Kickstarter Concerns.

[Mr Mystery]

How do?

So I've just seen a couple of threads about Kickstarters. And I have to say I do wonder about how on the levels these are. Not the threads I was viewing, but the concept and execution thereof.

From what I understand, it's crowd sourced funding for a project, with the promise of shiny toys when it's all done and dusted. Great concept, but how is it regulated? I mean they are capable of raising quite significant capital, so what mechanisms are there to prevent someone simply taking the money and doing a runner?

And just to reiterate, I am categorically NOT casting aspersions about those being promoted on BoLs. It's just I'm tempted to invest in one of the Fantasy ones, and I'd like to know I have some kind of protection here, in case things don't come to fruition.

[Gotthammer]

Protection? None, really.

Amazon's (who owns kickstarter) rules are that they are merely a facilitator of collecting and passing on money to the creator (http://www.kickstarter.com/help/faq/kickstarter%20basics#Acco):



Who is responsible for completing a project as promised?

It's the project creator's responsibility to complete their project. Kickstarter is not involved in the development of the projects themselves.

Kickstarter does not guarantee projects or investigate a creator's ability to complete their project. On Kickstarter, backers (you!) ultimately decide the validity and worthiness of a project by whether they decide to fund it.



It has caused some problems - the only one I know of personally is the Pictures For Sad Children kickstarter. John Campbell makes said comic and wanted to do a book run, got lots of money and is yet to produce it. He made a post on Kickstarter about how he'd only been pretending to be depressed for money, I'm assuming in reaction to criticism of lack of book, and that really set everyone off (essentially the only communication he'd given on the project thus far, months overdue at this point).
It was meant as a joke but was poorly executed and obviously not in the right environment to make it and it caused a huge ****storm and has, as far as I can tell, ruined his career (or at least severely damaged it).

Other ones I've backed include the OOtS one, which was so ludicrously popular that it took longer and there were delasy sand such - but Rich kept everyone well informed of these holdups and errors so it wasn't a mystery; Awkward Zombie, which has been good with the what's going on info; Ukyio-e Heroes, which arrived a few days ago; and a few others which have all worked out well (or am waiting on but know why I'm waiting).
Basically I assess them on how clearly they've layed out how they'll be doing stuff (if they've got printers/casters/greens etc). I've stayed away from miniature KStarters with concept art only and no greens as there's no telling what you might get, though. Same for computer game ones - too wobbly for my tastes.

[Mr Mystery]

Fair point.

I'm surprised there is no formal regulation, as it remains an investment type thing.

I shall ask around at work...

[Gotthammer]

How well that would hold up against a legal challenge remains to be seen, but given the costof legal stuff vs the benefit of a refund of the average pledge I don't think we'll see it happen any time soon.

And Kickstarter can't exactly hold on to the funds as they are obviously needing to be spent, and if they started loaning it would become much more like a bank and that would probably add far more complications than they want to deal with.

[eldargal]

There have been a few fraudulent Kickstarters but out of many hundreds of more campaigns it isn't a bad record. I only pledge to companies/people that are established and reputable. It might not always be perfect (see Gotthammers Pictures of Sad Children example) but for the most part it works.

[Chronowraith]

As others have stated, stick to the reputable companies and you should be fine. So far I have only pledged for a few items but I have the utmost trust in those individuals and/or companies.

A few pointers that I have learned over time;
Reputable kickstarter programs will often be honest about production limitations up front. If they can't expand the "basic" pledge any further due to shipping issues, production issues, or simply being too good of a deal they will tell you up front.
Good Kickstarter campaigns will give updates even after the kickstarter campaign has ended.


For anyone curious I have pledged for;

Larry Elmore Art Book (http://www.kickstarter.com/projects/1488741362/larry-elmore-art-the-complete-elmore-artbook?ref=home_popular)
Kingdom Death (http://www.kickstarter.com/projects/poots/kingdom-death-monster)
Reaper Minis "Bones" Plastics (http://www.kickstarter.com/projects/1513061270/reaper-miniatures-bones-an-evolution-of-gaming-min) (sadly finished)

I really wanted to get in on the Sedition Wars, Relic Knight, and Dreadball Kickstarters but I completely missed the Sedition Wars one, forgot to pledge on the relic knights one, and felt the dreadball one was too confusing and/or not enough value when I last checked it out.

[Wildeybeast]

There have been a few fraudulent Kickstarters but out of many hundreds of more campaigns it isn't a bad record. I only pledge to companies/people that are established and reputable. It might not always be perfect (see Gotthammers Pictures of Sad Children example) but for the most part it works.

Exactly. While most are pretty reputable, there is always a risk of a few going belly up of even being fraudulent. These are few and far between simply because if there are a significant number the whole Kickstarter scheme will collapse as people will stop backing any projects on there. You are going to have to use common sense; how well planned are the various stages, do the time scales seem realistic, what previous experience do the people involved have and so on.

[Nabterayl]

Fair point.

I'm surprised there is no formal regulation, as it remains an investment type thing.

I shall ask around at work...
Kickstarter's entire purpose in life is to NOT be an investment type thing. Kickstarters are simply ways to sell overpriced goods. If somebody takes your money and doesn't give you the "rewards" you bought, you have the right to sue them for those rewards. However, the rewards are all they owe you. They have no obligation to make the game (or whatever) the Kickstarter is "for."

Real crowd-sourced investment, at least in the United States, requires filing a registration statement with the Securites and Exchange Commission, and a prospectus describing everything about the project that a reasonable investor would want to know before investing (e.g., what are the things that could cause the project to go over budget, are there certainly personnel who can't be easily replaced if they quit the project, what are the sources of competition, what is the state of the market for the project, etc.). The SEC needs to approve those documents before you can even talk about the project, and that means satisfying the SEC staff that you really have adequately described the nature and risks of the project (and if the SEC staff has never heard of your type of project, that is just that much harder to do). Once this process is complete, people can invest in your project for real. The project doesn't have an obligation to complete the project (after all, sometimes things just don't work out), but they do have an obligation to try.

The thing is, the registration process is expensive. None of it requires a lawyer, in the sense that a multi-billion dollar merger and acquisition doesn't require a lawyer. If you don't have real securities counsel, the odds of your registration statement ever getting off the ground are about zilch, and the process is long enough that your legal fees can run into six figures without anything even going particularly wrong. Given how little money most Kickstarters want, registration would be pretty burdensome.

Kickstarter is an ingenious way to avoid registration legally. But because it isn't investment, "donors" (who aren't actually donors) don't have any of the protections afforded to investors. As others have said, if you want more than the goods you bought, you need to decide if you trust the project personnel and think their stages are realistic.

[Mr Mystery]

Hmm. I think I shall opt out then.

Again, not looking to cast aspersions about any given Kickstarter, but the overall process just doesn't fill me with confidence. One of the downsides to my job is that I seeing as my role is to ensure existing rules are obeyed means I'm all to familiar what a lax or non-existent level of oversight leads to :(

Shame, because the it's some really nice stuff. Also doesn't help that if it came to looking into the promises and stuff, I wouldn't know my arse from my elbow.

[lobster-overlord]

Does anyone out there think that by using credit cards or paypal might protect a person through this? I have only looked into ones from companies I know (Reaper, Mantic, etc), so I havn't even thought of investing with entities other than that level.

[Wildeybeast]

In theory, yes. You have paid for a product/service and have not received it, so CC's and PP would usually cover this. It all depends on whether those companies would actually consider this to by buying a product/service or you being chump and giving your money to some internet scammer. If this a real concern, contact PP or your CC provider and see what they have to say about it.

[Mr Mystery]

I dunno. I mean, you're not exactly buying a product, but the promise of a product.

I know Paypal are under the jurisdiction of the Financial Ombudsman Service here in the UK, but it's mostly trader rather than consumer disputes that turn up.

EDIT>>>

Just thinking a little further, it's genuinely hard to say whether contributing to a Kickstarter is in fact an investment, which would drop it at the FOS, or a standard financial transaction, on account you are pledging money for a pre-determined non-financial return. To the best of my knowledge, that would drop it at the door of the office of fair trading...

EDITY EDIT>>>

Just concerned some might think I've got it in for kick starters/Crowdsourcing. I totally don't! Just intrigued and enjoying the conversation!

[Nabterayl]

I dunno. I mean, you're not exactly buying a product, but the promise of a product.
Well, that's the thing - you aren't. You are buying a product (the reward) for more than it's worth, which you do so the project can take the excess and apply it to their project. But at the end of the day, the only thing they owe you is the reward that you deliberately overpaid for.

I understand that you don't feel like you're overpaying for a product, but that's what you're doing. That disconnect is exactly what makes Kickstarter work - it lets you feel like you're investing (because people would rather invest in a project than overpay for a reward), while sidestepping the investment regulations without doing anything illegal. But the basic issue you seem to have is that Kickstarter isn't subject to regulation, and there's no way to fix that other than for the investment regulations to change.

Should they? Maybe. After all, people like Kickstarter because it feels like investment, so maybe it should be treated like investment. But right now, it simply isn't.

EDIT: Bear in mind that setting up a Kickstarter is as easy as it is because the project personnel owe you very little. Offering people the promise of a product is dangerous stuff, that can easily lead to people sinking huge amounts of money into promises they don't fully understand. The last time that happened, it was a significant factor in the Great Depression. There's a reason you aren't allowed to sell the promise of a product without jumping through some serious hoops.

[Mr Mystery]

But is it not still possible for no goods to be developed at all? If so, and it was made clear at the point of sale that the goods don't yet exist, beyond a concept or prototype, then I'd feel I'd paid for a promise (personal opinion, categorically not an informed professional opinion!)

I know I'm sounding paranoid, but again, professional interest had been piqued.

[Cap'nSmurfs]

The Pictures for Sad Children guy was trolling. The amount of people who thought it was real suggests that about 75% of people who read Pictures for Sad Children don't actually get Pictures for Sad Children.


The last time that happened, it was a significant factor in the current economic crisis.

Fixed!

[Nabterayl]

I think I see what you're asking. Let's assume that you buy into a Kickstarter to market and produce 3D printers for $100, which gets you ten shiny miniatures and a 3D printer.

A couple of scenarios:

You get your miniatures but no 3D printer. It actually doesn't matter why. You have the right to the 3D printer you bought, or to have your money returned less the fair market value of the miniatures you got (which could mean you get nothing, depending on how awesome those ten models are).
You get all your rewards but the project to market and mass produce the printers fails due to cost overruns. You are out of luck; take your rewards and go home.
You get all your rewards but the project fails because the personnel took their Kickstarter proceeds and had a kickass vacation instead. You are probably still out of luck.
Why? In the case of 3, you might be able to prevail on a simple fraud claim. But you'd have to prove that the use the proceeds would be put to was a material factor in your decision to make the purchase you did. Now, it may well have been. But a judge or jury is likely to ask why, if the use the proceeds were to be put to was so important to you, you were content to enter into a contract that made no mention of that use.

You certainly can promise to sell a good you don't have, or that hasnt even been invented yet. But in general, that isn't what Kickstarters do. Even a Kickstarter to fund 3D printers using technology that hasn't yet been invented isn't agreeing to sell them to YOU, except as part of a rewards level.

[eldargal]

Well, that's the thing - you aren't. You are buying a product (the reward) for more than it's worth, which you do so the project can take the excess and apply it to their project. But at the end of the day, the only thing they owe you is the reward that you deliberately overpaid for.

All the Kickstarters I've pledged for, a dozen or so, have given me goods for below the RRP, where are you getting this from?

Honestly this thread is becoming bizarre. Ignoring the fact that Kickstarters have been likened to the Great Depression, the way you lot are talking you would think every other Kickstarter will be fraudulent. There are three that have been cancelled due to issues of reliability, a dozen or so more that were cancelled for various indisclosed reasons and only two or three that I know of that were successful and people are now viewing as fradulent in some fashion. This out of hudnreds and hundreds of Kickstarter campaigns and over 350 million USD pledged.

[White Tiger88]

Ya just pledge a small enough amount to get you what you want then hope for the best =/

[Nabterayl]

All the Kickstarters I've pledged for, a dozen or so, have given me goods for below the RRP, where are you getting this from?

I suppose I should have said more than they cost. That needn't be true of every reward level, but in the aggregate, rewards have to be sold for a profit - and, while I have no hard numbers on this, I would assume the profit is substantial. Who wants to have a Kickstarter where even 50% of the money raised is consumed by rewards?

[Wildeybeast]

Nabterayl, I get what you are saying that you are simply paying for goods (sometimes at more than RRP), but is the point of crowdsourcing not that without, these things would not got made and thus you would not have the option to buy them at all.

This discussion also seems like a relevant place to deposit this little gem (http://www.bbc.co.uk/news/technology-20444159). Peter Molyneux is using Kickstarter to fund his latest game. Not content with scamming idiots on Curiosity, he's now wanting you to waste your own money on another of his projects. This coming from the man who stumped up $6 million of his own money to get Black and White made.

[Nabterayl]

Nabterayl, I get what you are saying that you are simply paying for goods (sometimes at more than RRP), but is the point of crowdsourcing not that without, these things would not got made and thus you would not have the option to buy them at all.
Oh, absolutely. I think Kickstarter is both legally ingenious and useful, and I'm glad it exists.

My point was that there's two ways in which you can not get "what you paid for" in a Kickstarter. You can not get what you ACTUALLY paid for (the rewards), in which case you definitely have a right to receive those. The project can also fail (so the game doesn't get made, the models aren't mass produced, whatever), and even if you feel like you paid for that, you didn't. None of that is news, I'm just exploring the legal landscape because Mystery asked.

[Wildeybeast]

Fair enough. Though I'm not sure I see the difference. How can you get your stuff if the project fails and things don't get made?

[Nabterayl]

Let's say you have an initial goal of $500,000 (say, to prototype), but really need $1MM to produce your shiny new videogame. You have backer levels up to $2,000, with rewards that range from a promotional sticker to limited edition maquettes of the game's protagonist. You raise $500,000 - far short of what you need to make the game. However, unless you priced your rewards very unwisely, you DO have enough to give people their rewards.

I hear what you're saying, that if the project fails to meet its goals no money change hands and thus nobody has bought anything. But as I understand it, projects can - and have - met their Kickstarter goals and still failed, without any bad faith involved.

[Wildeybeast]

Ah I think I'm with you now. Your talking about situations where the Kickstarter is a partial fund for the project, rather than one where it is entirely funded by the Kickstarter and the game is given out as one of the rewards. So long as you get your reward, it doesn't matter if the project overall falls through, either from a legal or 'moral' view. I'd agree with that, as long as you get what you 'paid' for, I see no reason for people to be unhappy. The issue comes where people have priced their rewards unwisely and have promised things they simply cannot deliver for the money pledged.

[Allen Swan]

Hello, I have a Kickstarter Project going on now and needed to know how to let everyone here know about it. Ryan Harris and I met with Larry a few weeks back to show him my work and he replied that my laser Terrain was the best that he had seen and that we would have his support. Is there anyway I can get ahold of Larry to let him know that the Kickstart has started

http://www.kickstarter.com/projects/burnedstudios/28d-laser-wargaming-terrain