When some projects on the crowdfunding site Kickstarter fail, their creators face nothing more than angry emails from backers until they either deliver an update on the product’s status, or the product itself.
Seth Quest, the entrepreneur behind an iPad stand known as the Hanfree discovered there’s a fourth possible outcome from a failed Kickstarter campaign, a lawsuit & bankruptcy.
“When you fail on Kickstarter, it’s a very public failure,” Quest told Inc. “It definitely derailed my career substantially. Your backers can give you massive support, but they can also tear you down if you fail.”
According to the article, Neil Singh, an attorney from Arizona, was among those who gave $50 to fund the iPad stand. Singh and other backers were reportedly left in the dark about the status of the item they expected to receive. Eventually, Quest conceded that the project had failed and said that he’d be returning the $35,000 he raised through Kickstarter. But when Singh didn’t receive his money after several weeks, he sued for breach of contract.
Quest said, according to Inc, that he raised $35,000 on Kickstarter, but he didn’t have manufacturers lined up prior to his fundraising. Once the manufacturers knew how much money he had to work with from the site, they had the upper hand in negotiations, he said. In the end, Quest lost the money to engineers and contractors and was personally liable for returning it.
Read More: INC