Have You Contributed to a Health Scam?

Other times, the product changes radically from the time it’s funded to the time it ships.

TellSpec, a Toronto-based Indiegogo campaign, was panned by PandoDaily for claiming it would use a “Raman spectrometer” to use pulses of light to measure the particle density of food on a plate, and thus to calculate its nutritional information. In essence, it would be the GoBe for before you chow down. Drop Kicker and other sites pointed out that Raman spectrometers are enormous and cost tens of thousands of dollars each.

In response to criticisms from backers about the laser it used, TellSpec told me it has since changed the type of spectrometer in the device. In fact, there is no device, unlike what the Indiegogo page would suggest. TellSpec says, “the technology and our proprietary algorithms are complete, the compressing of the technology into its final shell is what still needs to be finalized.” And unlike the Indiegogo pictures, which show a colorful, computer-mouse-sized oval pointing at a tray of chocolate truffles, the ability to read the calories of an entire plate is still “in the future,” the company tells me—the current version would only know how many calories are in your food per gram or per ounce.

***

Reddit has an ongoing thread of Kickstarter projects that have been cancelled or never fulfilled. Last month Washington state’s attorney general filed suit against a Kickstarted card game that donors say surpassed its goal and was never received. There are also sites where you can buy real products that have their origins in crowdfunding.

Whether the flimsiness of some crowdfunding claims is a problem depends on how you think about crowdfunding. If you see it like some sort of proto-Amazon.com, where people pay to snatch up the hottest new devices, it certainly can feel like a rip-off if a product changes substantially, doesn’t work as promised, or delays its shipping. It’s less painful, though, if you see it as a gift meant to help a scrappy entrepreneur along.

In 2012, Congress passed the JOBS Act, which intended to open up angel investing to small-dollar investors. Previously, only millionaires could buy equity in companies. Experts expect that within a year, though, a new provision of the JOBS Act will allow companies to raise capital $20 or $30 at a time by doling out small slices of equity to people with little net worth. In other words, Grandma can be like Marc Andreessen, investing in companies she likes in exchange for a tiny stake in them—potentially through crowdfunding sites like Indiegogo and Kickstarter.

But the vast majority of startups fail, according to Jeff Stibel, an internet entrepreneur and CEO of the Dun & Bradstreet Credibility Corp. in Malibu, California. “The best investors have a 10 percent success rate with startups. Those are the best of the best,” he said. “The average is one to two percent. Now imagine when naive investors start investing. Most of those are going to fail, and they’re going to fail miserably.”

Stibel predicts that the new age of crowdfunding will be more like Vegas, with the very best startup pickers winning big, and everyone else sinking cash into companies that go nowhere. That’s not to say people shouldn’t invest, he says, just “take more of a lighthearted approach to it. These opportunities are going to be closer to gambling.”

PandoDaily’s Robinson writes that crowdfunded companies could shore up confidence in their products if they would demo them for journalists before they close their campaigns, as one TellSpec-like spectroscopy device did for him recently. He points out that there are now companies that aim to analyze the validity of crowdfunded projects’ claims and to offer insurance in case they turn out to be bunk.

When it comes to health apps, Haensly suggests looking for data, in the form of published studies, as well as a demo depicting a working device. If the company does provide research, make sure it’s a double-blind study to reduce the likelihood that you’re funding a placebo effect. Still, it will be tough for laymen to independently evaluate medical claims, especially when they come in the form of promo videos.

“There’s a reason why medical school takes four years and then a residency,” Haensly said.

Presented by

Olga Khazan is a staff writer at The Atlantic, where she covers health.

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