Crowdfunding website Kickstarter says it bears no financial responsibility for Coolest Cooler’s disastrous campaign to produce novelty coolers.
The Oregonian/OregonLive reported Saturday that Portland-based Coolest Cooler will shut down, leaving 20,000 Kickstarter backers without the $200 they paid in expectation of receiving tricked-out coolers equipped with blenders, a Bluetooth speaker and USB charger.
“There’s always a risk in creating something new, and some projects won’t end up working out,” Kickstarter said in a written statement Monday. “In this case, unfortunately, 1/3 of the backers won’t receive the (product) they were promised. We’ve worked hard to make it clear that Kickstarter is not a store.”
Backers who never got their $200 coolers are entitled to $20 under a 2017 settlement between Coolest Cooler and the Oregon Department of Justice. But even if the cash-strapped Portland company ultimately delivers that sum by a June deadline, backers across the country will still be out $3.6 million altogether.
Online anger over Coolest Cooler’s flameout has focused on the company and Ryan Grepper, the novice Portland entrepreneur who conceived the project five years ago. But with his company’s collapse, some backers say they’re going to be more skeptical about Kickstarter in the future, too.
“There’s bound to be some backlash due to the lack of accountability,” said Jeremy Gillean, a Coolest Cooler backer who lives near Nashville. “It’s hard to believe they’ll be able to maintain their position as the neutral broker of failed projects, with no liability whatsoever for the millions of dollars lost by so many backers.”
Kickstarter and similar crowdfunding sites provide a platform for entrepreneurs and artists to raise money for projects. Project creators offer a “reward,” like a cooler, to those who pledge money – but the crowdfunding sites don’t guarantee backers will actually receive the product.
Coolest Cooler was a national sensation in 2014, using Kickstarter to raise money for its “21st Century cooler.” The gadget captured the popular imagination and was featured on Good Morning America and in People Magazine, The Washington Post and many other publications.
The craze made Coolest Cooler the second-biggest Kickstarter project ever, raising $13 million from 60,000 backers.
The attention quickly overwhelmed Coolest Cooler’s founder, novice Portland entrepreneur Ryan Grepper, who discovered it cost far more to manufacture each cooler than the $200 he sought from Kickstarter backers.
Over the next few years Grepper’s company delivered about 40,000 coolers – but 20,000 backers never got theirs. Over the years Coolest Cooler offered a variety of explanations for the shortfall, from recalls on component parts to overseas labor troubles.
In an email to backers Friday night, Grepper blamed President Donald Trump’s trade war with China for putting his company over the edge. In this latest explanation, Grepper said Chinese tariffs raised costs beyond what the Portland company could afford. He did not respond to repeated requests for additional comment.
Coolest Cooler’s 2017 settlement with Oregon regulators required it to deliver coolers to all its backers inside the state and to pay $20 to all backers who didn’t receive their products by June 6, 2020. Grepper’s email Friday included a link where backers could file for their $20.
The email also said Coolest Cooler borrowed repeatedly to cover its production costs and is liquidating its inventory to pay creditors, so it’s not clear whether the company has the $400,000 necessary to meet its legal obligation.
The terms of the settlement required Coolest Cooler to set aside some profits from each sale to cover its obligations to backers. They also state that Grepper is personally responsible for the $20 his company owes each backer, and that his obligation to backers cannot be discharged through bankruptcy.
Justice department officials did not respond to questions Monday about whether Coolest Cooler is considered to be in compliance with its settlement or whether the agency has communicated with Kickstarter in the case.
As Coolest Cooler winds down and its backers seek their 10% refunds, New York-based Kickstarter may still come out ahead. It was still a young company when Coolest Cooler took off and brought an ocean of publicity to the crowdfunding scene.
Kickstarter levies an 8% fee on projects that reach their predetermined funding threshold, so it could have taken in more than $1 million through Coolest Cooler. The company said Monday it has made changes to prevent similar situations in the future – but indicated it feels no obligation to Coolest Cooler’s backers.
“In the five years since this project was funded, we’ve worked to help creators be more transparent with backers, and to better understand what it will take to bring their project to life,” Kickstarter said in Monday’s statement.
Reforms include changes to make Kickstarter appear less like a typical retail website, a budgeting tool to help project creators plan, and an online banner that warns project supporters that “Backing 1/4 u2260 buying.”
“Our goal is to help improve the chances that a project will work out for everyone,” the company said, “with the understanding that the risks involved will never be fully eliminated.”
Despite five years of trouble, Kickstarter’s website continues to list Coolest Cooler as a “Project We Love. Kickstarter spokesman David Gallagher said the company doesn’t have a process to revisit such endorsements once a project wins funding.
“You could view that as the transparent approach,” he wrote in an email Monday. “After the funding period ends, no new backers can support the project. So I’m not clear on how the designation makes a difference at that stage.”
Kickstarter’s new warnings weren’t in place when Coolest Cooler was all the rage in 2014, and backers said this week they were shocked to discover they wouldn’t get what they paid for – and may not have any recourse.
“Maybe it was naivety, maybe it was not paying enough attention, but when I contributed to the Coolest’s campaign, it never occurred to me that I might never get a cooler,” Matthew Cook, a Coolest Cooler backer in Rochester, New York, wrote in an email Monday.
“Throughout this whole process, I’ve never felt like Kickstarter owed me anything. I’ve always been looking to Coolest to fulfill its promise,” Cook wrote. “That being said, I’m unlikely to support anything on Kickstarter anytime soon.”