Finance & Wealth

3 Lessons From Failed Startups With Highly Successful Crowdfunding Campaigns

By Serhat Pala | Apr 6, 2020
Serhat Pala | ACHNET

Avoid these three things to make sure your crowdfunded project doesn't fizzle after funding.

Recently Ossic, which made 3D audio headphones for virtual reality applications, closed its doors for good. The company had gotten off to a fabulous start having reportedly crowdfunded $3.2 million, but ultimately had to shut down.

Ossic's experience is one of many highly successful crowdfunding campaigns that were flooded with money from eager backers, but eventually crashed after their campaigns were done.

On one hand, I do admire them for at least being half successful. My own experience with crowdfunding on Kickstarter ended with my project -- an app that connected dog owners to dog-related businesses in their respective areas -- not getting funded. (Although we were actually more interested in attracting users to the app than raising funds, per se.)

In researching some of these high profile crowdfunded flameouts, I've come to learn the following three things about why even if campaigns are successful, they still might fail.

1. Not having outside funding and business experience may hamper the project.

Crowdfunding can sometimes raise a lot of money for a startup. It's also a gauge for angel or corporate investors to determine which projects are worth backing. Even if your project raises a lot of money initially from the public, it still may not get off the ground if it doesn't also attract corporate investors.

It's not just money that business savvy investors can bring to the table. They can also provide guidance and mentorship for young startups with inexperienced teams. Mini-drone startup Torquing Group definitely could have used some guidance. While they raised £2.3 million ($3.5 million) on Kickstarter -- the site's most successful European campaign -- they burned through that funding quickly and wracked up another £1 million in debt.

According to an extensively researched article commissioned by Kickstarter itself, the team behind the mini-drone--called the Zano--over-promised and under-delivered. Without any true business experience or guidance of how to nurture a project to fruition, they bit off more than they could chew and flamed out spectacularly.

2. Promising technology that doesn't exist yet is a recipe for disaster.

It's fun to speculate about the