Why Indiegogo’s Sondors Ebike ‘Perk Insurance’ Is Risky Business

I published an article several days ago about whether there should be more federal regulation or private insurance in the crowd-funding world found here. That same day the Sondors Ebike campaign announced that they would be offering perk insurance for people’s ebike perks. This is quite possibly the most questionable services I have ever seen offered on any online site. Here’s why.

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It seems likely that if Storm\Ivars Sondors takes his $3.6 – $5 million dollars and runs, that it would spell almost certain death for Indiegogo. They simply could not survive the fallout from that situation. Forever henceforth they would be known as ‘That place people donate to get ripped off’. With legitimate competition like Kickstarter most people who wanted to run a real campaign would just go somewhere else. Indiegogo is already skating on pretty thin ice being known as the ‘Crowdfunder who never says no’. The ice is about to get a whole lot thinner.

Does the optional insurance make you feel better or worse than before?

Does the optional insurance make you feel better or worse than before?

So the crowd-funding site that is attracting the most dubious campaigns has decided to make even more money off their poor filtering process by offering ‘perk insurance’ for people to purchase along with their perk. For a $120 you can guarantee that you will get a ‘Sondors ebike’ in the mail within 3 months of the campaign close. This perk insurance does not insure the specs or the capabilities of the bike which there is already a lot of speculation about. The original bike was claimed to be at 45lbs for the ‘complete bike’ but later changed to 55lbs and then finally weighed in by a campaign donor at a hefty 58.5 lbs. The range is claimed to be 50 miles but most people will not get much more than 10-12 miles of range. The claimed top speed is 20mph but it is unlikely that it will be much over 16 or 17mph for a 170lb rider on flat and level ground. Basically Storm\Ivars and Jon Hopp can chose to ship you a yellow huffy frame with a AA battery taped in a plastic box and a walkman motor on the wheel and as long as it has the Sondors logo on it. Will Storm\Ivars and Jon do this? It is extremely unlikely, however what is likely is that 7000 people will end up with an electric bike that has a level of functionality far less than what they had originally pledged their funds for.

The Ebay of the Chinese Manufacturing world

The Ebay of the Chinese Manufacturing world

Lets look at a totally different system that works incredibly well. Alibaba has become the ebay of the Chinese market due to some thoughtful protection systems they have put into place. They have Trade Assurance for purchases over $1,000 which protects buyers from suppliers who don’t fulfill their orders properly or don’t meet the quality standards. They also offer an escrow service to protect both the buyer and seller from fraud. You want to buy a product you pay Alibaba, Alibaba tells the factory they have your money, they produce and ship the product, then when you are satisfied with the quality of the product Alibaba releases payment to the factory. Everyone is happy. Often times before you order a product you will buy ‘samples’. For ebikes you will usually get 2 samples and for a bike like the Sondors Ebike it would cost less than $2000 (shipping included) to get 2 bikes of that level of quality shipped to the US to your door for you to evaluate. Anyone can order samples, you don’t have to be a big shop or have any kind of store at all. There are dozens of models that are MUCH nicer than the Sondors ebike with aluminum frames, and geared cassettes for around $400 in quantity (shipping not included). At this point Storm\Ivars Sondors has sold $3.5 million dollars of bikes and has yet to collect $1.5 million in shipping fees having nothing to his name but <$2000 in sample bikes from a factory in China. Alibaba also makes the shipping a snap with their form based shipping quotation system that will give you quotes from a large variety of shippers using FOB or CIF shipping. Honestly the whole system is ingenious and the more I poke around with it the more I realize that your average Joe can order huge shipments from just about anywhere in China with nearly 100% buying confidence and very little risk. All they need is a little bit of starting capitol.

Still advertising a 50 mile range that no one will ever get.

Still advertising a 50 mile range that no one will ever get. Expect closer to 10.

Lets go back to looking at the Indiegogo crowd-funding system. There is no accountability, no escrow service and no trade assurance. Once you commit your funds you can’t even get a refund unless the campaign managers chose to give you one. The whole system is ripe for fraud. Ivars Sondors can change his name to Storm Sondors, start a campaign and collect millions of dollars in donations advertising a perk that has wildly different specs than the sample bike that he already has in his possession. He claims the weight as 30% less than it actually weighs, the battery is 14% less capacity than the original claims and the range is less than 1/4 of what they are claiming. Thousands of unwitting people purchase what they think is a ebike, but is really just nothing. Before they click the purchase button they are told that they may never get their perk and that they are really donating to ‘a campaign’. They still click anyway out of blind faith and misplaced trust.

Having Indiegogo offer perk insurance is like having a fox guard the henhouse. When campaigns wildly overstate their products claims, Indiegogo is the one who wins by getting even more funds raised and they collect their 4% no matter what happens after the campaign ends. On the Sonders Ebike campaign Indiegogo stands to make $144,000 off their 4% fee and another $3600 off the perk insurance (30 people have signed up) for a total of $147,600 at campaign close. If Sondors does not deliver his product and they are forced to pay off their perk insurance then that number drops down to $140,400. It is worth an extra $7,200 to Indiegogo make sure that Sondors follows though with his promises?  $7,200 is a lot better than $0, but it’s not enough of risk to make me think that Indiegogo is really going to take much action in getting Storm\Ivars Sondors and Jon Hopp to deliver on their promises.

odds-of-success

Then there is the cost of the insurance. Indiegogo would want to set the price of the insurance such that over the long term their insurance fund would end up making money. That means that Indiegogo has calculated the odds of Storm\Ivars Sondors coming through with his promises at 76% (100% – $120/$499) or higher. For a bike that is already produced, easily available for bulk purchase by anyone from Alibaba at a competing price point, 76% does not seem like a very high percentage chance of success. I personally feel that the odds of Storm\Ivars delivering some kind of bike to most of the 7000 campaign pledgers is much higher than that. Even with the constantly misrepresented stats on his bike and his history of payment avoidance on a previous lawsuit ruling I still choose to believe that Storm\Ivars Sondors and Jon Hopp are decent guys who want to do right by their supporters. Time will tell.

If perk insurance is to be offered it should be done by an independent third party so that Indiegogo is not financially rewarded through their continued acceptance of riskier and riskier campaigns.

Ride On.

 

4 thoughts on “Why Indiegogo’s Sondors Ebike ‘Perk Insurance’ Is Risky Business

  1. Look at the Kickstarter campaigns by Dillenger and Shocke. Totally different tone. Look at the comments for the Dillenger campaign, which isn’t much of a bike. Night and day, difference. I asked Shocke a bunch of questions and the young man in charge just answered them. Geared MXUS 350w motor, 12 LiFePo batteries in the case, Kenda tires, whatever. They will ‘assemble’ in Canada, want to be a retailer. If you want drama, go with Sondo. Sondo was a brilliant marketing campaign but they are idiots when it comes to bikes. If you want an idiot supplying your bike, these are your guys.

    The guys have their money. What happens happens. The core idea of CF may work out, that of letting the little guy find a way to raise a pool of money, maneuver in the China market. I like KS better than IGG. Maybe they can do some smaller deals like the Juggernaut. The overall record, even for KS, is muddy.

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    • I too purchase a fat e bike from sonders I say ,you dude. Come up with my bike …….don’t have cash just to give away,,want e bike ASAP……..333Brooklyn n.y.

      Like

  2. My understanding is the $120 insurance is really just some guy coming over to your house and slapping you in the face 120 times.

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  3. Pingback: Ethics And The Ebike Industry : The Correlation Between Honesty And Profitability | Electric-FatBike.com

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