New York Times on a failed Kickstarter

[PlainName]

Interesting read about a project which seems typical of the likes of Mu that we see slagged off around here:

NYT page

[Marco]

The rancor is due, perhaps, to a fundamental confusion about what crowdfunding really is. On one hand, a backer is not a customer, because the product does not exist yet and may never; Kickstarter is constantly reminding its patrons that the platform is not a store.

On the other hand, though, neither is a backer an investor, even if many of ZPM’s backers insisted they be treated as such. A Kickstarter pledge does not buy a portion of a company. Backers do not sit on the board; they are not enfranchised to review the company’s audited financials. Investors’ interests, at least ideally, are aligned with those of the company, whereas nothing in the crowdfunding relationship ties a backer to the company for the long term. Moreover, the last thing Kickstarter wants to deal with is S.E.C. regulations.

How does he mean on the other hand? We aren't customers, we aren't investors ... that's not on the other hand, that is ON TOP OF. Also it's complete bullshit. We enter into a legal contract, we pay money for the legal obligation to deliver a product ... how is that not a store? (It is one with really shifty delivery dates, but that's besides the point.)

Any project over a million should be forced to hold some money in escrow to pay for a forensic accountant to go over the books and make sure the founders didn't pay themselves more than minimum wage (for hours not worked in other jobs) in case they fail.

Then I would be willing to recognize I'm not entering into a simple contract for delivery ... but until that time people like Gideon Lewis-Kraus need to stop making life easier for frauds. Small businessmen go bankrupt all the time ... it's not a big deal, there needs to be consequences because otherwise we just get more moral hazard. Just because they are nice to you over a cup of coffee is no reason to just make excuses for him.

[rx8pilot]

My strategy is to never back anything at all unless I am considering it a donation. Everyone should consider that approach. Kickstarter is NOT a store for finished goods, it is a playground for big dreamers that think they are a manufacturer because they purchased a "Maker" book and have a 3D printer. it is such a rare case that the ambition does not far exceed the capability.

There are some that work out well and that is great, but it is still an experiment and should be treated as such.

[PlainName]

We enter into a legal contract, we pay money for the legal obligation to deliver a product ... how is that not a store?

I think this is much like IPR and 'stealing' music or whatever: traditionally we have a view of these things that matches very well with the practices that exist, but these new technologies or methods are different to the old things and fall  between the slots. We struggle to make them fit in the slots that aren't the right shape (because there are no other slots).

Eventually there will no doubt be new slots into which these thing can fit and everyone will be happy, but it can take a looong time for that to happen and we are right at the beginning so far as crowdfunding is concerned. Best not let yourself get wound up over an unsolvable problem in the meantime

[donotdespisethesnake]

I think that Kickstarter does fall into a slot, that of "online store", it is just obfuscated.

Many other companies tried to bamboozle regulators with technology in a similar way. e.g. ebay says "we are not a shop, we are an auction site". But when they have "buy it now" auctions, it looks exactly like a shop, so they are obliged to operate under Retail Selling regulations.

Paypal say "we are not a bank, we are just facilitating transactions between users". Nope, say the regulators, you must be registered under the banking and finance regulations.

Kickstarter are a shop, the regulators just haven't caught up yet.

[Mechatrommer]

Many other companies tried to bamboozle regulators with technology in a similar way. e.g. ebay says "we are not a shop, we are an auction site". But when they have "buy it now" auctions, it looks exactly like a shop, so they are obliged to operate under Retail Selling regulations.

if you own/rent a shop, all the items inside for sale come from you your expenses, you sell it to your customers and you get the profit from the selling... then you can rightly say, you have a shop, that are the thousands of sellers in ebay. ebay is not seller nor a shop, its like a big shopping mall with only to manage sellers/shoppers who want to rent a space, or get profit from sale small percentage of the sellers, and impose some security measure. can you differ? i think the regulator is the one who are spinning off. same with paypal, they cannot lend you money and give interest, if you keep your money in there you will not get dividend. though internal implementation i'm not sure. that need investigation to rightly say they are a bank.

Kickstarter are a shop, the regulators just haven't caught up yet.

where is the "buy it now" button?

[rob77]

Kickstarter is NOT a shop, either accept it guys or keep living in your dreams you don't buy anything on a kickstarter - you literally DONATE money to a project and in return the project owner will give you some reward for that DONATION. that's how it's meant to be and that's how it actually is on kickstarter.

[all_repair]

It is not a donation, never a donation.  It is a pre order, and there is a delivery date and schedule.  Kickstarter is not a shop, it is a mall for the campaign which is a shop by themselves.  Not going after them shall land kickstarter into a law sue sooner or later.   Donation is a regulated activity in almost every country.  So as you may wish, it is never a donation but a trust and support on people with no track record. 

If kickstarter cannot deliver, taobao shall be able to deliver for these non-performers for the backers. 

[rob77]

It is not a donation, never a donation.  It is a pre order, and there is a delivery date and schedule.  Kickstarter is not a shop, it is a mall for the campaign which is a shop by themselves.  Not going after them shall land kickstarter into a law sue sooner or later.   Donation is a regulated activity in almost every country.  So as you may wish, it is never a donation but a trust and support on people with no track record. 

If kickstarter cannot deliver, taobao shall be able to deliver for these non-performers for the backers. 

you're wrong... probably the word DONATION is not correct, but it's not a pre-order either. and yes - it's about supporting a project and the project owner gives you a reward for that support.

just read the "What is Kickstarter ?" page - no pre-orders, no shop, just supporting projects and rewards.

https://www.kickstarter.com/hello?ref=footer

[all_repair]

It is not a donation, never a donation.  It is a pre order, and there is a delivery date and schedule.  Kickstarter is not a shop, it is a mall for the campaign which is a shop by themselves.  Not going after them shall land kickstarter into a law sue sooner or later.   Donation is a regulated activity in almost every country.  So as you may wish, it is never a donation but a trust and support on people with no track record. 

If kickstarter cannot deliver, taobao shall be able to deliver for these non-performers for the backers. 

you're wrong... probably the word DONATION is not correct, but it's not a pre-order either. and yes - it's about supporting a project and the project owner gives you a reward for that support.

just read the "What is Kickstarter ?" page - no pre-orders, no shop, just supporting projects and rewards.

https://www.kickstarter.com/hello?ref=footer

It is a pre-order with escape clauses, and with a lot of kindness from the supporters.  So the people have to be truthful with what they put up, if they deviate then they are wrong.  Many people are treating the supporters like donors like you.  There is no donor, but kind hearted supporters.   Once this line is crossed, the kickstarter is goodbye.  So treasure it and stop treating supporters as donors.

[madires]

you're wrong... probably the word DONATION is not correct, but it's not a pre-order either. and yes - it's about supporting a project and the project owner gives you a reward for that support.

just read the "What is Kickstarter ?" page - no pre-orders, no shop, just supporting projects and rewards.

The problem with that is the webpage design. It suggests it's a pre-order because it clearly states what you'll get for your money. Under German law it could be considered a fraud, when claiming to be a non pre-order system in the fine writing while the whole look and feel suggests a pre-order system. And the "support" would be a "Werkvertrag", i.e. a contract to produce or fix something specific. If they don't deliver you can sue them. If you don't pay they can sue you. Very simple.

[Mechatrommer]

stop treating supporters as donors.

duh if you make a donation, doesnt that mean you automatically support the campaign, the person or whoever that asked for it? semantics mantics. some project starters did specifically asked for "donation" and some specifically asked for "pre-order payment" is this too difficult to understand?

[CatalinaWOW]

I only read the "What is Kickstarter?" page, I didn't read any other documents associated with any project.  On that page there is a rather tenuous promise of a reward, with some examples.

At least here in the US it is common practice for those seeking donations to offer enticements to potential donors.  These range from calendars and coffee cups up through season tickets to the opera and beyond.  Even though there is substantial value in the higher end enticements, there is no perception that the donation process is a store where you are buying the product of the charity (whether it is a music foundation, the Red Cross, a church, a museum or the local boys club).   There is certainly an obligation to provide the promised enticement, but that often has little or nothing to do with the charity's operation.

It would seem that the rewards on Kickstarter could be as creative as the projects themselves and meet the legal commitments.  The commitment would be different for each project, and could range from an email thank you note up to and including part ownership in the project.  It would all depend on what each project promised as a reward.

[PlainName]

It would seem that the rewards on Kickstarter could be as creative as the projects themselves and meet the legal commitments.  The commitment would be different for each project, and could range from an email thank you note up to and including part ownership in the project.  It would all depend on what each project promised as a reward.

Exactly so: the 'donation' gets you the reward, and the project coordinator is committed to providing that reward. It is essentially a promise (aka contract), and you could be giving them $1000 in exchange of a T-shirt - nowt wrong with that.

But the reality is that most rewards, and the reward most donators prefer, tend to be the thing the project is working towards making. Sure, it is not a shop or a charity or an investment. It is a simple exchange of money for reward, but when that reward is the project output, it may as well be a shop, a pre-sale, call it what you want. There is a promise to provide the item (as the reward) in exchange for money - how is that not a sale?

OED definition of sale

The exchange of a commodity for money; the action of selling something

[Marco]

Kickstarter is NOT a shop, either accept it guys or keep living in your dreams

Government has guns and will make you live my dream if they feel like it ... we'll see where this goes.

[Mechatrommer]

how is that not a sale?

it is a sale, but kickstarter admin is not doing the sale, the project starter is doing the sale, through kickstarter website facility.

[Richard Crowley]

I don't see anything "for sale" on Kickstarter.
I have "pledged" well over $1000 on several different campaigns in hopes for a "reward".
But IMHO, Kickstarter is like gambling at Vegas. You should write off 100% as "entertainment" and be pleasantly surprised if anything comes out of it. I would much rather drop $1000 on Kickstarter than in Vegas.

[PlainName]

the project starter is doing the sale

I don't think all these people saying nasty things care who is making the sale, and if you pushed them they would happily agree that it is the project bloke doing it.

Similarly, all these people saying it's not a sale probably haven't thought about who isn't doing the sale, and if you pushed them they would happily agree that it's Kickstarter that isn't making the sale.

So... I am foxed as to why there is an argument about any of this

[SeanB]

Kickstarter= venture capital without any shares in the enterprise. The only warranty is that they will take your money if it reaches the funding goal, and then the realisation of the project is up to them. Basically you are donating towards a charity without having the 501C3 backing behind it. If you get something out of it 1 time in 10 you are actually ahead of the game.

[snoopy]

Kickstarter is NOT a shop, either accept it guys or keep living in your dreams you don't buy anything on a kickstarter - you literally DONATE money to a project and in return the project owner will give you some reward for that DONATION. that's how it's meant to be and that's how it actually is on kickstarter.

But it seems so easy to raise money for some hare brained idea and then run off with the loot whilst offering some lame excuse why it could not be completed. Surely it shouldn't be this easy !!

[Sigmoid]

Kickstarter is a glorified way of e-begging. You are giving money away to a(n e-)hobo, so that (e-)hobo can probably maybe build some cool thing you'd like.

Actually, looking at its purpose, crowdfunding should be classified as investing - the only problem with that is that in the US, investing is overly restricted - as in non-public companies cannot take investment money from people who aren't very rich. It's some kind of backlash regulation that was brought back after the roaring 20s, when regular investing worked in a way similar to how Kickstarter is being used now (and many people lost all their money as a result).

That, or it should legally be a pre-order store.

[Mechanical Menace]

Kickstarter is a glorified way of e-begging. You are giving money away to a(n e-)hobo, so that (e-)hobo can probably maybe build some cool thing you'd like.

That's a bit harsh. For some (most?) that may be true but there have been more than a couple of cool, totally above board campaigns.

[fcb]

Kickstarter is a glorified way of e-begging. You are giving money away to a(n e-)hobo, so that (e-)hobo can probably maybe build some cool thing you'd like.

Actually, looking at its purpose, crowdfunding should be classified as investing - the only problem with that is that in the US, investing is overly restricted - as in non-public companies cannot take investment money from people who aren't very rich. It's some kind of backlash regulation that was brought back after the roaring 20s, when regular investing worked in a way similar to how Kickstarter is being used now (and many people lost all their money as a result).

That, or it should legally be a pre-order store.

I disagree that it is begging. I'm considering doing a KS in September - but for the following reasons:

1. Proves the validity of the idea before I invest in manufacturing - allows me to create a minimally viable batch.
2. Provides a (potentially) huge amount of publicity - for free.
3. Creates cash-flow that LOWERS the risks to both the creator and the PURCHASER (compared with placing a paid-for order).

I reckon 85-90% of KS I've backed in the last year have delivered so far, most significant projects have delivered late (perhaps a 1-3 months).

[Corporate666]

Kickstarter is NOT a shop, either accept it guys or keep living in your dreams you don't buy anything on a kickstarter - you literally DONATE money to a project and in return the project owner will give you some reward for that DONATION. that's how it's meant to be and that's how it actually is on kickstarter.

Incorrect.

Nowhere does it say you are making a "donation".  They are very careful in their terms... they call it a "pledge", which is a commitment made against a deliverable.  The project creator is the one making a commitment about what the backer is getting for the money - and a legal obligation exists to deliver that good or to return the money.  That legal obligation does not exist with a donation.


I don't understand why everyone has to come up with analogies about what kickstarter is or isn't.  Are people not sharp enough to understand the nuances of crowdfunding sites without simplistic analogies?

The closest and most correct analogy is a store.  People are pre-ordering items with the express understanding that the creator will use the funds to produce the good according to the pitch they have made.  If they misrepresent the status of their project and caused backers to give money who would not otherwise do so, then it's likely fraud.

[Corporate666]

Kickstarter= venture capital without any shares in the enterprise.

Venture capital without shares is like marriage without people... it's a non-sequitur.  KS is not like VC investing.  VC investing is all about spending capital on express risks with the goal of future (large) ROI.  KS is not.  KS is about a promise by a creator to produce a deliverable for a specific sum, with the sum paid up front and the money being used to create the deliverable. 

Because VC money is risk capital, if the venture goes sideways and nothing is produced, the company has no obligation to the VC other than paying out a proportional number based on liquidated assets.  Not so with KS projects... with KS, the creator is obliged to fulfill their commitment to the backer - either product or refund.