Self Crowdfunding and the Failure of Plastc
Death is a sad thing when it befalls the people around us, and there are 5 stages of grief that people go through when they are mourning the loss of a loved one. There is now a 6th stage of grief that seems to have appeared lately. Go setup a crowdfunding campaign. These days it seems like everyone is getting into “self crowdfunding” and there are even companies now that ignore the traditional crowdfunding platforms and have a go at it themselves.
We’ve warned before about the dangers of crowdfunding, how easy it is to run a scam on Kickstarter, and the problem with equity crowdfunding. We would expect that equity crowdfunding will attract the same sort of criminals that think they can fleece investors (and they often do) on the over-the-counter (OTC) market. Sure, some of these people are just incompetent business people that don’t know how to run a business but do you know what they all have in common? They all take your money and spend it then give you nothing in return. Now we’re starting to see problems emerge from “self crowdfunded” companies with the $9 million crowdfunding failure that took place a few days ago by a firm called Plastc.
Long story short, a startup called Plastc decided to offer an “all-in-one” smart plastic credit card and they took in $9 million in funds by pre-selling these things back in 2014. They actually didn’t even use a crowdfunding platform but instead they decided to pre-sell their product on their website using self crowdfunding. Here’s a look at the product which was said to have a working prototype:
Why did this company decide not to use well established crowdfunding platforms? Maybe it’s because the two founders seen below had previously built digital businesses and thought they would reinvent the wheel:
Fast forward to today and they suddenly announced that they are closing their doors, filing for bankruptcy, and will not be filling any orders. Then the co-founder and CEO, Ryan Marquis, decides to delete all his social media accounts making people start to ask lots of questions about the startup’s intentions. This is not the sort of behavior that people would expect from someone who talked so much before about trust and transparency, like this excerpt from an article on the Huffington Post:
That above statement came from a Huffington Post article which was published on 03/11/2016. Along with that article is a video in which Ryan Marquis is interviewed for 30 minutes by the CEO of “a full-service production company focused on great storytelling“. It is unclear if this is the same PR firm mentioned in the article that helped Plastc conduct their initial marketing campaign that resulted in $5 million in pre-sales in just 7 days. The author of that article is the CEO of a PR firm that offers the following services:
Without a very good PR firm, Plastc would have never been able to pre-sell $5 million worth of product in 7 days. This article on HuffPo was one year ago and it’s hard to believe that the company wasn’t already having problems. This begs the question, what responsibility do PR firms have when it comes to promoting companies like Plastc? Should they be conducting due diligence and fact checking? Not once in that article did the interviewer challenge Ryan Marquis about the delay in their product:
Incredibly, throughout the entire 30 minute interview, not once was Ryan Marquis put on the spot about when his product might be available. For almost 30 minutes, the interviewer asks Mr. Marquis questions about how he became such a successful entrepreneur as if Mr. Marquis was Steve Jobs himself. If you want to watch the interview in its entirety, here’s the link and you better hurry. Per the below comments on Youtube it’s likely to be removed at anytime:
What’s even more interesting is that less than a year ago (around the time that interview was conducted), it appears that the company was running a referral campaign for a lifetime subscription to the product for those that pre-ordered it. In fact, it appears that you could still pre-order the product right up until the company failed. At what time was Plastc obligated to tell customers not to give them money for a product that they did not yet have all the funding needed to deliver?
As of right now, the company Twitter account has been deleted, and the company Facebook page has been deleted. While everyone is attacking Ryan Marquis as if he were Satan himself, it’s important to look at everyone that was involved in this venture from the beginning. We found a list of 4 founding members of Plastc back when they first started (this is a permament record anyone can see available at this link). Now the extent to which these individuals were involved is unknown, aside from the fact that they all assumed C-level positions in Plastc and one was a Board member. Perhaps they jumped ship when things went south? We’ll never know. This raises the question though, what accountability should these people have for the failure that took place?
If you are someone who is thinking about buying a product on pre-order from some startup that decided to do self crowdfunding, don’t do it. If you do, you need to be very close to the company that sells you that product. 9 out of 10 businesses fail. What makes you think that the company you want to pre-order from will be the 1 out of 10 businesses that succeeds? It’s already risky enough using crowdfunding campaigns but now people feel totally comfortable with buying a product from any company that decides to go about “self crowdfunding”. Let’s hope everyone learns a lesson from this and never gives anyone $155 for a product that doesn’t exist, no matter how much compelling story telling takes place. And if you run into a guy named Ryan Marquis, tell him there are lots of people who have questions for him.
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After five years of research into the why behind the correct quote above,”9 out of 10 businesses fail’ we decided to address the biggest reasons and the reality that both the fundraisers and investors in crowdfunding can’t get the information and protection available to wealthy investors the succeed funding great startups.
Our Crowdfund Guarantee, a principal protection program that returns money investors lose in failures like Plastc is designed to build confidence as well as provide the incentive to build wealth and opportunity in communities by building and funding small businesses (the far and away largest job creators). With it, investors can recover from and entrepreneurs can learn from failure, a so often necessary step on the path to success.