Increase spend and profit with Kickfurther? My 3rd review…

Is Kickfurther a good way to increase credit card spend and earn a profit?  I’ve been testing out Kickfurther for over a year now.  Let’s see how I’ve done…

Background

Kickfurther is a platform that lets companies seek funding from the Kickfurther community by offering a return on investment (such as 8% profit in 10 months, for example).  Technically, these offers aren’t loans.  When you invest in a Kickfurther offer, you are actually buying inventory that is then sold on consignment by the company seeking funds.  With Kickfurther, you will earn a profit with each offer that you fund as long as the “borrower” pays out as promised.  A nice perk for the points & miles crowd is that Kickfurther allows funding by credit card and, in my experience, it is never treated as a cash advance.  Regardless of how you fund these offers, Kickfurther charges a 1.5% fee to withdraw the paid back funds to your bank account.

My Experience To-Date

I first wrote about Kickfurther with “My half-baked Kickfurther Review” and then followed up with “Kickfurther review 2. Manufacturing profit and spend.”  Even with the second review it was too early to say whether my Kickfurther investments were panning out.  But, at the time, things looked good.  I published this chart showing results from my Kickfurther investments:

The green bar, above, seemed to show that actual payouts were tracking nicely with expected payouts.  So I continued to invest in new Kickfurther offers.  Over time, though, more and more offers failed to pay on time.  Some were outright cancelled.

Kickfurther no longer provides a chart like the one above, but they now have better data reporting.  I threw my current results into a spreadsheet and found the following current status of the consignments that I’ve funded to-date:

Out of 62 consignments that I partially funded:

• 1 was immediately cancelled and fully refunded (i.e. I simply got my money back)
• 28 completed successfully (I earned the expected payout)
• Of the 33 incomplete, 19 have issued partial payments to-date

Some of the above numbers are from recently funded consignments and therefore are too new to have paid back yet.  So I filtered to “old” consignments (those funded 12 months ago, or more).

Out of 19 12-month-old (or older) consignments that I contributed to:

• 13 completed successfully
• For the other 6:
  • 4 are still paying but very slowly
  • Kickfurther has taken legal action with the other 2 to try to recover some of the funds
  • The 6 have paid, on average, 27% of the amount I invested.

If we optimistically assume that the 4 still paying will eventually complete successfully, then I’ll end up with the following success rate: 17 out of 19 completed (or may complete) successfully = 89.5%.

Or, worst case would be if the remaining 6 all fail to pay anymore.  Then we have only 13 out of 19 completing successfully, and the others completing 1/4th of the way.  Let’s call that 14.5 out of 19:  76%

So, my success rate is somewhere between 76% and 89.5%.  That’s awful.

My newer investments are looking potentially better.  Of those that I’ve invested in since August 1, many have completed successfully and most of the rest are paying out regularly.  Still, as I saw earlier, interim results are far from a perfect predictor.

Based on my results to date, if nothing else was changing, I’d strongly recommend against investing in Kickfurther.  But, things are changing…

Kickfurther’s New Model

The folks at Kickfurther haven’t been any happier than the rest of us about how poorly the portfolio has done.  In fact, in a recent blog post they wrote:

We also feel betrayed and lied to by the small and medium retailers (SMRs) whom we welcomed into the community, who later turned their backs on us. Fundamentally we believed in the trust economy, and that was a mistake.

To try to fix things, they interviewed Kickfurther investors who have done well.  What was their secret?  They learned that the most successful investors primarily bought consignments that were 100% backed by purchase orders.  Companies that needed funding so that they could fulfill an order that was already in place were more successful than those who needed money to build and then sell their product.  That seems obvious in retrospect!

So, as of the end of January 2017, Kickfurther is posting only 100% Purchase Order Backed Co-Ops. Further, they’ve promised to do the following:

• Verify all Purchase Orders: “brands share their purchase order document with our team who then contacts the vendor listed on the document to verify the purchase order number, SKUs listed, date, and amount listed.”
• Place Order: In some cases, the money collected by Kickfurther will bypass the “brand” (the company seeking funds through Kickfurther) and Kickfurther will purchase needed inventory directly on behalf of the brand.  This way the company seeking funds can’t simply take the money and run (so to speak).
• Collect Purchase Order Funds: When inventory is delivered to fulfill the purchase order, payment will go to Kickfurther rather than to the brand.
• Distribute Funds: Kickfurther will then distribute funds to the Kickfurther community members who participated.

Theoretically, Kickfurther’s new model should make Kickfurther consignments much more safe.

My take

I’m cautiously optimistic.  I expect that Kickfurther’s new model will be much more successful than the old model.  But, I have a few big concerns:

• Will Kickfurther itself stay afloat?  Kickfurther is actively seeking funding to stay in business.  What will happen to open consignments if they go under?
• Will Kickfurther continue to accept credit card funding with no fee? Kickfurther had tried to add a fee in the past, but then rolled it back.  If they add a credit card processing fee, the platform may still make sense for investing, but will no longer serve the dual purpose of offering a way to earn a profit and to increase credit card spend.

My go-forward plan is to continue to dabble lightly in Kickfurther to get a sense of how well the new model works.  And, over time, I’ll report my results.  If they add a fee for credit card processing, though, I’ll bail.

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