This Is Why Crowdfunding Shouldn’t Always Be The Way To Go

Just two days ago Kobus du Toit, the founder of Gizmo3D, announced that Paypal refuses to release the fundings from their Indiegogo campaign. Were does this leave the business and their customers?

Startups are allowed to make mistakes – of course most of the time its their first business. And crowdfunding platforms like Kickstarter and Indiegogo allow startups to target a wide audience very easily. This could create a potential dangerous situation for the company and their customers. Especially if the bank doesn’t know about the intentions of their customer.

This time PayPal, as a provider of the account from Gizmo3D, holds back a percentage of their fundings because of the higher level of risk of Gizmo3D´s business model.

Kobus du Touit sent this information out to all customers to address the issues:

The possible impact:
We will be unable to deliver your much appreciated orders in time if we do not have the money to do so.

We have registered a dispute against PayPal at the Financial Ombudsman of Australia today and received our case number. PayPal has 21 days to respond to the case. Because this is now a legal matter PayPal refused to communicate with us any further.

As a last resort we might have to refund the orders and hope that you will place them again through bank transfers to our secure bank account, but we can’t do this until the Ombudsman has made their ruling.

We apologise for any inconvenience this may cause and will appreciate your continued support through this unfortunate incident that we will keep you informed on.

As unfortunate this incident is for the backers of Gizmo3D and of course Gizmo3D, it could have been avoided by simple advanced communication. And if PayPal doesn’t want to work with Gizmo3D there are other banking institutions that sure will. But if you are backing a startup you have to consider that delays and errors may happen.

I really don’t believe that in this case any of the companies is to blame. What everybody can learn from this incident is that communication is key!

Hopefully Gizmo3D and PayPal come together, so that Gizmo3D can soon come back to their original schedule.