Tuesday, May 13, 2008

Crowdfunding: Accountability?

I first read about Nvohk on Springwise in December 2007. The founders were starting an eco-friendly clothing company and were trying to crowdfund their initial round of capital. The early stage target was 20,000 members @ $50 per annual membership ($1m). This would provide enough seed capital to get them off the ground. Paying members would participate in business decisions by voting on logo and product designs, marketing campaigns, sponsorships, charitable recipients, discounts, and all the other standard shenanigans that come with a crowdfunded business opportunity. Additionally, as one would expect, noone was asked to put up any dough prior to Nvohk interest "tipping" at 20,000 members.

For a month or so, Nvohk received some coverage in the blogger press (ASRtalkingheads.com, CherryFlava.com, 5ones.com, boardridingblog.com, Springwise.com, KillerStartups.com, Treehugger.com, SmallBizTrends.com, PSFK.com, HuckMagazine.com, Shinystyle.tv, LazyEnvironmentalist.com, etc. Nvohk also featured a counter on their homepage advertising how many interested people had signed up for their monthly e-mailer. I remember that less than 1,000 potential members had signed up prior to 01/08. I liked the idea, so I bookmarked the site, signed up for their monthly e-mailer/updater, and checked back in periodically to see what was happening with this grassroots, eco-friendly effort.

At the end of February, I received the monthly e-mailer that let me know that 1550 people had signed up and that, based on the overall excitement from potential members, Nvohk management had decided to accelerate their activation efforts (i.e. lower the required number of members) by setting the tipping point at 5,000 members. While this would cut down the amount of seed capital by 75% to $250,000, I would think that you could make some t-shirts for that (heck, you can make a t-shirt in 3 minutes on CafePress.com). It also demonstrates that, unless you have a serious platform already in place like the guy who started MyFootballClub, you might have to do a little marketing in addition to putting up a three-page website if you are ever going to reach a goal.

My March Nvohk e-mailer let me know that we were halfway to the goal of 5000 members. It also asked me to sign up for the Nvohk groups on Facebook and MySpace. Facebook had three separate Nvohk groups with one of them letting you know that, "If 20,000 people join this group, you will all become rich!" That group didnt mention anything about the 50 bucks. But, then again, anyone can start a Facebook group about anything they want, and it notes in the group description that the group isn't endorsed by Nvohk.

The May e-mailer was a little different. It seems that Nvohk has decided to forgo the a 5,000 member activation goal and just launch with what they have in June. This means potential members will be asked to pony up the $50 in June regardless of the number of people who have expressed interest. Currently, Nvohk claims 2650 interested members - this still means they will get a seed round of $132,500. First action item? Nvohk is going to hold a crowdsourcing contest (advertising, round 2) where members will vote on a user-submitted logo. The prize will be $500-1,000 US dollars. So, hey, let's burn 1% (ish) of our initial round of capital on a logo.

My big question: After 5 months of virtual silence (well, 4 monthly e-mails) from the Nvohk management team, what's the take rate going to be on the 2,650 people that have signed up? How many people are going to even want to put $50 into this company after management achieved 15% of their original goal and haven't really done much to foster excitement and trust with their potential members. Is this just a big scam?

Who cares if Nvohk is legit or not, do you really want to throw $50 at a company that can't even communicate with "potential" members over a 5 month launch period? But, Nvohk launched a blog on May 04, 2008. 5 months to launch a blog? Shouldn't Nvohk management have introduced the blog months ago for this crowdfunded, crowdmanaged project? Wouldn't you want to keep the crowd informed of what was happening?

Not sure where this one will fly, but it might be worth my $50 to keep an eye on it.

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