Crowdfunding campaigners have the responsibility to do their due diligence and ensure their supply chain can deliver for any funding result. Those who do not take the proper steps will be doomed to face the same fate as Fidget Cube and risk ruining their reputation within the community. Unfortunately for backers, Antsy Labs could not deliver on their promised timeframe, and an influx of copycats like the StressCube flooded the marketplace in the wake of the fulfillment delays.

Fidget Cube backers were rightfully infuriated, and a wave of backlash ensued. One backer summed up nicely:

Failure By Design

The word on the street is that Fidget Cube and Co. placed an order for a large amount of product to fulfill their campaign. When they arrived in China to inspect their product, they found that the product was not up to snuff and weren’t willing to pay the balance owed.

So what caused this? In an update that went out to backers, Antsy Labs said the following:

“We need to let you know that we discovered an issue that we had to make a tough call on. It’s an issue that many possibly wouldn’t have noticed, but it’s one that a person who uses their Fidget Cube often would probably notice over time and with heavy use. We had to make the difficult decision to briefly pause shipping in the name of quality. Typically this wouldn’t be too big on an issue but with the holidays and a tight deadline it has made a greater impact.”

I’ll start by saying that their hearts are in the right place with this comment.

Having said that, this stuff should have been finalized in ADVANCE! Antsy Labs missed their holiday timeline and some backers still haven’t received their Fidget Cube.

I’ve been in China long enough, and here’s my theory:

Fidget Cube prototyped their product with a trading company they found on Alibaba. The prototypes aren’t perfect, so they move onto the next round of samples. After the next sample comes out, there are still issues. The factory communicates to Fidget Cube that these are small issues and that they will surely be fixed for mass production. Fidget Cube hesitates but accepts. Fidget Cube blows up. Fidget Cube moves forward with mass production. Fidget Cube goes to factory to check units before delivery. They find that the same flaws that were present in the prototype are found in all the mass production units. Not wanting to upset their backers, they tell the factory that they will not pay for the units until they are all fixed. The factory sees the high demand for the product and loads them out the back of their factory onto trucks and distributes them internationally before Fidget Cube is available from Antsy Labs.

Over-Commited, Under-Delivered

Imagine you ordered a pizza and it came a month later.

In crowdfunding, ‘late delivery’ has become the norm. It’s grown to the point where the backer community expects it and even accepts it.

A Kickstarter study done by a scholar at Wharton found that only 65% of backers agreed or strongly agreed with the statement that “the reward was delivered on time”.

A CNN study done back in 2012 found that 84% of the top-50 funded campaigns of all time failed to deliver on time.

This needs to be fixed.

It isn’t post-campaign activities that causes these problems, but rather, it is the lack of pre-campaign preparation. Preparation is 80% of the battle.

The following excerpt is from Antsy Labs:

“We want to take a second to reiterate … If we weren’t planning on sending you a quality product, we would have shipped you your Fidget Cubes within weeks of the campaign closing,” they wrote. “There’s the right way to test and manufacture a product and this process can’t be rushed, especially when it comes to how important the tactile ‘feel’ is. We’re proud to say that we’ve developed and executed Fidget Cube even better than we could have imagined when we first launched the campaign.”

Their campaign came in with an overwhelming total of 154,926 backers. I repeat: 154,926 backers.

Delivering that much product to that many people a couple weeks after the campaign finished is complete and utter BULLSHIT.

The logistical nightmare of prepping and manufacturing for that many people would throw anybody for a loop. And that’s not even factoring in those who ordered multiple products.

Avoid Alibaba ‘Factories’ Like The Plague.

Rather than listening to your Alibaba factory and posting their timelines on your campaign, work with someone who has done this before so that you can prepare for the worst.

Our business development and sales teams are often heard saying: “We’re not saying you have to work with us, but please don’t resort to Alibaba.” In fact, the majority of our customers are folks that have had nightmarish experiences with Alibaba before, and want to avoid another costly mistake.

The reality is that a majority of the“factories” that are listed on Alibaba are just trading companies. These “companies” have friends of friends and families that own factories, they hire English speaking (kind-of) employees, and they take advantage of the lack of information in the Chinese manufacturing marketplace.

These companies middle-man the entire process, which leads to 3 major issues:

1) Quality: When farming out work to factories, these companies work with their connections rather than industry leaders. Contract manufacturers can identify the best factories and curate a network of the best supply chain.

2) Prices: Extra middle men are added to every step of the process. Everybody gets paid out, and there’s poor communication to boot. This can cause timeframe and delivery to slip.

3) IP Loss: Entire design files get sent to everybody involved in the process. As the saying goes, “loose lips sink ships”.

The one company that continually puts out good products and is never replicated is Apple. Apple does not own its factories. They use a contract manufacturer called Foxconn. Foxconn breaks the product design into every single component and has specialized factories work on each component.

By working with a contract manufacturer, you can compartmentalize and have each specialized factory only work on their bread and butter, but leave in the dark on all the other components. In most cases, the factories won’t even know what product they are working on.

Having said that, I think transparency is important. China is an open-source haven. Chinese engineers are the best at reverse engineering in the universe. If your product hits critical mass, fakes will appear. It is inevitable.

As Frank Tobe of the Robot Report said, “If you’re not shipping, someone else will.”

How To Avoid Antsy Labs’ Mistakes:

Entrepreneurs need to prep for various funding scenarios, thus avoiding delays and quality problems. They should also improve communication to their backers to ensure a successful product delivery. These problems are glaring in the crowdfunding industry due to:

1) Funding scenarios — Many crowd funding entrepreneurs focus on a low MOQ (minimum order quantity) from their supply chain as a method of risk aversion. However, if the campaign blows up — like with the Fidget Cube — it’s crucial to continually communicate with your supply chain to ensure they can handle the increased capacity and prepare for a much different MOQ than initially planned.

2) Quality Control — One of the main reasons Antsy Labs slipped on their delivery timeline for the Fidget Cube was product quality. They told their backers that the initial batch of mass produced Fidget Cubes were not up to par. However, any quality control issues need to be addressed prior to beginning a mass production run. A big part of why fake Fidget Cubes flooded the market was because their initial supplier likely wanted to offload their excess inventory, and there was no agreement in place with Antsy Labs to address this scenario.

3) Intellectual Property — Last but not least, Antsy Labs likely had a supply chain developed with Asian suppliers. As such, it’s important to understand the local laws of where you are manufacturing. In China, there is a document known as a NNN Agreement (Non-Disclose, Non-Use, and Non-Compete) that is enforceable by local law to avoid any intellectual property issues, as well as protection against the supplier competing with your product or using your designs and manufacturing implements. Remember, an American NDA is NOT enforceable in most other countries, and so an understanding of local law is imperative to protect your IP.

4) Inexperience — Last but not least, most campaigns are founded by first time entrepreneurs. Many first-time campaigners may not have experience doing the pre-campaign due diligence required for a successful delivery. For example, preparing for a variety of MOQ scenarios, creating a Quality Control standard document, and ensuring NNN type agreements with your supply chain are all key steps that Antsy Labs failed to implement.

Most of the articles about the Fidget Cube fiasco have titles like:

· How to Protect Your IP from China: Step One, Recognize the U.S. is NOT the Only Place in the World

· Intellectual Property (IP) Protection When Importing from China

· Protecting Your Intellectual Property in China, NNN Agreements

That’s great. It really is. But truthfully, Kickstarter entrepreneurs are not prepared to face these pre-requisites alone. Most of these articles are overly fluffy and don’t provide any details on how to go about accomplishing them. In fact, one of them even recommends using an American-style NDA to enforce IP protection in China!

Talk about a productive start to fixing the problem.

TL;DR

If you find yourself in the same position as Fidget Cube, it’s too late. It must be stressed that the product supply chain process doesn’t happen post-campaign or during campaign, but rather 6 months in advance, at a minimum.

What a good contract manufacturer can guarantee you is some runway. We can get you out in front of your wannabe competition and give you a good start.

The world of manufacturing is a messy one. There is no debate about that. Doing that overseas in China makes it even messier. But, following the tips above will get you to a much better position.