I have too many thoughts about this company and their performance in my portfolio. Today I finally decided to pen some of them down.
Introduction
First of all, Kickfurther is not a scam, its a company with a skewed business model. As I will explain below, as an investor you are the worst off in the equation, between the company, Kickfurther and you, you are the one that is most likely to lose money in my experience, especially if you keep investing. The POs, guarantees, UCC Liens mean nothing when shit hits the fan and you lose your entire principal.
Business Model
The business model is quite simple, you fund inventory for companies, companies sell through the inventory. Kickfurther takes two cuts, once at disbursement to the company and once during withdrawal. Note that there is some conjecture here in my business model paragraph since I have not seen the actual agreements and I have got to know that Kickfurther itself invested in at least one co-op.
Recently, a good majority of the last few companies I have invested in have not paid back.
The risk I did not expect
However its all part of the risk you would say, right? Well, its not so simple. The risk most investors including me signed up for is the risk of inventory not selling out. However in my experience, many companies actually sell off inventory and then refuse to pay back.
The model in my opinion encourages such “scams” for the lack of a better word by these companies. No action is taken against these companies by Kickfurther until buyers vote no confidence against this company. Usually a 50% threshold is required to make a co-op as cancelled. So many bad co-ops were not getting cancelled that Kickfurther has now pro-actively started doing affirmative votes. That’s actually one of the only steps where I think Kickfurther is working for investors in these unfortunate situations.
What happens when a company defaults? In my experience, you often times don’t get anything back. Kickfurther has stated that they have no obligation to sue the companies who refuse to pay. They end up sending the companies to a collection agency. These collection agencies in my experience end up with little success so investors have to write off their loss while Kickfurther has made their money and move onto the next company.
Kickfurther just hides the companies that don’t pay so its hard for you to figure out what’s happening overall on the platform, they often quote some research numbers but its of little solace to investors who are facing losses.
Example Failures – Kickfurther is broken!
Lets take a few examples of what happened (again its what is visible to me as an investor in these companies, reddit is a good source to see other egregious stories of scammers using Kickfurther including a case wherein the CEO Sean Clerq had to issue an apology).
- Company 1 – This company is super popular on the web for their equipment. I invested in it looking at its presence and almost certainty that it would sell through the inventory. It did, however the company initially denied any liability, then got onto a payment plan with a bulk payment at the end and then defaulted on that payment. This company is still active but they owe hundreds of thousands of dollars to investors.
- Company 2 – This company also seemed to have a decent web footprint, after selling through, the company shared how their payment would be a month late. After that they stopped updating and sent no response to Kickfurther. Guess what a few months later, this company sold all of its assets but not the liabilities (Wink wink). According to LinkedIn, all execs of the company quit. Kickfurther knew about the sale and despite being a creditor claims that it had no right to interfere in the sale. The collection agency is still collecting against the old company which actually may not even have assets. This incident is what broke the camel’s back for me. Its the first time I actually think I am sure Kickfurther does not give a damn about me as an investor. All detective work here was done by investors and Kickfurther had not even shared the sale information.
And these are just 2 examples, there are a lot of other examples wherein the company just didn’t pay even after selling the inventory and Kickfurther’s updates are only about collection agencies collecting against them. In many cases I have seen the companies continue to sell other things.
Final Thoughts
The model is inherently broken for individual investors, as Kickfurther has no incentive to get the money back if a company refuses to pay. The 1.5% withdrawal fee is a pittance against what would be required to get a judgement on a company. Despite the horrible recent performance new companies continue to get funded in days which shows me this hide the bad performers model is working.
So what’s the moral of the story?
If its too good to be true, it probably is. I don’t have the heart to do full math on my losses on the Kickfurther (yet) platform, but its significant with the 1.5% withdrawal fee and the companies I think would be permanent defaulters. I also have no clue on why these are not considered equity and under the SEC. I plan to ask the SEC that.
Be Prepared to lose your principal. Investment Rating:
1.5/5
One of the reasons I am writing this is that sites like Trustpilot are flooded by experiences of companies who were able to get money via the platform and hence leave 5 star reviews. If I were to fathom a guess, I would say Kickfurther solicits reviews from these companies just due to the regularity with which these companies are posting on Trustpilot.
As I write this, I have thousands of dollars pending on the platform, keeping my fingers crossed for a Christmas miracle but not holding my breath.
