Crowdfunding platform Emphas.is goes insolvent amid internal conflicts

A bold experiment to bring new capital in photojournalism has ended in failure and legal imbroglio when Emphas.is, a crowdfunding platform launched in 2011, went insolvent this summer after having accumulated more than €300,000 in debts. Olivier Laurent finds out what went wrong

Olivier Laurent — 14 October 2013

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“I’m currently conducting an investigation to understand why the company has failed,” says Pauline Atkinson, the liquidator appointed to Emphas.is, the crowdfunding for photojournalism launched by photographer Karim Ben Khelifa, photo editor Tina Ahrens and open innovation evangelist Fanuel Dewever.

Emphas.is was born in early 2011 with an ambitious goal: to allow photojournalists to raise funds for their projects by appealing directly to their audiences. Emphas.is offered photographers a place to pitch an idea for a story, present their budget, and – if they received the necessary funds – keep in touch with backers with exclusive updates and early access to the work. A year later, Emphas.is expanded to the book publishing business, appointing Walter Tjantelé as publishing director. Emphas.is Publishing, said Tjantelé, was a “natural evolution” for the platform as the founders found that a lot of photographers “wanted to fund self-published books on our platform”.

In its two years of existence, Emphas.is helped raised $500,000 for photographers’ projects, financing work by Matt Eich, Pep Bonet, Tomas van Houtryve, Robin Hammond and Kadir van Lohuizen among many others. Yet, behind-the-scenes and as early as September 2012, the company’s financial situation was in tatters, and internal divisions were rampant, BJP has learned, leading to Emphas.is being declared insolvent this summer with more than €328,000 of debts on its books.

Speaking to BJP, Ben Khelifa explains that the “running of the platform, as well as tech support, hosting and licences cost too much in comparison with the income we could raise through the 15% fee [we took] from projects that were successfully funded on the platform”. A fact confirmed by the company’s liquidator. “It would appear that some of the pricing models were wrong and that they didn’t have the volume of work they had anticipated,” Atkinson says.

For Ben Khelifa, the company would have needed a “substantial investment to grow Emphas.is’ reach and staff to get to a sustainable level with a much larger number of projects and books on the platform”. He says: “We were confident that we could find an investor but, unfortunately, after numerous talks, none of the potential partners came through.”

BJP understands that up to three investors had expressed interest in the company, with one “willing to put in $250,000 to try and salvage the company”, says Atkinson. “Then he pulled away. I think he liked the concept but probably realised, when he did his due-diligence, that the company wasn’t going to be turned around. And looking at the books, it seems that $250,000 may not have been enough to sort the company out,” as when it was declared insolvent this summer, Emphas.is had accumulated €328,661 of debts.

Ben Khelifa is quick to point out that “the lion’s share of the debt is owed to the founders for their unpaid director fees and development done by one of the co-founders’ companies. The overall debt due to third-party creditors only forms 16% of that figure”, he says. “At all times, we, the directors sought to minimise the exposure of these creditors and did so to our own financial detriment.”

Tjantelé disputes that fact, explaining that Emphas.is was already insolvent in September 2012 and should have been shut down then. “I did realise a year ago that the debts Emphas.is had were too big,” says the former publishing director, who had invested €100,000 in the company and resigned in late 2012. “Emphas.is had two types of debts – the real debts, which are what the photographers who raised money on the platform were owed; and the other debts, which are what the shareholders, including myself, were owed. And already last year, I realised that we were living on money that was supposed to be used for other things. I could see that the money we received from funding wasn’t sufficient to pay photographers.”

At that time, Tjantelé and Ben Khelifa were in direct conflict, says the former publishing director. “I simply couldn’t work with him any longer,” he tells BJP. “Karim just wanted to continue because he thought he would be able to find money from investors, but I thought it was too big a risk to do that. I thought Emphas.is should have been liquidated then. I think they should have been more honest towards the photographers.”

Ben Khelifa confirms that the shareholders met in late 2012 to discuss the company’s financial situation – but, he adds: “We, including Mr Tjantelé, voted unanimously in favour of pursuing ongoing investment opportunities. Perhaps Walter has forgotten this, the minutes of the shareholders’ meeting are recorded and are proof of this.”

He adds: “It is the nature of a start-up that you need investments at various points of the business development, so the fact that we needed an investment in itself was clear to everyone involved. In order to make a crowdfunding platform work, we needed to reach a critical mass. In order to reach a critical mass, we needed investors to grow our reach and our team.”

Collateral victims
While all photographers who successfully raised funds on the platform received the money they were owed before the company’s liquidation, a group of photographers have seen their work become hostage to Emphas.is’ internal divisions. William Daniels, Rian Dundon, Peter Dench and Rémi Ochlik’s family have now learned that the books they published using the crowdfunding website are sitting untouched in a garage in the south of France.

“There are a number of books that are with Walter [Tjantelé] in France, and he’s refusing to release them until he gets paid for what he believes he’s owed,” says Atkinson. Tjantelé confirms that he holds books published by Dench, Daniels, Dundon and Ochlik. “I will propose to the liquidator to get the books in return for my debts – the money that Emphas.is owes me,” which, in addition to his initial investment of €100,000, also includes a €1250 monthly fee that, Tjantelé says, was agreed but never paid as a compensation for “my time and labour spent” while managing Emphas.is’ publishing arm.

When told by BJP that the crowdfunding website had no cash available to pay debts owed to its shareholders, Tjantelé says he’s ready to come to an agreement with the different photographers concerned. “I’m willing to give them the books, but not all of them. I just want to keep 10% or 20% of them so I can sell them to recoup some of my investment.”

Emphas.is Publishing relied on orders of special-edition books sold at a higher price to finance a full print run, and while these books have been dispatched to the projects’ backers, the remaining books, numbering in their hundreds, are now in a legal imbroglio. Do they belong to the photographers who produced them, or to Emphas.is, which handled the printing process? To BJP, the liquidator says that she doesn’t have enough resources to help photographers claim the books back. “With all liquidations, somebody always get hurt, people don’t get paid. What I would suggest to the individual photographers is to contact Walter directly to negotiate with him what will happen to these books.”

Photographers Jocelyn Bain Hogg and Patrick Brown, however, have found themselves stuck in a more critical quagmire. Having raised $14,450, Bain Hogg, a VII photographer, now knows that his book will never be published, despite the fact that his 136 financial backers already paid for copies.

“It’s appalling,” says Bain Hogg. “You ask your colleagues for support because we’re all going through these hard times. People invest in you – your friends, your colleagues, your family. They put money in – they buy a book before it’s produced, and now the money is gone.”

Brown, who raised more than $28,000 for the production of Trading to Extinction, has been battling Emphas.is for more than a year. When he was first approached by the crowdfunding platform, he planned to raise $25,000 to produce a high-quality book. “Emphas.is asked me to bring the price down as a favour because if the project failed, than Emphas.is’ business model would fail [as it would not receive its commission],” says Brown, who agreed to ask for a more achievable target of $15,000 instead. “When that reserve amount was met and surpassed, everything was fine, at first. It wasn’t until the crowdfunding campaign was over that they started bringing all these new elements – these extra fees – into the equation. They were cutting corners on paper stock and even pulled the file from the printer to do the pre-press themselves.” These fees amounted to more than $10,000, forcing Brown to invest £12,500 of his money to get the book done.

Ben Khelifa disputes that fact. “Prior to the crowdfunding campaign, we had an agreement with Patrick Brown about the kind of book he wanted and the production budget needed to make that happen,” he says. “Mr Brown made significant changes to his book after the funds had been raised, which resulted in increased production costs. An agreement was reached that these increased costs would be partially borne by Mr Brown and the balance would be absorbed by Emphas.is.”

According to the liquidator and Ben Khelifa, Brown’s book has now been printed but has yet to be bound because EBS, an Italy-based printer used for Emphas.is’ books, hasn’t been paid in full. “A small balance is due to the printers, which will have to be discharged,” says Ben Khelifa. “So again this is a matter for the liquidator and Mr Brown to resolve. The Directors of Emphas.is would hope that this matter will be resolved to Mr Brown’s satisfaction.”

For Bain Hogg, the next step is “to start emailing people who have invested in the book and tell them that their money has disappeared. But I don’t have a list of donors. I asked for the list three months ago and they have so far refused to give it to me”. Another fact that the directors at Emphas.is refute. “We never refused to give Jocelyn the list of backers,” says Ben Khelifa. “As there were matters which were sensitive at the time, a decision was taken that this matter should be left with the liquidator once appointed to deal with it. Mr Hogg should now contact the liquidator directly with his request.”

Yet, the harm is done, says Bain Hogg. “Our name is on this. We are the ones responsible to raise the money, and when the platform fucks up like this, it impacts us.”

Failed experiment
Tarnished by internal conflicts and divisions, Emphas.is, which started as a bold experiment in a market that has been plagued by passive acceptance of transformed business models, seemed doomed from the start.

“Operating in a niche is a difficult predicament in crowdfunding,” says Ben Khelifa. “Mass is something most crowdfunding platforms go for, offering projects ranging from gaming to soda making and gadget pre-sales, as the large profits are to be found there and not in journalism. We always thought it would be difficult to create a platform like Emphas.is that wants to create a dialogue between the journalists and their audience, and bring more transparency to the journalistic process, and mix that with plain commercial projects that aim to simply sell products. Mass is critical, though, for crowdfunding, so there might not be a way around this dilemma.”

He adds: “With an investment we believe we could have brought the platform to a sustainable level by investing in reach and staff. But investors remained hesitant because media as a sector seemed too volatile to them and we were not seen as disruptive enough. As a company our aim was never large profits, but to be sustainable, but that is not enough for most investors. We had propositions from investors that involved keeping copyrights of the work produced on the platform and for us to sell the photographic work, which was against everything Emphas.is stood for. There are enough aggregators out there and not enough organisations supporting the production of new work. At least we are proud to have helped to produce a substantial amount of important international stories.”

“My job now,” says Atkinson, “is to investigate the books of account and make a report to the Office of the Director of Corporate Enforcement in Ireland on the role of the directors on the management of the company. And there’s going to be hurt for a lot of people. People have put money in this company and they are not getting it back.”

 

[This article was updated to remove a claim that 219 backers who had participated in Emphas.is' last-ditch attempt to find funds had lost the $18,985 they had pledged - as pointed out by Karim Ben Khelifa, two thirds of these backers have received the "rewards" they were promised. The remaining third are expected to receive their rewards as soon as the situation surrounding Emphas.is' photobooks has been resolved.]