Amid an ongoing debate about the merits of equity crowdfunding in Canada, a Montreal-based firm has pulled its project from the Kickstarter crowdfunding site after facing questions about its legitimacy from participants on the site.
The Wall Street Journal reported Tuesday that GXP Technologies, a firm that was seeking $40,000 in funding for a device to promote lucid dreaming, had pulled its project from Kickstarter. When it was cancelled, over 2,500 people had backed the project, pledging over $350,000 in funding, according to the site. Commenters on the site expressed concerns about the proposed device.
GXP posted a note indicating that it decided to pull the project after finding a private lender to fund its project. “With the direction that this campaign is going, dealing with a single person instead of 2,500 doubtfuls made our choice very easy,” it said. “We still think Kickstarter is a great medium, but it clearly has some serious moderation issues. Giving them $20,000 in commissions for allowing such a circus on their website does not seem appropriate. We will be sticking with more conventional funding sources like we have in the past.”
The case highlights a couple of the central worries about crowdfunding as a fundraising model. Critics of the concept, such as investor advocates, have argued that crowdfunding could expose investors to fraudulent schemes. At the same time, prospective issuers also have to worry about the mechanics of raising small amounts of money from numerous investors.