If a buddy of yours borrowed a few hundred bucks from you because he had a can’t miss product he was developing, would you give it to him? What would you ask for in return? Nothing?
That’s essentially what Kickstarter uses for a business model: people from around the globe can bid for your attention to raise funds for any number of worthy – and not-so worthy – projects. They’re supposed to promise something in return if they reach a goal, but oftentimes that something is dependent on some other development apart from raising the money.
Case in point: Oculus Rift.
The big winners of Facebook’s $2 billion deal to buy Oculus VR, a virtual reality headset maker, include a roster of elite venture capitalists who invested in the company early on.
But many who supported Oculus in its early days will walk away empty-handed.
Those would be its backers on Kickstarter, the fund-raising platform that Oculus used to raise $2.4 million in September 2012. That money helped the company develop its Oculus Rift headset for video games.
Small donors got a thank you note. Larger donors were promised a prototype headset. Based on the value assigned by Facebook, if you gave $1,000, your investment is worth $1,000,000.
To Oculus, but not to you.
Does that seem fair?
Oculus leveraged the initial $2.4 million into venture capital of $16 million within a year. Within another 6 months, another $75 million was raised.
THOSE investors are getting a return on their investment of a lot more than a pair of cheap sunglasses.
I like the idea of crowdsourcing the fund raising based on how attractive an idea is, how qualified the recipient is, and how well the entire shebang is marketed to the crowd. You ought to be able to put together some sort of business plan if you’re going to borrow or solicit money anyway.
And yes, I get the whole caveat emptor aspect of this: it’s not like Oculus promised anything more than what they promised and they still raised the money they needed, and then some.
But we’re not talking about someone who decides to expand their cookie business from their kitchen to a store in town. We’re talking about a firm who clearly had designs on tackling a larger market, and who underpromised to their donors.
Enough of these – the Pebble watch springs to mind as another troublesome thorn in Kickstarter’s side – and people are going to start shying away from the site.
Yes, I know: the Veronica Mars Movie was a Kickstarter project, but there was a scenario where people did it more for the love of the character and the show than expecting a product to be wildly successful. And besides, movies don’t get sold to some idiot willing to overpay for a product.
If I was the head of Kickstarter, I’d be taking a good long look in the bottom of my next glass of wine.
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