What If The Plant Fails To Grow?

Buds in HandsWhat happens when a plant fails to grow? Do you: blame the gardener, the garden centre or the seed supplier?

There’s a lot written about crowdfunding and even more about the risks of early stage companies. Look anywhere and you’ll see disturbing statistics which show that at least 60%+ of start-ups don’t make it past 3 years. In other words, most fail! The problem? is that investors unsure of their rights where things go wrong.

I recently saw an article about Zano Drones which has just closed and is being investigated. People have been questioning what their rights are against the company and the platform Kickstarter, and allegedly been misled. If so what can they do. I should stress that these were rumours and as yet nothing has been proved .The problem seems to be that not all investors understand what their rights are and how far their rights (if any) lie outside their relationship with the company.  I think that the simplest way to see it is a bit like buying a plant or a packet of seeds from a garden centre, and then asking what happens when beautiful marigolds you buy don’t grow. I’m not a gardener, but I’m pretty sure the crop failure will probably be any one of the following: they were planted in the wrong place; perhaps they didn’t get enough food and water; or there was something unexpected, for example a late frost.

Frankly, it could be any number of practical and environmental issues, all of which are probably the gardener’s fault – in some cases because they have no talent for the thing or simply an unlucky one. So for our example, it would be the investor who perhaps didn’t do enough due diligence or understand the market risks.

It could be the person who re-sold the seeds (i.e. the shop/magazine or garden centre was to blame). In the above case Kickstarter. There are only exceptional circumstances I can see where it would be the fault of that person – it would have to be where they so totally interfered (wrongly) in the process, that they steered you towards disaster. For example, the shop assistant said, “Oh don’t worry about what it says in the back of the packet, you can plant these in November”, and apparently for a plant in the UK, that’s a bad idea! For the crowdfunder then, they would have to have got something really wrong, like posting the wrong information about a company which took everyone down the wrong path.

Ultimately in our garden analogy, it might be the manufacturer’s fault, for example the seed batch was spoiled or the plants were wrongly labelled and they turned out to be daffodils.  This would be the equivalent to asking, “Was it the company’s or their directors and founder fault?” The answer is: it could be. So what are your rights in this situation?

If you think they really lie with the founders, you need to ask fundamental questions of them and how far they took your money, knowing something was fundamentally wrong. When they were making their statements, where you have to show they were reckless or even fraudulent, did they properly verify what they were saying back to hard facts.  In most cases, if they were properly advised before posting their campaign, they will have this covered and it will all come back to buyer beware. However that doesn’t rule out rogues who have managed to slip through the system.

So if you have invested in a start-up, possibly as part of a crowdfunding platform and you are worried that you are going to lose your money, it’s time now to consider what rights you have. Call us if you think you’ve been misled in any way.

 

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