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The FitNatic Nourish, and other cautionary crowd-funding tales

Sarah Jacobsson Purewal | Aug. 24, 2015
Revelations of the sketchy track record of two members of the FitNatic team prompted us to look back at successful crowd-funding campaigns that failed to deliver.

“For Bringrr, none of the work [Beqiraj] told people he was doing from scratch was actually from scratch,” my source said in a phone call. “He was buying parts on Alibaba and repurposing them—his plan was to get the project overfunded and then deliver as cheaply as possible.”

When asked if Beqiraj and Lamarre were running a high-level scam, my source said “not exactly;” they didn’t start the campaigns simply to get money and then abscond with the funds. But they were better at talking big than getting down to business.

“[Beqiraj] was more interested in having a cool startup than getting work done,” my source said. “Lots of team building, partying, and drinking, but no work. The rest of us would come in every day, but he would only show up once in a while. I wanted to get the project finished, but he just wanted to feel like he was successful.” Beqiraj spent a lot of his backers’ money funding his own lavish lifestyle, according to my source, including a $9000/month penthouse apartment, a new Cadillac, and an all-expenses paid company trip to Bali for the Nourish launch.

If that’s true, it could spell legal trouble for Beqiraj. On June 11, the Federal Trade Commission took its first-ever action against a crowdfunding campaign, finding Erik Chevalier (creator of The Doom That Came to Atlantic City) guilty of deceptive representation and spending most of his backers’ money on rent, personal equipment, and licenses for a different project.

My source also mentioned that the impressive Nourish prototype I saw in Los Angeles cost more than $50,000 to build, with most of the funds coming from credit-card financing and funds from the founders’ previously funded campaigns.

When contacted for comment on this story earlier this week, a FitNatic representative responded with the vague statement: “FitNatic is currently investigating previous business histories and past performances surrounding the Reddit thread. We are in deep discussions with our legal team to resolve these issues in a timely manner. Update to follow Friday 8/21.” That update appears above.

Crowd funding is inherently risky

When you buy into a Kickstarter or Indiegogo campaign, you’re not buying a product—you’re not even pre-ordering it. You’re investing in a person or in a team, and hoping you’ll see a return on your investment. Crowd-funding on Kickstarter is an all-or-nothing affair. The creator establishes a financial goal and pledged funds are released from escrow only if that goal is met or exceeded.

That provides crowd-funders with a measure of protection: If not enough backers have as much faith in a project as you do, your pledge will be refunded at the end of the campaign. Indiegogo campaigns can work that way, too; or they can be set up as “flexible funding” campaigns. Under those rules, the team sponsoring the campaigns gets all the pledged funds whether or not they meet their goal.

 

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