Crowdfunding can be a good thing. It's gotten products I've bought off the ground. But when done badly, it's a disaster, and done badly enough, it leads to lawsuits and worse as it's nothing but a giant scam, as the Verge's Ashley Carman recounts the sordid tale of Doug Monahan and his magical backpack.
Lots of people want a word with Doug Monahan — government lawyers, crowdfunding backers, people from his past, and me.
I’d been trying to find him for over a year. As a reporter interested in crowdfunding disasters, I thought Monahan’s failed iBackpack project was one of the ultimate gadget pipe dreams gone bad. The beats were familiar: an idea that raised more than half a million dollars, only to never ship and leave behind thousands of angry backers. The difference in this story, however, is that for only the second time, the Federal Trade Commission is coming for the creator.
The agency claims Monahan took his backpack funds and spent them on “personal expenses,” including bitcoin purchases, ATM withdrawals, and credit card debt. The agency says he threatened backers who pursued him for their bags. The state of Texas is suing him, too. A lot of people want a piece of Monahan, but he’s not going down without a fight. He’s serving as his own lawyer to dispute the claims in court, and he invited me down to Texas to clear his name and reputation.
We meet at a Tex-Mex restaurant chain called Pappasito’s in Houston. It opened at 11AM, when we planned to meet, and by the time Monahan hobbles in a half-hour late, the restaurant is already closing because of tropical storm Imelda’s rain and flooding. The staff lets us stay. Monahan calls the place, which has a similar vibe to Chevys or Chili’s, the “best Tex-Mex restaurant in the world,” even though there are 16 locations in the Houston area alone.
Monahan is frailer and older than I imagined. In the few online photos I’d ever seen, he looks young with brown, spunky hair and wears a sweater layered over a collared shirt with a tie. Professional, a bit conservative. When Monahan shows up to our Tex-Mex meeting, he’s in light brown pants with an elastic waistband. His hair is overgrown, graying, and scraggly. To complement the pants, he wears an Andy Warhol-esque shirt with black-and-white flowers. The petals are blurred, as if being viewed through a kaleidoscope. The shirt has a stronger Austin energy than a Houston one, which makes some sense. Monahan spent years in Austin before moving back to Houston to handle this court case and be near his 92-year-old mother.
I ask why he thinks the FTC is going after him. “I am the poster child for fraud and crowdfunding,” he says sarcastically. “You’re looking at the Jesse James, the John Dillinger.”
He sold iBackpack as a high-tech wonder that would “revolutionize” backpacks and improve people’s lives, whether they’re eight or 80. On Indiegogo in 2015 and again on Kickstarter in 2016, Monahan advertised the backpack as the bag of people’s dreams: it’d feature more than 50 pockets, include multiple external battery packs, RFID-blocking pouches, a precipitation hood, a USB hub, charging cables, a Bluetooth speaker, and a mobile hotspot for a portable Wi-Fi connection. That’s a lot of stuff in one bag that you could seemingly be talked into believing is useful. Yes, it does rain by me sometimes. Occasionally, I do wish I had a Bluetooth speaker in my bag. What IF I had a constant Wi-Fi connection? But the reality is that most of these things could be bought on their own and crammed into any old backpack. Monahan doesn’t see it that way; the iBackpack needed to exist. “The whole backpack is built for power,” he tells me.
Thousands of people bought into Monahan’s project, netting him nearly $800,000 to bring the bag to life. He shipped a few beta units, but the vast majority of people never received anything. They haven’t seen the backpack in person. They don’t believe it’s real, and they started a Facebook group to organize ways to recoup their money and get the FTC’s attention. As far as they’re concerned, Monahan’s a grifter, and the FTC lawsuit was long-awaited and necessary. They track the case in the group, too. “Clearly Doug is a snake in the grass and hopefully the Federal Trade Commission hammers him,” one member of the group wrote.
Meanwhile, Monahan says they just don’t understand him or crowdfunding, in general. He’s not a bad guy, he says. It’s just that businesses fail sometimes, which is what he invited me to Texas to prove. Poking at Monahan’s past, however, suggests this isn’t a man with a one-time flub, but rather someone with a trail of failures. Is he a con-artist? An irresponsible businessman? Does the difference even matter?
Doug Monahan crowdfunded a backpack. The people who never got their product or their money back crowdfunded a lawsuit against him in return.
I'd say that's fair.