How is pre-ordering not just a form of fundraising on Kickstarter that skirts the laws around crowsourced investing? Couldn't a startup just go on Kickstarter, promise some type of product to be delivered x months in the future, raise their seed and focus on getting bought w/o ever having to give up any equity?
If it had been 'investing', the funders would have gotten a piece of facebook's two billion acquisition bucks, right? That's what investing means, right? As you mention, "without having to give up any equity."
I think kickstarter funders on technology projects are frequently suckers, but it's not got a lot to do with 'skirting the laws around crowdsourced investing'.
Agreed. This is a "gamble to win a product that you want" game, not a "gamble to win a stake in a company that you like" game. The very product-based focus of the transaction is intended to discourage thinking of it as an investment. I think Notch was perfectly reasonable in his analysis. He got the product that he wanted, but was disappointed that their tactics after fulfillment were to cash out and align their direction with Facebook's. And he doesn't trust facebook.
I think many people _do_ give to kickstarter campaigns when it's a group of people they _feel like helping_. This is a bigger part of non-technology project kickstarter transactions, but I think it's probably a part of technology projects too, as can perhaps be seen in the way they are pitched on their project pages, or how funders respond to them -- obviously Notch didn't give $10k just as a 'pre-order'.
It's not _just_ "I want to pre-order this not yet existing tech thing which hopefully will exist", it's also "I want to help these guys succeed, I understand they're scrappy nobody's who might not be able to do it without me, I'm willing to take on some risk and perhaps pay a premium in part because I want to help them, and I know they're taking on risk themselves." It's not about equity, in fact it's more... charitable? Solidaritous? Helpful?... than equity.
I mean, consider, if Facebook itself started a kickstarter project to fund some new device or platform -- do you think people would fund it on facebook?
I think it's both predictable and understandable people feel 'sold out' when they thought they were funding some scrappy strivers who were putting themselves on the line for the project too, only to have those scrappy strivers make a huge amount of cash by selling out to major corporation -- before the product you thought you were helping to make possible was even finished.
What is all the FUD around Kickstarter here on HN? Kickstarter isn't investing. It is a form of pre-order donation, helping to bootstrap a viable market for a product the backer believes in. From the terms of use[1]:
"Kickstarter does not offer refunds. A Project Creator is not required to grant a Backer’s request for a refund unless the Project Creator is unable or unwilling to fulfill the reward.
Project Creators are required to fulfill all rewards of their successful fundraising campaigns or refund any Backer whose reward they do not or cannot fulfill.
Project Creators may cancel or refund a Backer’s pledge at any time and for any reason, and if they do so, are not required to fulfill the reward."
So, if you go on kickstarter and never have any intention to deliver rewards, you're breaking the TOS. How often have this actually happened? I'm sure some number of funded projects have probably disappeared -- but is it really a significant number considering the scale of Kickstarter?
I also see that roughly 45% of projects are funded -- so that's a pretty decent filter right there. For my own anecdotal experience with Kickstarter, I've yet to be "cheated" -- a couple of games I've bought/supported are still under development, but seem to be right on track (Elite, Start Citizen, Torment and Wasteland 2). I've backed some one-off projects, and helped kick-start three businesses: hexbright.com, Printrbot and peakdesignltd.com/capture/
Why should I be upset that my "reward" for supporting these are a subsidized great little product, and not half of a share of the company? I mean, the risk investing in something like any of these seem on average much larger than "most probably getting a cheap, unique product". Yes, the reward is less too -- but I don't understand why people seem to think this has something to do with investing?
Kickstarter provides actionable market research. That's it. It's a chance to trial selling your product, proving it's viability.
Sure, if I had a million dollars lying around, it might have been great if, say the founder of hexbright came to me and asked me for captial, so that I could be the one benefiting from his idea, not him. But for "real" me, that haven't got any substantial capital to invest, that outcome would've been worse. I think it's great that Kickstarter helps lower the need for up front investment for starting a business.
