Is InventureX a scam? So far, I have sent them $500. I got some educational materials, and learned a bit, but at the moment it looks more like a bait-and-switch scheme than an honest operation. And Google is running a ton of their ads at YouTube. [Update: A refund was at last issued.]
When it comes to running a business, I admit that I am not the sharpest tool in the shed. I’m an idea guy, full of enthusiasm and optimism. Bright ideas, I’ve got. The knowledge of what to do with them, not so much.
That’s why I was ripe for a $500 “investment” with an eye towards getting the job done right. Unfortunately for me, that kind of person seems to be their kind of prey.
I came to InventureX by way of the many YouTube ads they have been running. In retrospect, the sheer amount of advertising they were doing should probably have been a tip-off. In any case, it was my first clue.
It all started early in 2019, somewhere around January or February…
- They claim to have a AAA rating with the Better Business Bureau. But when I checked, the Better Business Bureau in Los Angeles had no listing for them. (Their website says they have offices in Los Angeles and Las Vegas.)
- At the very beginning, they claim to “have the know how” to set up a crowdfunding operation, and the “ability to predict” the number of people who will join. That sounds great! They can predict how much money will be coming in and can therefore afford to front you the money needed to get it. Right? Not quite. When you get to the fine print, things change a bit.
- When it gets down to the point that they are going to arrange a loan for that funding, they make it a point to say that they want people “who believe in their product”, which means (they say) that they don’t expect InventureX to “assume all the risk”. What does that really mean? In short, it means that you are entirely responsible for the loan. If too little money comes in, for whatever reason, you are on the hook for it. (Or it might mean that they wish to share the risk. That would be fine, too. But when it comes to answering questions they are missing in action, so it is impossible to find out.)
- Of course, if you get crowdfunding money, you can pay them and their fees. Will you have enough left over to fund your business? One can hope…
- To even get to the fine print, they want $500 “earnest money”. That’s pretty reasonable—especially when they say they will refund it if you decide not to go with them. But nowhere in the materials I have seen is there any indication of how to say you have decided against using them. And to date, they have not responded even to questions. How then, is it possible to get a refund?
- The $500 ($497, to be exact) gives you access to a “members area” that contains a collection of videos on what you need to. A really nice education, in a lot of ways. I learned a lot from it. But is it worth $500? I’m not really sure. At this point it doesn’t look that money will ever be coming back, so I’m learning all I can from it.
- Then there is the fine print. They say they do profit sharing at the back end. Fine, if the price is right. But how much is their profit sharing percentage? Is there a cap? It makes a difference to product pricing, of course. And profitability. And any sort of reasonable number is fine. But what it is that number? The inability to get answers to questions is troubling.
- The funding option they point you to is Lending America LLC. They say their fees are 3–4% at the front end. That’s less than the 10–12% (they say) that others charge. But “others” aren’t involved in a profit-sharing arrangement. (They say InventureX pays them. Again, how much? It could be the greatest deal in history. For them. Or for you. Without the details, who knows?)
- The line of credit will generally be $50–100k. It’s arranged through a variety of local banks, global banks, and credit unions. You tap into it when you need funds, and have 12-18 months to pay it back, at zero interest. Sounds good, right? Maybe a little too good.
- InventureX point to several success stories. They definitely have crowd funding pages, and several people have recorded videos telling how satisfied they are. But, as far as I can tell, not one of those products has made to the store shelves. In other words, when it comes to “evaluating” your idea, you are pretty well guaranteed to be well-regarded, in their eyes.
- Looking at those products, I don’t see anything I would buy. I’m not sure that many would. So it seems that InventureX is going to tell you have a winner, regardless of your offering. Not a good sign.
- Lending America says you can spend the money on product development or any number of other business expenses. InventureX says 50% of it has to be spent with them. But how much of your company’s operations is InventureX really prepared to handle?
- For one thing, their real expertise seems to be in crowdfunding and marketing to people like me. If they have other skills, I haven’t seen evidence of it online or in the “members” area. And then there are the products they offer as examples of “success”. I haven’t seen any of them for sale anywhere. So clearly their income derives from being paid to design the products, rather than from actually selling them.
Although I have tried on several occasions to get answers to these questions, I have yet to see so much as an acknowledgement that a question has been received! Much less an answer.
- How much will they need for a promo video & campaign page, with text and images?
- What else is in the marketing plan, and how much will they need for that?
- How much extra would they charge for the video-instruction segments I need to record to show people how to use my product?
- How does their profit-sharing arrangement work?
- What is the percentage?
- Is it a percentage of gross incoming funds, or a percentage of net funds, over and above the cost of goods sold?
- Is there a cap on the amount?
- Does InventureX stand behind their claim that they are experts in crowdfunding, that they know how reach potential funders, and can predict how many people will sign up?
- Or is the risk entirely assumed by the entrepreneur, with only their say-so as to expected revenue?
On Monday, I had a great conversation with InventureX over the phone. I had spent time looking at reviews and searching the web for negative reports. But it is possible I did not go deep enough.
Their intro video says that they take a $500 deposit, to weed out those who aren’t serious. After that, if I decide not to go with them, it will be refunded. It also says they will craft a plan that is tailored for my project.
Awesome, I think. I know I can use help in many areas, especially in the areas of crafting professional marketing materials, financing, and initial production. So I make the call, so they can “evaluate my project, to see if it is a fit”.
Here’s how the conversation went:
- [Jason@InventureX]: We’re experts in crowd funding. We have our own studio to make videos and everything else you need to succeed.
- [Me]: Sounds great, the problem is how to afford it. I’m getting to the end of my financial rope.
- [Jason]: With our Partner Profits Program, we provide the financing.
- [Me]: Awesome. Here’s my card. Bill me $497. It’s a not even gamble, given that I get it back if I decide not to go with you.
Now, they didn’t tell me what the financing option(s) would be. Maybe it’s an investment. That would be cool. Maybe it’s a loan. That would be fine, if payments come out of crowdfunding proceeds.
After all, they say that they are experts in the process, and can predict what they will be able to generate in funds. So that, too, is a no-risk proposition, if it is structured right.
On the other hand, if I wind up on the hook for the loan, despite the results, that is a proposition I am prepared to turn it down. Too much risk for me, at this point.
So what I am expecting at this point is a financing proposition to evaluate, and a plan for raising the funds needed to get the TreeLight Yoga Bench into production. (Crowdfunding done right will actually be a great vehicle for that. In addition to generating funds, it will raise awareness while at the same creating pre-order sales for the product!)
Okay. It is now Friday afternoon, at 3:25. An email arrives. I see it at 6:30 pm.
It is my login instructions! Wonderful. I go there, to a page entitled “Partner Profits Program”.
What I see is a list of videos and instruction-pages for me to review. I’m sure they’re all good. But there is no mention of a customized plan or financing. All I see are segments on how I can find partners, and how I should go about arranging financing with my partners.
I’m sure the material is valuable, and I’ll be happy to go through it, if it is only the first step. But nothing in the email I received or the page I visited tells me it is only the first step.
At this point, I can’t very well go through the materials. Because if I did wind up paying up $500 for a generic education, I can’t very well go through it and then ask for my money back.
Now then, since it is late Friday, I suspect I won’t see a response to the email or the Tweet I sent until Monday. At this point, I am recording my thoughts in draft form, just in case.
I hope I’ll wind up deleting it, and that they just need to improve their communication process. After all, I’m happy to make them money if they will help me get the product out to the world. It’s just that I have fallen victim before, and I’m wary…
The Education Begins
After being unable to reach anyone over the weekend or early the next week, I begin investigating the materials. I might as well get something for my money. It seems like a pretty good collection of videos. It takes me a week or so, but I get through them.
Of course, what the videos don’t say is way more important than what they do say. A couple of months later, I get the straight scoop from some helpful contacts at IndieGoGo:
- Successful campaigns generally get 1/3 of their contributions in the first couple of days. (Those campaigns build momentum and get the word-of-mouth ball rolling.)
- During that time, about 5% of your contact list will contribute.
- So, based on the size of each contribution, you can do the math to figure out how much capital you are likely to raise with your current contact list or, conversely, how large a list is required to raise the capital you need.
Basically, the success of your campaign depends on the size of your mailing list and the size of any “influencers” who are on board with your idea.
Now, it may well be that InventureX excels at finding people and building the list you need. That’s the kind of thing I expected to read in their “plan”–how they would identify the right people, how they would target those people, and the number of folks they would expect to come on board, as a result.
But since I never say anything resembling an actual “plan”, the only confirmation I have that they really know what they doing is their say-so—that, and the highly selective testimonials of people who appear to have succeeded.
But was that success based on what InventureX did? Or on particular skills or resources possessed by the entrepreneur?
The “Financing” Option
The bottom line is that InventureX doesn’t plan to invest one thin dime into the operation. They sent me to their secondary outfit which will give me a “zero interest loan” (a line of credit, actually) for 18 months or so, at a variety of banks.
And what is the interest rate after 18 months? No clue. Neither they nor the loan outfit says a word about that. But from the way things have happened so far, I’m guessing it’s a usury-level credit-card rate close to 30%.
That would make sense. They simply defer their income. They say they have an “approval” policy, but looking at the products that have been approved, none of them have hit the market, and none seem to me to be very marketable.
So they approve anyone who applies, deliver a collection of videos instead of the promised “marketing plan”, and switch from “we know what we’re doing so we can afford to invest” to “we only want people who believe in their product” (so it’s your fault if things don’t work).
Meanwhile, they never delivered on their promise to return my initial $500 investment. I don’t know for sure, but if it isn’t illegal, it seems to me it should be. At the very least, Google should stop running their misleading ads.
Complaint-34149 was filed with the California Department of Business Oversight in hopes of obtaining the promised refund.
Update, Mid-July 2019: Refund in Process
After not hearing from me for 5 months or so, their main admin guy sent me a note asking how I was doing with the program. I replied saying I wasn’t doing anything with it, and asking to how to obtain a refund.
He said he would process that, and wondered if I would send him some comments on the program, and my reactions to it. I responded with a short version of the items listed in this article.
As of today, the refund is being issued. But the fact that there was no clear way to ask for it nor any response to repeated questions remain troubling.
To his credit, though, the InventureX representative thanked me for my detailed feedback, and for identifying many potential areas of improvement.
The only question remaining is whether any of it would have happened absent this article, my Tweet of it, my note to the CA Dept. of Business Oversight, or my letter to YouTube regarding the many ads they are running.
It’s not clear whether any of those actions made a difference. It is clear that once communication was established, they reacted quite well and are issuing the refund.
In that conversation I was told:
- They’d love to partner with inventors, but can’t really do that.
- They provide the “program” as a DIY tool so people find out what goes into it and so they can try it themselves.
- For “funding”, the only option they have is the zero-interest loan for 12-18 months. (But what is the interest rate after that? I never did find out.)
- With some kind of funding for marketing, it becomes possible for them to put together a plan they will execute, instead of the “DIY” approach.
Finally, to be clear, they never did promise “investment” in the initial phone call. They said they could help me get the “funding” I needed to get off the ground. It was my own mental processing that translated “funding” into “investment”.
The Bottom Line
If you have a product with a clear need that people will pay for, InventureX may well be a good vehicle for you. In my case, I’m doing an “educational sell”. (For some reason, that is the kind of project that gets my juices flowing.)
But because it is an educational sell (for a yoga/meditation bench), there are several possible audiences and several possible appeals. (AND I’m dealing with production pipeline issues.)
Possible marketing appeals include:
- Make meditation more comfortable.
- Enhance the experience of “energy flow” meditation”.
- An easier form of yoga anyone can do.
- Develop the capacity to sit in Lotus Pose.
- Sit as though on the floor, without having to go to the floor.
- Reduce back pain.
- Develop strength.
- Improve osteoporosis.
That’s a pretty long set of options! One audience, for example, consists of aging Indo-Americans who are no longer comfortable on the floor. They have a positive response to the bench, but are they likely to be found in a crowdfunding venue? (Probably not. So the question becomes: Can their kids be motivated to purchase it for them?)
And so on for each possible combination of audience and appeal. It can take time to find which approach(es) will work best, and during the time, the loan-clock is ticking!
In the end, I decided that this may not be the right vehicle for me. With the information you have now, it may be the right one for you–but keep in mind this bit of wisdom from the good folks at Indiegogo:
- The success of your crowdfunding campaign depends more than any other factor on the size of your mailing list.
- You should reach a third of your goal in the first couple of days. (That kind of pace generates the buzz that produces viral growth.)
- In general, about five percent of your mailing list will participate in the first couple of days.
For a given contribution amount, then, you can do the math to determine how big a list you need. Alternatively, you can use your current list to determine how big a crowdfunding goal you can reasonably reach.
And that, fundamentally, is why you need paid marketing assistance–to use the tools at their disposal to reach a given audience, trying different appeals to find the ones that work best.
The alternative is to have a thought-leader or celebrity in your corner, with a sizeable list of followers. Or develop that list yourself, in time.
That is pretty much the only way to make a crowdfunding campaign work!
Copyright © 2017, TreeLight PenWorks