The dark side of crowdfunding
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- เผยแพร่เมื่อ 15 เม.ย. 2019
- Crowdfunding gives gadget makers the power to launch their own companies, but sometimes their dream dies not long after launch. In this episode of In the Making, reporter Ashley Carman looks at how crowdfunding platforms Kickstarter and Indiegogo are changing their business to prevent creators from never shipping their product.
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Have you ever backed a crowdfunded gadget, and did you receive it?
Yes I have backed about 700 projects over the past 2 years, and not received about 5 as they were without doubt outright scams. But TH-cam channels that promote these gadgets to subscribers without truly reviewing any prototypes are also very much to blame as many campaigns quote reviews by VLOGS, INFLUENCER'S & TH-cam CONTENT who have mosy often been paid to promote content without even seeing a product or prototype. I mainly back Micro Brand Watch companies as that is my passion & I do it to hunt for investment opportunities in MB watches. The great pary about this is that the smart Micro Brand Watch companies that want to kick off with crowd funding pass prototypes around to all the various watche review channels on TH-cam so you get a review or look at a real product prior to making a pledge.
I backed the Verum Audio headphones project on Kickstarter in 2018. I received the product 7 months later, about 60 days delayed but that comes with the territory. No complaints.
@The Verge
Yes, The Nifty MiniDrive on kickstarter.
Remix Mini. Yes
Remix IO. No.
I got the refund but no amount of refunds can substitute the IO I don't have.
It’s like 3/10 if you receive the product or not, more has to be done. Lloyd’s Bank won’t help in any situations. They say they can’t issue chargebacks against Indiegogo or Kickstarter as they be chargebacking the company not the individual who made the product.
I just went back to check my kickstarter history. I have supported 60 projects and it is only four of these projects that didn’t deliver. Only one of them have been the developer taking the money and runing. The other two where game developers that had underetimated time and price and a hardware project where just about everything that could go wrong for the entrepreneur did go wrong. I might have been lucky. I don’t know.
I think that the big problem here is not the crowdfunding platforms or the crowdfunding idea, but that some people see this as normal shopping. It isn’t normal shopping. There is a risk. Your helping bringing an idea to life. Don’t invest more money, than you are willing to lose. You almost always have the option to not support the campaign and then come back a few months or a year latter and then buy the product if it get made.
Once again Verge, amazing video, misleading title.
You should be used to misleading information by now. If live in America, Trump is the perfect example of Lies.
@@RabbitsInBlack just because I'm used to it doesn't mean I will accept it. I believe the Verge cares about their content and how it is percieved. If enough commenters complain about the video titles not reflecting the content, they will make an effort to change it.
You are right... But hey... It's more catchy which imo drives more views in the end which this video deserve :)
had the title not been misleading you wouldn't even be here complaining about it and praising the quality
It's not really that misleading. The main story that sticks out to me is the dickassbitch who went 2.0 on his backers. He's on the dark side. It's just that it's actually a pretty balanced video.
12 mins summed: Crowdfunded things are often delayed or just scammers.
Just because something doesn't ship or the creator(s) lack customer service skills doesn't mean they're scammers. There are a couple of examples of genuine scammers on crowdfunding platforms, but this piece didn't cover any of them.
@@jaredbowhay-pringle1460 so if it doesn't ship and no refunds what's that called?
@@MommaKnowsBestest When crowdfunding, you're not buying a product in the conventional manner, you're investing in the creator of the product, but most people don't seem to grasp that. Obviously, people have the right to feel aggrieved if a project doesn't work out, but it's very different from buying a retail product from Amazon.
@@jaredbowhay-pringle1460 that's called scam. If the funding of the project is met there is no reason for them not to produce. Money was spent with expectations of product at the end.
Momma Knows Bestest u really do know best♥️
You should never pledge money you aren't comfortable with losing.
Yep, there is always risk involved when investing in young companies. Big companies and investors often invest millions in companies that end up flopping. There is a difference between Kickstarter and Amazon
you mean losing?
yeah, it honestly kinda shocked me when the host asked "who's accountable for campaign failures" and didn't offer the backers as a potential choice. they're the ones putting up the money for anything to happen in the first place, so why wouldn't it be the case that they're the ones responsible for whatever ends up happening? they are held accountable for the issue _through_ their loss of pledge money, the loss of pledge money is not the issue here..
Or just dont pledge in general
@@thatxonexguy5438 Yes, if you're not comfortable spending the money and possibly getting nothing in return, save your money.
It baffles me that the issue of accountability is getting attention this late. It was an obvious problem from the start of crowdfunding.
Anyone shopping on crowdfunding funding sites need to think like an investor before contributing their hard earned money into any of these projects. Is it just the idea of a cool product that you like, or are you actually confident in the people behind it, and the preparation they've put into the project for it to actually take off and sustain?
Problem is, few people (know how to) think like an investor. That's why *real* investors in *real* startups must read and sign extensive waivers acknowledging they have both the wealth and experience to embark in such a venture. These crowd funding sites are not fundamentally different from the real estate and (railrod) stock scams from the late 1800s.
@@alliejr Yeah, it's a risky thing to put your money into. I'd much rather just buy products from already established companies, even if it costs a little more.
I think it goes both ways. Backers have to understand that the product may never come to market. And that can be part of the fun. But also innovators need to understand that manufacturing is a whole different skill set than inventing or software coding.
Lol, “part of the fun,”? You have an interesting thought process of fun….
Is it really the creator of platform's fault. Why is the "investor" spared from any responsibility? You're investing in something that doesn't exist from a company that has no experience (in most cases). When you invest in a known company there is a possibility of losing money. When you invest in an unknown company who has no history of delivering new "innovative" products you should do so knowing there is absolutely a chance you will lose money and get nothing from it. You want a guaranteed something for your money go to a brick and mortar store and pick something up off of the shelf. Taking all responsibility out of the hands of those who recklessly give money to someone they don't know on the internet because of some cool pics feeds into the current state of our society where as nobody is responsible for anything they do, itsy always someone else's fault.
Investing in a product isn't the same thing as purchasing a product and its bizarre that they are treated as the same thing...
@@TheLaughingDove Agreed
The very least the crowdfunding companies should do is return their commissio to the backers once a project fails. It would also bring incentives to the platforms to do everything they can to see that a project goes through. Currently they get paid for failed projects as well and that actually incentivizes them to host failing projects as well.
Did you not even mention what cut of the funding the crowd-funding websites take from each project?
I am interested to know. Can you please mention?
This is a really really great series ...
I always thought that people were donating the money... Without getting a return.
When you're funding a project, you're not buying a product, you're investing in the possible development of one.
"possible" is the key-word
The crowd funding websites could create a template that will help developers set up their strategic plan. A good strategic plan will set benchmarks that make it easy for stakeholders to follow along. An established plan will also heighten consumer confidence in the product, making it more likely to succeed.
I lost $300 on Kickstarter for a damn 3D printer...
Tiko?
Hello from India .we are starting a dairy .which will support handicap from profit let me know if you would be interested in investment .everyone is welcome to invest.
How?
one thing I learned working with startup involved in crowed funding that " Hardware is Hard "
Power Laces. October 2010. It got a fair amount of media at the time.
At least I got a t-shirt.
*Hold the* *_"shareholders"_* *responsible.*
You're investing in a product that does not yet exist, you accept the risk for it's failure to an extent. That does not include fraud, or remaining funds that the manufacturer agreed to refund in the licensing agreement, but both of those examples are legal liabilities that have already existed outside of crowd funding anyway.
All these videos... She's never going to catch that camera without a bit more hussle...
Very educational, very well edited and produced, glad to hear the FlowHive was a success story, as well as Mousr. And Ashley is a great host.
Personal experience indiegogo is less safe then kickstarter nowadays, got 2 projects that intended to scam people on that platform.
Yeah indiegogo supports fraud
liu chialung how?
really love these videos and i'm so glad to see it's a series!! please keep making them! :~)
I’ve lost combined about $1000 on Kickstarter when a couple products (two drones and an air purifier) I backed around the same time never delivered. That’s the last time I ever have given to a crowdfunding campaign for hardware.
Gabe Shakour how?
@@JoyWanakwanyi In the case of the two drones the companies mis-managed their funding and went into bankruptcy before delivering a product. The air purifier was just a complete scam and I never even heard from the creator/company behind it once they took my money.
That’s where being poor is helpful, I don’t have $1000 to give to anyone. A family or close friend’s emergency yes, to back a project with someone I’m not close to or don’t even know? No chance
Thinking about it I did once back a project, a relative in high school was studying small businesses. So they had to approach backers, aka friends and family to fund their projects. I remember it was £3 & we got it back. For that money didn’t really matter about it back. All my family gave it back as a donation for school because we felt bad being refunded
Sounds like a unregulated scammers dream,
Big promises and large sums of cash to be lost quickly in the shuffle and folks left with nothing.
Got burned by PopSlate. Never again. I just buy it on Amazon once it’s done. Forget crowdfunding.
That’s by far my fav series from The Verge yet
Will watch anything with Ashley Carman or Dieter Bohn.
nice looking video and great reporting. only wish it was longer with more detail. well done team.
bet you could knock out a workable design in less than a month if you were in shenzen, probally cheaper too
This is the kind of stuff I want to pay for.
Where can I get that floor lamp at 2.58
Man yourself and Becca are usually what keeps me watching a video on The Verge.
Dieter is the same; but only if he talks about WebOS. Vlad for his cynical tone.
I mean... I've never done one of these things but I always thought of it as micro-investing. Part of making an investment is taking a risk that you might lose your money... the idea of having a guarantee seems a little excessive. By all means go after fraudsters but there's some responsibility on the part of the investor to know who they're giving money to I think.
I am afraud there s just no way of knowing who you are giving money to. Crafty fraudsters will make it look like its noit their fault
I see two options:
1) Consider the project as an investment, and your “profit” if it succeeds is (usually discounted version of) the eventual product (possibly with extras to entice you). But it’s an investment, so if it doesn’t pan out, it’s money lost.
2) The platform can promise a full refund if the product is never delivered. That can be achieved in two ways: a) the platform takes the risk (which significantly increases the overhead cost of the platform for that project or for all projects), or b) the platform only pays out after delivery, which means the initial r&d and production costs will have to come out of the founder’s pocket (which doesn’t sound like a viable solution).
So why not mix option 2b with a “regular” investor: the platform collects the money from the backers up to a target, but retains it until the product is delivered. The money from the backers (up to a limit) goes to the investor, not to the founder. The investor in the meantime pays the founder, so he can do the r&d and production of the promised products.
There is a number of upsides to this: the investor knows there’s a market with committed funds if the project succeeds, and can do a much more thorough due diligence than the backers or the platform. The investor becomes shareholder, but since his risk is much lower than that of an angel investor, the founder gets to keep a larger stake in his company while receiving a bigger investment. And through negotiations the founder might be able to secure the full investment (long) before the project has enough backers, if the investor has enough faith.
Much safer for everyone involved, and will still allow entrepreneurs to create products that would otherwise never be made. And the risk lies with the traditional investor; which sounds about right to me, since the other three parties (backers, platform and founder) will hardly be able to take that risk, if you want to sustain this business model.
Isn’t the risk the whole point of investing? I think that the platforms should inform pledgers more clearly about the risk they are taking and at the same time, the platforms should request frequent updates from startups.
After two backed projects, one pebble watch and the other a video game controller, I can say, I HIGHLY doubt I'll ever back another project. Pebble launched obviously, but the controller is now a full year past due, with every update from the maker for the past 7 months saying it'll be delivered "next month". No more crowdfunding for me.
Excellent video.
As a long time entrepreneur and kickstarter creator and backer, I preeciate ya
Well done
I wish you included more stats about the failure to ship. If you don’t get your item within how long, you’ll be 80% more likely to never get it. Or if it’s a company’s second prospect, they are 150-175% less likely to need a significant extension from 6-9 months a they would be on their initial project.
The ideas in this series are really good. They’re worth exploring. But without more detail to help solidify the real world risks, the ideas remain more abstract and almost diaphanous. I’d like to be able to hear more about earnings and losses and those potentials would mean not just for the companies and consumers, but for the new creators with the next crop of ideas, the people trying to figure out where we go next from here.
Im looking forward to the next epi but I do wish it had that little extra something extra; I may be hard on stuff I like but it’s because I know it’s close enough that it can get there and be a favorite I recommend and rewatch all the time. The script is such a tricky element in this, but if it can be better balanced, I think it’ll be really really powerful.
The one and only project that I have supported with a $10 pledge, which was some sort of battery manager, notified me they were refunding me, which they did. I will just shop Amazon for the finished product.
entrepreneurs are ultimately responsible to be aware of all the steps needed to successfully manufacture and ship a product. Crowdfunding sites should reinforce that message to new entrepreneurs, but it's not their fault if a product isn't successfully completed and shipped.
One thing I know for sure - You could fit a whole crowdsourcing campaign in that coat.
I funded an acquaintance's album on indiegogo and that was great but my last kickstarter experience was disappointing. It was for biodegradable dental floss and they basically said they were ready to go on it. Cool, I was leaving for travelling in 8 months and could take it with me! A year and a half later they've finally shipped but I'm not in the country. They made it sound like it was almost ready and it wasn't.
It would be great if these platforms could offer mentorship and assistance to projects. I imagine there's quite a few good ideas where the creator doesn't have a ton of experience. I think mentorship would be a good value add.
Im getting ready for a kickstarter campaign, im trying to get everything as ready as i possibly can. I plan to do 95% of the manufacturing myself, mold making, cnc milling, injection molding.
If i get what i ask for, first thing ill do is order circuit boards, and about 10 more cnc machines, once my campaign is up, the only thing left will be mass production.
If im unable to finish my injection molding machine, i have my eye on one that is around 5k.
Probably the best work yet on the verge
This series is really good!!!
You've made a great video once again, you got my like comment and subscribe! Great jobs verge
The owner's cat would have died waiting for 4 years
Very insightful content right here! Keep it up!
verge actually has a good series.
it's like "worth it" for buzzfeed, wow
This is such an awesome series
This is a great video as someone who backed projects on both companies and waiting for some projects. It's great idea but it is a gamble.
This is a very complex problem. The idea behind Kickstarter is that if you can get people to support your idea, then great, let's see if you can make a business model out of it.
There is a difference from actually trying to make a business and failing, to using the platform to scam people - but the tough part is to, even through investigation, see the difference.
We want to live in a world where people can pledge money to ideas in hopes of making it a reality, but with the freedom to fail if things don't pan out. But, there needs to be some kind of limitation to how many failures you can have on these crowdfunding sites, some enforcement making sure the money goes into R&D, production etc., and not just used as a payday scheme for the founder.
I learned my lesson the hard way, I've backed something that HOPEFULLY is going to be done with 2 years delay. After this time all concurrents have exactly the same functionality, but I hope that at least it's going to be shipped(they've started shipping first batches month ago). Like I said - lesson learned, if those platforms are not able to protect me from such negative experiences they loose me as their customer.
I think ultimately it is the creator’s responsibility. I’m working on my own with digital files, and so far in feel terror lol. I’m in the beginning (planing stage for the kickstarter), and still trying to figure out how to properly deliver those digital files. I have no issue with creation of the STL for 3D printing. I have 7 product lines some finished and some in designing and prototyping stages. I am enjoying every bits of the creation and production process. But I want to make sure the digital delivery to the backers to be flawless.
I’m sure I will look back and laugh about my worries on that matter. But as it stands now the delivery method seems daunting. I have a Gumroad store, they haven’t really answered my questions about how to setup delivery to backers.
Really liking this series
Love this series!!!
I posted this to the project polygons:
Kickstarter and only Kickstarter is responsible through its policies, contracts and inaction for not ensuring that backers contributions (note: not investments, not purchase...but our _donations_) are used to the projects we have been convinced to part with our money to support.
We support projects, with (what Kickstarter is not at all transparent about) our financial _donations_. When you "fund" a Kickstarter, you are not buying something, you are not investing in something and as anyone knows now you_will_never_get_your_money_back. If you read the fine print, there is not even a promise of what expectations you may have been convinced by the project creator videos, updates and often paid for hype, to be made real. Kickstarter owes you NOTHING.
The only time Kickstarter will refund a project is
-1 If they did not get enough interest( translate money)
-2 Outright, legally undeniable (because oh, they have tried) fraud.
-3 The project makes Kickstarter look bad to their whales.
(whales are what the super backers are. They pump tons of money into Kickstarter on the mear idea that they may get something or on the mear implication of being an “influencer” (translate social status). They are what literally keeps the company going and just as long as they make them happy nothing changes)
Once you click the payment button, your money is _gone_ and its the whims of personal decency and the hard work of the project team to decide to honor the commitment, however much they feel to the donators. Kickstarter has already gotten paid and you, the cow has been milked and just so long as they can keep just enough abuse away from the cows they can continue to milk them, day in and day out. It's acceptable to allow fraud and abuse because it cost more to enforce the idea of Kickstarter. It cost in potential revenue from a scam project for cool looking spoons that netted the company hundreds of thousands of dollars with little cost. It cost them because actually administering projects is hard work, enforcing contracts is hard work and while they can walk the tightrope for a while no one cares. I’m not privy to the plan, but I suspect Kickstarter has an exit plan, and airlock they can blow and sell the company to some hapless financial investor and run before they realize what they bought right before it all collapses.
The problem is that we all want a Kickstarter like ~thing~ to exist, we all want the vision of the best ideas to get matched to the funding it needs to make it a success all the while making sure that the promises of the idea and their creative team are kept. This is still a fantasy. There are companies who do this, they care called Ventur capitalist and they make and lose tremendous sums of money doing this.
What we actually have is a set of companies who basically allow you to gamble on creators and ideas. You see a good horse, you think it can make it to the finish line and you put your money down… but worse than gambling is the only return you get is always worth less then what you put in financially. However I rarely look at things from a purely financial point of view, I want to see big hary audacious attempts at doing the great or the impossible.
My original experience in the Polygons project has, for me, pulled the curtain back on Kickstarts unwillingness to manage the donations and enforce some semblance of fiduciary responsibility for the vast sums of money entrusted to them. Its the appearance of being the responsible broker, the person verifying the projects that attracted so many people to the site and its not true. It took this and a few other fraudsters to show the weakness of their contracts and their oversight. In the _years_ that passed, Kickstarter has done nothing to address this, they have not changed the process and gone after abuse in the ways other micro-funders have. so the fraudsters have won, you can make a strawman product, produce some fraudulent data and take the money and run, just so long as you post some nonsense apology for delays every 4 months you are within your contract, but fairly soon that will end as the farse will become too obvious, the statue of limitations too far out of date, and the reputational harm will be gone. Even now the creator has started trying to purge the connections between this project and himself.
So, I hope this makes clear my position. I do not wish to debate it, so don’t expect a reply.
idk if we're taking votes but i absolutely don't think the platforms need to take on this responsibility. They should make clear though that they're a type of investment service, not a pre-order service.
I think the platform should give the raised money as a loan to the creator the does not accrue interest until the advertised delivery deadline passes and the loan will be written off once the customers who payed receive their product as advertised, if not the platform must pay back the funders and the creators must pay back the loan just like at a bank.
Nice series i like it 👍🏻 good work team✊
It's like stock. You take a risk. I've funded Kickstarter and IndieGoGo. Only one cheap product, I've lost money which was on Kickstarter.
As someone who's lost at least $500 on hardware products that didn't ship, I've often thought about how best this problem could be addressed. One solution that I came up with was for the platform to fund in tranches - release the funding in 3 or 4 tranches on hitting pre-determined milestones. It would then be the platform's responsibility to ensure that the milestone is hit. This will mitigate some of the risk, and backers can at least get back some of their money.
Indigogo/Kickstarter should have an agreement to pay back backers, even if its only a percentage, and then the platform can go after the project managers. Assets could be put up like a house when getting a mortgage. Projects with those sorts of guarantees or assurances would have a higher chance of panning out. Might not be perfect, but it'd be a big help.
Love Ashley's specs!
Great vid!
Backed a Tiko 3d printer. Then I paid for shipping separately because they said the product was ready... its been 2 years and still nothing.
Osvaldo Perez they declared bankruptcy
Top of the range Eve V backer here, still haven't received it over 18 months later and I still haven't seen anything about my refund either.
Do pledgers on Kickstarter/Indiegogo gain an equity stake in the company, or merely the product?
I think all they get is a middle finger
Just the product-- in other words, "pledgers" == "idiots". Idiots who do not understand economics and risk management, therefore should not be allowed to "pledge".
They are pretty much give money so the guy will try to make it... Best you get is some product or service.
I only crowdfunded once. But I will never do it again. since you pay full price for the product you can't see, touch, and take the risk of not getting it or getting it and be unsatisfied. Where you get something from a retailer you don't like. You send it back.
Big risk, minimal reward.
The platform needs to take some responsibility. As a buyer for the government, we pay according to the milestone: Concept paper, mock draft/model, prototype, tooling, etc.... I worked with many Engineers, they're not motivated if there is no deadline.
Great series 👏
Is it just me, or are the Kickstarter and Indigogo offices way nicer then I thought they would be?
Love this series! 👍👍
Ashley's jumper is giving me life
Its so retro, very cool.
Excellent series.
Thank you for sharing.
Backed a Modular LED Keyboard in 2015, still awaiting my product. The last update is from January. I understand that issues arise during the whole process so I am not upset but I would like more updates (speaking about my case) to go off of. I still have a sliver of hope that I will still get it.
Lol
The platforms could have stricter rules in place but the pitchers should ultimately be responsible.
A lot of people decided to get a refund instead of getting their Virtuix Omnis. Respect the founder for providing that option but did anyone get their Cyberith Virtualizer??
The evil platform founders KNEW from the start the risks if they would hold any responsibilities for scandalous/fraudulent campaigns. They KNEW it would be bad business for them if they would have to pay refunds on each and every single disputed projects. So they decided to disavow the refund responsibility. What an insincere and terrible attitude for business owners.
I think backers should be aware that they are just that and not buyers, although the sites should also place more emphasis on this as well. I don't think people should be entitled to refunds, apart from in extreme cases where the actual goal of the project was to commit fraud; if a venture capitalist makes an investment in a start up that ends up not panning out, they're not going to go to them for a refund.
the risk-reward mechanism of crowdfunding isn't hard to understand. people just don't like to be made fools. campaign videos without a face to go after if it fails are a pretty good warning sign though.
9:36 is the best thing I've ever seen. Why aren't they in every library and university yet?
What about backers owning the responsibility for the investments they make? These are not stores‽ MOST enterprises fail or lose money, the vast majority; Success has always been the exception. Crowd funding is a gamble and though I do believe platforms can adopt strategies to even out some of the risk, it will never eliminate it.
Some responsibility should be on the consumer too. We need to do our own research too.
Risk is inherent in crowd funding, if you can't handle risk, wait for it to come to a store. It's not the platform's fault, it is the creator.
This is why I wish all the best to Pledgecamp project. Really good video btw
Surprised to see no mention of Ossic. I backed on indiegogo as a "pre-order" and even prepaid shipping. In the end we know what happened and indiegogo didn't care to do anything about it.
I think that the entrepreneurs should be heald responsible, however the crowd funding site could make some extra money by selling insurance.
Giving people the option to get most of their money back if the product is delivered...
Love the series
Amazing series. Awesome presenter, clear and concise.
backed one ... got scammed ... never again
About 2 years ago a bookmarked all of the cool gadgets I found on Indiegogo and kickstarter. There were about 20 in total. A few months back I remembered the list and went through each saved link one by one. SIXTEEN out of the 20 campaigns were full of comments from backers saying how the project had never been shipped, they had been scammed, and that they were still waiting for a refund. 16 out of the 20 campaigns never shipped to any of their backers. They were a scam.
I would NEVER back anything on one of those kickstarter websites, and you are a god damn fool if you do.
One solution is to make founders personally liable and be prosecuted for fraud with a clause which protects them in case of issues beyond their control. For e.g the factory making the product breaching their contract, etc. This way the backers are protected and the founders aren't treated harshly in cases where it wasn't their fault.
On average, the projects I’ve backed took 2-3 years to get to me (if they ever came). Sorry Kickstarter, but I never received the memo that said it was an ‘investment’ with risks involved.
Kanoa and Radiate Athletics were 2 I funded who disappeared, thankfully I got a chargeback for the Kanoa!
Crowd funding isn't a secured investment failure should be a recognized possibility, but it mostly comes down to how much genuine effort went into trying to produce the product, now deciding how much effort is enough effort is definitely hard to figure out and probably becomes a case by case basis issue. Maybe Kickstarter and other platforms like it should start hiring people to simply keep up with 'funded' projects to make that educated decision.
Best Series for a Begineer!
Remember when Oculus took a ton of money from people on Kickstarter, and then just turned around and sold for $2bln to Facebook. I was not a backer, but this is why I will never, ever back a product.