Hybra’s Kickstarter Backers File Complaints, Allege Fraud—And Wait

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promised; be honest, and make “no material misrepresentations in their communication to backers”; and offer to return any remaining funds to backers who have not received their reward, or else explain how those funds will be used to complete the project in some alternate form. Failure to do any of those things, Kickstarter warns, could subject creators to legal action from backers.

Gallagher said the crowdfunding website is meant to be a way for people to make something new, which is inherently risky. According to data supplied by Kickstarter, an independent University of Pennsylvania study found that fraud is fairly uncommon and creators fail to fulfill pledges to backers only 9 percent of the time. More often, backers get upset when the project doesn’t come to life exactly as proposed in the initial fundraising pitch. Sometimes, creators get in over their heads, as seems to be the case with the Zano project.

“In the space of a few weeks, they went from ready to ship to goodbye,” Gallagher said. “That was a shocker, and it led us to say, ‘How can we help backers understand how the system works?’”

Zano’s backers were convinced that the creators ran off to the Cayman Islands, but the report found that Zano’s creators simply didn’t possess the knowhow to deliver to backers. And sometimes, Gallagher explained, creators aren’t willing to admit defeat, which is part of the reason Kickstarter clarified its rules in 2014.

Kickstarter also maintains an “integrity team” to ensure projects conform to the site’s rules. If they don’t, campaigns are canceled. Gallagher recalls one such project for a laser-guided razor. The integrity team found that the creator hadn’t actually built a working prototype, so it was pulled. (He said it immediately relaunched on Kickstarter’s competitor, Indiegogo.) But once a project is fully funded and the funding period expires, the money contributed by backers goes to the creator and it becomes a business arrangement between backers and creators. (Although there is a small window of time where, if a project is found to be violating the rules, it can be pulled.)

“A big part of our role is to set the right expectations going in, so potential backers know that Kickstarter is not a store, and that projects may not work out,” Gallagher said. “When a project is funded, a contract is formed between the backers and the creator. Kickstarter is not a part of that contract, so our role is limited. If we hear from backers that a creator isn’t being responsive, we’ll reach out and encourage them to send an update. A creator who isn’t fulfilling their promises to backers and isn’t keeping backers informed would not be able to launch another project.”

What Should Hybra’s Backers Do Now?

Kickstarter recommends that dissatisfied backers who believe they have a legal case against a creator seek the advice of an attorney in addition to filing complaints with the proper regulatory bodies. Jeff Aronoff, a lawyer at Sidewalk Ventures, said crowdfunding is so new that there aren’t a lot of legal precedents to go by. (The FTC’s spokesman said he knows of only two instances nationally where creators of crowdfunding projects were brought up on criminal charges: once after an investigation initiated by his office, and once by the state of Washington.) Aronoff said backers might be more successful pursing a civil complaint rather than a criminal one.

And what does Hybra’s co-founder, Joe Thiel, say about the latest round of accusations from backers? That the project is continuing to “progress well” despite a durability testing process that was longer than expected, he said in a phone interview this month. He said his most recent update, the cut-and-paste e-mail from back in December that so many backers found confusing, was meant to be a “kind of neat” way to show the back-and-forth with, one assumes, the engineering team. (It’s not clear who is participating in the e-mail discussion, or what their role is.)

He said further delays were caused by procuring yet another piezo driver, a key piece of technology that allows the Sound Band to operate without covering the ears, after Hybra exhausted the stock of one component manufacturer. And there was a capital issue, he said, that involved moving money from Hybra Energy—a separate entity that has a contract to light the Ambassador Bridge connecting Detroit to Canada—to fund the Sound Band’s development. “The long lead time on parts hurt us, but rather than make a big deal about it, we wanted to move forward,” he said.

Thiel said he had other things to worry about, like shipping beta test units out. He declined to share tester feedback publicly, but told me most of the testers praised the sound quality but were less enthusiastic about the fit of the headphones. And he spoke of meeting with “multibillion-dollar companies,” which he said came to town and commissioned his lead engineer to explain how he refined the Sound Band’s design.

Thiel is adamant that the Sound Band is not outdated or obsolete, as some backers now claim. He said Hybra is the only one developing headphones capable of detecting “surface sound”; his competitors, he said, rely on bone conduction, which is a different technology. “You wouldn’t ask that question if you understood the technology,” he said. “I don’t want to talk bad about another company, but there’s nothing else remotely similar.” Thiel even went so far as to say Hybra was … Next Page »

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