameras. On the other hand, it has steadfastly insisted that it is not a store. Indeed, it points to such laudable projects such as a low-cost, wind-powered land mine detonator -- not exactly the kind of thing one would pick up on the next Target run (even on sale).

Still, that is cold comfort for the backers of products such as the iCache Geode, a strange and ambitious iPhone contraption combining NFC and e-paper with a reprogrammable credit card that was floated last April. The project blew past its $50,000 funding goal, raising over $350,000 and units were to be delivered in June. Some of the nearly 1,800 backers received their units to mixed reviews. Many others did not. The project's comments section is filled with angry statements from backers who had paid $159 for the product (with five backers purchasing "reseller packs" for $7,500), many of whom feel they have no recourse. As one noted last month, "I wish someone would just say, 'Look, this didn't work out, so go [bleep] yourselves.' We've just been left hanging, which sucks the most."

DNP Switched On Higher states, higher ground for crowdfunding, part 1

Other long-delayed tech projects include the Syre, a Bluetooth wristband adapter for the now long-discontinued sixth-generation iPod nanos originally due to ship last November. A recent update from the project's creators note that "we are unable to issue refunds in advance of finishing the project, as that would jeopardize the completion of the entire endeavor" although they will look into refunds prior to shipment.

Jorno, a promising folding Bluetooth keyboard, first saw public light back at the Consumer Electronics Show in 2011. It had a successful Kickstarter campaign last October after its creator, Cervantes Mobile, had initially indicated the product had been scuttled. In early February, though, the company noted only that there had been "a problem with our supplier" that would result in further delay. The update elicited frustration for its lack of specifics. The company followed up later that month with a new schedule that pegged the release of the product as September, assuming the deal with its new manufacturing partner could proceed quickly.

That many first-time -- and even some experienced -- gadget creators should experience problems and challenges navigating the rough terrain of product development and manufacturing is not surprising. While Kickstarter and other crowdfunding sites have attracted their share of established, or at least venture-backed, companies, there's a fair share of amateur hour on display.

Kickstarter says that it will take further measures to protect consumers. Its guiding philosophy, though, is to help educated adults best assess their risks.

The question of uncertain reputations and the potential fraud haunted another startup that pioneered a new marketplace many years ago: eBay. The company insisted it was not liable for transactions between those who bought and sold products. Ultimately, however, and particularly after it acquired PayPal so it could control the cash flow, eBay changed its tune. Indeed, PayPal is now often the target of frustrated eBay sellers who say that the company is too quick to pull the trigger on refunds on behalf of buyers.

Kickstarter says that it will take further measures to protect consumers. Its guiding philosophy, though, is to help educated adults best assess their risks. With their transactions falling somewhere in the gray between purchases and investments, crowdfunding sites may not be stores the way an is. But they are absolutely creating marketplaces. Next week's Switched On will discuss some options emerging in the wake of crowdfunding's laissez-faire.

Ross Rubin is principal analyst at Reticle Research, a research and advisory firm focusing on consumer technology adoption. He shares commentary at Techspressive and on Twitter at @rossrubin.