JD.com has stopped taking on new crowdfunding business. No new project will be listed.
Photo from CFP
By YU Hao
JD.com has discontinued its crowdfunding business. No new project are to be listed after September 30. Those that are already on the platform have been allowed to stay.
JD Crowdfunding was launched in July 2014 to help individuals contribute money to pet projects – a gadget under development, or a startup, for example – and get rewards ranging from T-shirts to finished products, depending on the donated amount. One of its most successful projects is the PowerEgg drone, which became the first crowdfunding project in China to raise more than 100 million yuan. In 2015, JD Equity Crowdfunding was founded, where users can invest in startups in return for equity.
Crowdfunding took off in China around 2014. By 2016, there were more than 500 platforms, many owned by tech giants such as JD.com and Alibaba, but the fervor quickly wore off as regulators arrived on the scene with added scrutiny for startups. Two years ago, only about 100 platforms were still operating.
Complaints about shipping, quality, and even fraud abound. PowerEgg was accused of having hired people to bump up contributions. Generally speaking, the more popular a project appears, the higher the chance of securing more funding.
A person familiar with the industry said these practices are not uncommon in crowdfunding. On US-based platform Indiegogo, which he himself uses frequently, presale collected from customers is sometimes marked as money already raised from believers. Typically, a project that aims to raise US$100,000 needs at least US$60,000 in the first two days to stay alive.
“No one wants to contribute to an unpopular cause that no one else cares about. You need to be at least 50 percent funded to convince anyone to put money in it,” he said.
Customers are fine with blurring the line between crowdfunding and presale as long as they are guaranteed fair prices and timely shipping, which crowdfunding platforms are not particularly good at. Recently, fans who contributed to toy brand Keeppley on the creativity-focused platform Modian were outraged to find a better deal on a different e-commerce site. Not only was exactly the same product offered for less, it also came with freebies.
Platforms find it hard to stay profitable simply by charging a percentage of money raised, so alternative revenue sources are essential. Shuidichou, which funds healthcare, generates most of its profits from insurance. Modian now has its own e-commerce business.
Some choose to partner with or seek to be bought by large tech companies to save the time and money needed to build profitable businesses from scratch.