"The O in OUYA stands for Open. The rest? We just liked how it sounded. "

September 7, 2012 7:01 AM

The OUYA (OOH-yuh) is games industry veteran Julie Uhrman's (AMA, NY Post) dream of a $99 Android-based video game console. And the dream is coming true. The $950,000 Kickstarter was funded in a record eight hours and then nine times over. Some big names are expressing interest. But speculation abounds and Kickstarter talks about accountability. Meanwhile, Forbes asks if we're in a crowdfunding bubble due for a crash.
posted by griphus (91 comments total)

I predict a crowdfunding crash because the sort of hype cycle that comes with kickstarter funding isn't mixing well with the length of time it requires to develop any sort of game at all once your principle capital is secured.

Basically, I see your typical Kickstarter-funding gamer looking at a lengthy sidebar list of projects he or she has funded--some stretching back many months--and no final products yet resting on their metaphorical doorstop.

I've seen people in the same groups complain about shipping being delayed for a day. I can't imagine this sort person feels anything other than spending fatigue at this point.
posted by whittaker at 7:09 AM on September 7, 2012

Kickstarter's accountability post is remarkably readable but it is too long. Summary: "we don't guarantee any sort of delivery. In theory buyers could sue the creators for non-performance." Good luck with that.

I'm in the camp that thanks Ouya is going to be a major disappointment. We'll know in March. I sure hope I'm wrong; it's going to be a big bummer if it or any of the other big ticket projects fail.
posted by Nelson at 7:13 AM on September 7, 2012

I didn't fund it, but for $100 if it ever comes out I'll probably buy one.

I find myself funding more and more things as time goes on, and I generally don't care how long something takes as long as there are updates.
posted by cjorgensen at 7:14 AM on September 7, 2012

As a Pebble watch backer, I was disappointed that they missed their September delivery date, seeing as it was fully funded in May.

To their credit, they are keeping backers fully appraised of their progress and the reasons for their delay.

This might be the exception rather than the rule, as the Pebble folks were the poster boy for successful funding and folks are just waiting with baited breath for them to stumble or fall. The microscope they are under demands that kind of transparency.
posted by THAT William Mize at 7:15 AM on September 7, 2012

Basically, I see your typical Kickstarter-funding gamer looking at a lengthy sidebar list of projects he or she has funded--some stretching back many months--and no final products yet resting on their metaphorical doorstop.

Kickstarter does not defend you from funding a project that never comes to fruition. But it does defend you from paying for rewards that you don't receive- the site TOS specifies that if a project creator is not capable of fulfilling a reward, they have to refund the backer.
posted by Jpfed at 7:16 AM on September 7, 2012

The first project I ever backed (FTL the game) was just delivered on time, and it is a very fun little game. On the other hand, a couple of RPG projects I backed are behind schedule because of personal problems, which is a danger for projects with a small team where everyone is crucial and nigh-irreplaceable, but they've been pretty transparent about it and progress doesn't seem stalled, just slowed.
posted by adamdschneider at 7:18 AM on September 7, 2012

Jpfed: Oh I'm not saying that these projects won't deliver either their reward tiers or the final product. I'm just saying that a lot of people who are used to learning about games when the publisher is already halfway through the development cycle and ready to lift the curtain.

I suspect a lot of early kickstarter videogame backers may have intellectually known from the timeline that their project won't actually be ready until "Fall 2013" but may not have been prepared for the actual experience of plunking down two or three figures and then waiting for 18 months.
posted by whittaker at 7:20 AM on September 7, 2012

Jpfed is right, the Kickstarter Terms of Use explicitly say "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." But without any means of enforcing that refund, I fear it will never happen. What, are the buyers going to form a class action lawsuit and force some poor nerd who's in over their heads to refund money they don't have? The Kickstarter model makes more sense to me for small projects where the financial risk is limited. $9m is a lot of money to be borrowed on such flimsy terms, and if a lot of people are out $100 there's going to be pitchforks.

While I'm here, a couple of weird bits of language in Kickstarter.

People talk about funding a Kickstarter project as "investing". It's not investing. When you fund something like Ouya you're not buying equity in the company with a share of future profits. You're just pre-purchasing a product. You are a customer, not an investor.

Also people talk about Kickstarter "success" as succeeding in raising the money. But getting the money is just the second step; success is in actually delivering the promised product. I feel like Kickstarter is deliberately encouraging this misuse of language.
posted by Nelson at 7:20 AM on September 7, 2012 [7 favorites]

I think Kickstarter makes the most sense for established artists with an existing fanbase, rather than entrepreneurs with cool idea and a slick pitch for it. There's also the factor of scammers always taking over these kinds of sites (see eBay and Craigslist), but again if it's established people raising the money then there's a lot smaller of a risk of accidentally paying for a vaporware project that was just designed to extract money from suckers. I think right now people put too much stock in how cool a Kickstarter project looks and not enough in who is asking for their money.
posted by burnmp3s at 7:22 AM on September 7, 2012 [1 favorite]

Meanwhile, Forbes asks if we're in a crowdfunding bubble due for a crash.

Oh, right, because MILLIONS of dollars are involved. Thanks for staying on top of all these dangerous bubbles, Forbes. Your foresight has served us well.

(Snarky sour grapes aside, they're probably right.)
posted by jcreigh at 7:25 AM on September 7, 2012 [6 favorites]

For $100, as long as they ship something - and I think people are far overestimating the chance of that not happening, since their basic hardware is a readily available SOC in a shiny case - then at worst you end up with a competitively priced Android TV. Whether it will get more than a dozen games made for the platform? That I'm less optimistic on.
posted by Holy Zarquon's Singing Fish at 7:25 AM on September 7, 2012 [1 favorite]

The OUYA has a .tv domain name. Already I am doubtful of the project.
posted by RonButNotStupid at 7:26 AM on September 7, 2012

I've funded a few Kickstarter campaigns and have yet to receive anything. I was disappointed that Ouya is now associated with Vimeo, a company I *loathe*, but they're saying you can just uninstall it. If you can't, I'm gonna be pissed.

I think Kickstarter can work great if the people you're funding know what they're doing. I have full-faith in this recent Noir Magazine Kickstarter, for instance, as the people behind it have a track record in their industry.

Charles Waugh, the creator of this Kickstarter, is the complete opposite. Utter buffoon. Spent all his time making dumb videos showing the product and sending emails after it had already funded -- backers completely understood the product already and didn't need his updates. He's missed his ship date multiple times and now it appears he's fulfilled orders with retailers before sending a single unit to one of the individual backers. Excuse after excuse. Kickstarter should ban idiots like this from ever using the system again.
posted by dobbs at 7:26 AM on September 7, 2012

You know, you can buy a pretty good Android game console with USB for a controller and HDMI for a display plus a built in 7in screen for about $69 delivered.
posted by bystander at 7:27 AM on September 7, 2012 [2 favorites]

It feels like right now the atmosphere of the site itself is what keeps bad projects in check. So it seems like a lot of blowing smoke, this talk does. Then again, while I've backed only 13 projects, all of them have either been delivered or aren't due yet by their original timelines.

Then again, like burnmp3s said, most of my backs aren't with complete unknowns.
posted by parliboy at 7:27 AM on September 7, 2012

...Vimeo, a company I *loathe*...

How come? Admittedly, I don't follow streaming video site news too closely, but last I heard everyone was pretty positive about Vimeo.
posted by griphus at 7:28 AM on September 7, 2012

DAMN! Shit. I typed Vimeo, which I love, and meant VEVO. Fuck.
posted by dobbs at 7:29 AM on September 7, 2012 [1 favorite]

Wow. You've backed 13 projects. I've backed none as I was always a little hinky it mightn't pan out.
posted by bystander at 7:29 AM on September 7, 2012

Oh, yeah, fuck VEVO.
posted by griphus at 7:31 AM on September 7, 2012 [2 favorites]

DAMN! Shit. I typed Vimeo, which I love, and meant VEVO. Fuck.

You have no idea how relieved I am. I was expecting to learn that my favourite video sharing site was run by pro-apartheid, Rape of Nanking-denying, MRAs or something.

Seconding griphus.
posted by whittaker at 7:36 AM on September 7, 2012 [4 favorites]

Pebble's months-long delay is not unusual at all.

I've backed 15 projects on Kickstarter, going back to April of last year, mostly board games. I have received copies of what I've pledged for four times. I have been told that four more of those projects are literally in the mail. On average, it has taken a year to see product delivery from the end of the drive.

Of the unshipped product:

- one is three months late (the first copies are with the creators and shipping within the next month or so)
- one is six months late, claiming that there are problems with the original printer and switching the job off to another printer
- one is a month late, with claims that the product is still on the boat from China
- one is two months late, with some evidence of finished product partially available

And the rest aren't expected until 2013.

In one of the projects I backed, the creator handled things badly enough that he ran out of money before getting enough copies produced to fulfill his KS pledges. So he's been selling copies on his website and rolling the profits into producing more copies in order to fulfil those orders. IMHO, that's pretty unreasonable and should have been remedied by the guy selling his car and/or liquidating his own assets to make good on his promise to his backers to deliver product.

That would never happen, of course; I smell a pervasive sense of a lack of personal financial responsibility on KS, and it troubles me. When a backer pledges to a project and the pledge drive succeeds, the backer has a contract with the creator, not with KS; like EBay, KS is merely a venue. Some people claim that backers are not really ordering product; I disagree. The pledge rewards are listed right there, in the sidebar. I'm being promised delivery. It's no different than if I give fifty bucks to PBS because I want a Masterpiece Theatre totebag and gift set. PBS can't simply opt out of delivering my totebag because they've run out of totebags and there isn't money in that line item to buy more. Do what you gotta do, but your ass better mail me that totebag.

I guess what I'm saying is this: unless you're pledging to an established company that has the resources to cover the project costs in case of unexpected issues, or you're buying into a relatively small project where the creator could conceivably make up the shortfall by selling blood or borrowing from their pension, you're hrowing money into a hole from which you may never see a return. Ten million dollars to produce a videogame console? Good luck with that. I hope the backers tossed money into the pit because of their irrational love for Android and that the warm feeling serves as an appropriate reward.
posted by ten pounds of inedita at 7:41 AM on September 7, 2012 [3 favorites]

Derail: Vimeo has actually been pretty hostile to game developers that want to host videos there. So I'm not a huge fan, but of course they're not VEVO so they've got that going for them.
posted by Jpfed at 7:47 AM on September 7, 2012 [1 favorite]

IMHO, that's pretty unreasonable and should have been remedied by the guy selling his car and/or liquidating his own assets to make good on his promise to his backers to deliver product.

That would never happen, of course; I smell a pervasive sense of a lack of personal financial responsibility on KS, and it troubles me.

...aaaaand this is why you always file an LLC when starting a business. If you hit a snag and the venture becomes unprofitable, people actually believe you should sell everything you own, down to the last stich of clothes, and wear a borrowed rain-barrel.

No. Here in real-world-land, using profits from copies sold on the website to send out promised copies to KS supporters is a pretty classy move, as opposed to giving up on it completely and leaving everyone completely in the lurch, as most businesses would have done when hitting a financial hurdle.
posted by Slap*Happy at 8:01 AM on September 7, 2012 [13 favorites]

I'm reminded of the reaction to Rich Burlew's Order of the Stick reprint project, where some people were shocked, shocked that large block orders of books, sent directly from the publisher, got to retailers before every last backer order for three of Book 2 and one each of Books 1 and 5 with an incentive patch and a poster was boxed and shipped out by hand.
posted by Holy Zarquon's Singing Fish at 8:06 AM on September 7, 2012

IMHO, that's pretty unreasonable and should have been remedied by the guy selling his car and/or liquidating his own assets to make good on his promise to his backers to deliver product.

Basically what Slap*Happy said about LLCs: there are literally reams and reams of business regulations (guess what I do all day at work) based around making sure that the situation you describe doesn't happen, whether or not the business thrives.

Of course that doesn't keep people from saying I'M GONNA BE A BIG BUSINESSMAN WITH MY KICKSTARTER, never consulting a lawyer or CPA, accepting tons of cash for a good diea, blowing it with a shitty business plan, and ending up becoming liable for a lot of money they never, legally, had to be liable for.
posted by griphus at 8:12 AM on September 7, 2012

I agree with Slap*Happy, an LLC is the right thing to do for a big Kickstarter. The idea of selling a car (or blood!) to make good on a risky project is insane. But how many Kickstarter projects have done that much setup? An LLC is expensive; $2500 or so with a fancy lawyer, a few hundred bucks minimum if you DIY.

I can't even tell from the Ouya Kickstarter page if I'm backing an LLC or I'm backing Julie Uhrman individually; the Ouya profile is quite non-specific on that point. Does Kickstarter really make it clear to backers what entity they're backing?
posted by Nelson at 8:16 AM on September 7, 2012

An LLC is expensive; $2500 or so with a fancy lawyer, a few hundred bucks minimum if you DIY.

My day job is forming LLCs and corporations and it's a lot closer to the "few hundred" end than it is to $2500 (except in New York, where the state puts LLCs through the damn ringer.) Although I assume some of that $2500 is drafting of operating agreements and general business consultation by the lawyer?
posted by griphus at 8:19 AM on September 7, 2012

(I work for a processing company, not a lawyer's office, though. We don't do operating agreements or any sort of consultation.)
posted by griphus at 8:20 AM on September 7, 2012

I've backed 47 projects. Mostly for $20-50 over 3 years.

Almost all of them are late. Sometimes ridiculously late. One of the best things that's going to come out of Kickstarter are some kickass product managers that actually understand how hard it can be to get things done. And how many points of failure there are on any big project.

I've only been REALLY disappointed on 1 project.

I'm prepared for disappointment. But the thought of helping people do interesting things is motivation to keep doing campaigns. Though I've noticed I am less interested in big ones now that Kickstarter is 'mainstream' and the sales people have come out of the woodwork.
posted by DigDoug at 8:29 AM on September 7, 2012

Haven't there already been legal problems associated with failed Kickstarter ventures?

There's Hanfree, for example (kind of hard to follow, but it appears that one of the funders took legal action and got some cooperation from a minor partner?)

Also, the whole Zioneyez debacle.
posted by shoyu at 8:41 AM on September 7, 2012

A major, highly visible, outright Kickstarter failure seems like an inevitability. I don't know if Ouya is it - but their CEO is definitely glossing over the very central issue of manufacturing the product... the difference between a spreadsheet of available components at a price and some manufacturing ballparks versus putting a device in a shipping box that is actually going to plug and play. She spends quite a bit too much time talking up Yves Behar - like beautiful design means anything to whether you can deliver the product (and ooh I just bet they are paying way too much to get a controller that looks like it was carved out of blocks of purest iPodium). And I'm not sure how much confidence should be inspired by invoking the input of an "adviser" who is basically responsible for a large-ish install base of $100-$300 paperweights.

Of course Ouya faces the further possibility, if they leap the manufacturing hurdle, of just failing as a platform, pretty much for the reasons discussed in the "selling a dream" section of Ben Kuchera's article. I don't know that failures like that are quite as big a problem for Kickstarter. You're being a super-early adopter on a new technology platform, you better accept that you're rolling the dice. I'm waiting to see how people react to the one where they pony up on an order of magnitude of $100 or more, fume through something like a year of delays, and finally get told "we've spent all the money and there's no product". It's bound to happen, it can't help but, it's the kind of thing that happens all the time - just usually the investors are called investors and they understand this outcome is on the menu, rather than being "backers" who are under the impression that they transacted a pre-order.

Then again, I wondered about all this stuff the minute I understood what Kickstarter was actually doing (offering a very functional escrow service with a free website thrown in, in exchange on speculation on a piece of your eventual receipts). It's not a bad deal but it was totally obvious from scratch that it was caveat emptor time and their terms of service spelled this out unambiguously. I never fund anything if I don't feel comfortable with the idea of eating my pledge basically without rancor because seriously, life is too short raising your blood pressure over whether your new watch is ever going to ship. I know inevitably people will be shocked for feel entitled and get angry but I sort of wonder if this supposed sea of people who don't "get" that a Kickstarter pledge isn't a regular preorder isn't sort of a media invention.
posted by nanojath at 8:49 AM on September 7, 2012 [2 favorites]

Are people trading shares in kickstarter projects for amounts far in excess of their intrinsic net worth? Are people pledging $99 to the OUYA campaign, not because they want the console, but because they are hoping to sell their rights to the console for a lot more later?

A bubble is not the same thing as a fad or trend.
posted by justkevin at 8:52 AM on September 7, 2012 [6 favorites]

That Hanfree saga that shoyu linked is fascinating; read from the bottom if you want details. A $35,000 project with 440 backers didn't deliver. The creators said they'd make it good, then went silent. One of the backers (Neil Singh) sued the creator and won summary judgement for a refund. Unfortunately he only sued on behalf of two people for a couple hundred bucks, so it may be that he'll get paid off and made to go away and the other 438 people will still be SOL.

A lot of folks in this thread have said many of their projects are delayed. How long will you accept a delay before you decide that in fact the project is just never going to deliver at all? Kickstarter's only a couple of years old, it may be there's a coming wave of projects that still feel like a delay now but will be a total failure in six months.
posted by Nelson at 8:55 AM on September 7, 2012

A bubble is not the same thing as a fad or trend.

This is a good point. According to Kickstarter stats far and away the biggest category of successful projects are in the $1-10 thousand goal category (almost 20,000 projects) - and these are flanked by almost 7,000 in the under a thousand and 10-20 thousand categories. Lower bars to success and smaller risks to support.

The big profile, over a million dollar projects that generate all this hype and counter-hype? Ten projects. Another 250 projects in the $100K to a million category. They make the news and they are no doubt a significant part of Kickstarter's bottom line but they aren't necessarily the real driver of the business.
posted by nanojath at 9:08 AM on September 7, 2012

OOH-yuh

The pronunciation has to be "ooh yeah" right? Maybe "oo-yeə"
posted by mrgrimm at 9:12 AM on September 7, 2012

It's so strange to see how people react to Kickstarter projects based on what originally drove them to the site. I understand how people react and think of it as some sort of "bubble" that can happen if they're going to the site for games or hardware, but as someone who has funded mostly films and other artistic products (not including graphic novels/comics), I never have any expectations and just hope the darn things get made. Not saying that one way of looking at the site is right or wrong -- it's just interesting how the same tool can give such a different set of expectations or experience.
posted by MCMikeNamara at 9:15 AM on September 7, 2012

I'm in for a console to Ouya and I've donated to a few other kickstarters in the past year. Only one so far has delivered. The best ones at delivery have been the publishing ones, taking an already generated project and producing a professional-quality product from original content. These are simple and therefore pretty low risk. The engineering ones, like Ouya and Pebble, are much higher risk because they have so many more ways that they can go wrong, design supply, production, developer buy-in, so on.

I view these more as donations to people who I think might do good work. It's money we won't miss if nothing happens. I think most of these people are acting in good faith, but project timelines have a way of exploding even with the best of intentions, even with the most solid-looking business plans. Each kickstarter project, particularly the engineering ones are rolls of the dice.
posted by bonehead at 9:17 AM on September 7, 2012

The pronunciation has to be "ooh yeah" right? Maybe "oo-yeə"

I can't read linguistic symbols, but it's basically a Wisconsin/Minnesota "yah."
posted by griphus at 9:17 AM on September 7, 2012

I can't read linguistic symbols, but it's basically a Wisconsin/Minnesota "yah."

Or a Wisconsin/Minnesota yeah. ;)
posted by mrgrimm at 9:27 AM on September 7, 2012

I just say "baggle."
posted by Holy Zarquon's Singing Fish at 9:33 AM on September 7, 2012 [4 favorites]

Kickstarter is the very reason we have laws, and the SEC. This is backdoor investing plain and simple and it is going to get regulated once enough people lose money and get pissed.

I'm still working on my SMS gadget. Meant to be a ruggedized keyfob that does only SMS, for 2 factor authentication and support ticket escalation. I guess I should get it on kickstarter before it gets regulated out of existence.
posted by Ad hominem at 9:38 AM on September 7, 2012

Looking at my 20 backed projects on Kickstarter (whose funding is finished), it's a little hard to state the success rate. I've very clearly gotten the goods for two of them, one of which was massively late (it was a game whose publisher had real life crises, and I'm totally willing to cut him some slack.)

One was for a short film which really did get made, but I never got the filmmaker's comedy CD that was supposed to be my reward. Singularity & Co. has been a disappointment so far -- it was funded at the beginning of April, and there was supposed to be a release a month, and I thought what I was mostly paying for was for them to acquire the rights to out-of-print copyrighted material. There have been a total of three releases of public domain works and not a lot of communication. The Locus Photo and Ephemera Archive Project got out my reward promptly; the project itself is a long-term thing for which one can't expect fast turn-around. Another role-playing game delivered its PDF in a reasonable amount of time, and the publisher says he's mailing the book now, late but not extraordinarily late. One was for 6 novels, the first of which appeared promptly.

Which leaves 13 for which I've gotten nothing, most of which are too recent to expect otherwise; one of which really isn't.

So I've been feeling a little like backing projects is the triumph of hope over experience, but only a little.
posted by Zed at 9:47 AM on September 7, 2012

No, Kickstarter is not investment and the SEC is not involved. I explained this up thread and I corrected this misunderstanding in the previous Kickstarter discussion. The Securities Exchange Commission regulates securities. No one is selling securities via Kickstarter, they are selling products. It's an entirely different thing legally. There are some startups trying to be Kickstarter-for-investment, and the JOBS Act is also relevant to that idea. But Kickstarter is a place for selling products and dreams, not investments.

It may be the Federal Trade Commission would take an interest in Kickstarter. The FTC has been quite proactive in some aspects of Internet startups, particularly privacy. I suspect they're watching and waiting to see how Kickstarter evolves, it's still so small and new. I'd hate to see the government regulate Kickstarter out of existence, the best way to prevent that is if Kickstarter protects consumers effectively themselves.
posted by Nelson at 9:53 AM on September 7, 2012

It's not a bad deal but it was totally obvious from scratch that it was caveat emptor time and their terms of service spelled this out unambiguously. I never fund anything if I don't feel comfortable with the idea of eating my pledge basically without rancor because seriously, life is too short raising your blood pressure over whether your new watch is ever going to ship.

Agreed. The boardgaming community has gone crazy over Kickstarter with the result that (a) there's a ridiculous number of boardgaming projects, (b) boardgamers seem ready to fund almost anything before (c) the inevitable gnashing of teeth and shouting when some of these deals go sour.

(Seriously - go and read up about "Glory to Rome", a veritable saga of misjudgment and broken promises.)

I've been lucky with Kickstarter - of 4 projects, 3 have delivered more or less on schedule and I pick up the 4th in Essen next month - but calls for Kickstarter to "do something" about non-delivery outside the specifications. What could they do? Judge every project individually and send the creators away if they don't have a plausible plan? How do you judge that? How do you be an expert in all domains covered by Kickstarter? And what's the appropriate way to handle late or partial delivery?

The fallout of a major Kickstarter failure should not be to reshape Kinckstarter but to reshape the expectations of backers. Don't bet what you can't afford to lose. Examine the project and the project creators carefully. If it's too good to be true, it probably is.
posted by outlier at 9:57 AM on September 7, 2012

We both know this only reason it "is not investment" is because of the legal definition of investment. Like I said last time it "is not investment" the same way bongs are "for tobacco use only"

This is a fiction to provide cover.

In many kicstarters you pledge money and don't even get the final product, so it isn't a pre-order.

These aren't charities so it is not a donation.

Are you paying for the t-shirts and random junk you get as "rewards"?

Sure, my $1000 got me a t-shirt and thanks from the team. Totally not an "investment"
posted by Ad hominem at 9:59 AM on September 7, 2012

It's hard to comment on Kickstarter in general because there are so many types of projects. If you pay $100 for the promise of an Ouya, that's a preorder. If you pay $1000 for a t-shirt and thanks, that's charity. Investment would be you pay $1000 now for the promise of >$1000 return in the future.
posted by Pyry at 10:11 AM on September 7, 2012 [5 favorites]

I'd love to send some money for an OUYA to play games on my TV, but I just spent my last thirty bucks on some OUZO which I'll drink while I watch TV.
posted by Benny Andajetz at 10:16 AM on September 7, 2012

It's not an investment because you're not getting a share of the company. The "reward" tiers where you pledge money and don't get the eventual product, or get only a token prize, like a magnet or whatnot? If that's analogous to anything, it's panhandling. If I give a bum $5, I'm not expecting a direct return on my fiver if he eventually gets a job.
posted by Holy Zarquon's Singing Fish at 10:16 AM on September 7, 2012 [1 favorite]

I think it's closer to busking than panhandling. You're giving money for the effort and to help them achieve their goal, but if they have a CD on sale, you can buy that too.
posted by griphus at 10:20 AM on September 7, 2012 [2 favorites]

Right. I don't even get the benefit of having shares. The founders have no fiduciary responsibility towards me at all. They can take my money, blow it on strippers, and all I can do is try to sue.

This is why we passed securites laws to begin with.
posted by Ad hominem at 10:21 AM on September 7, 2012

Investment would be you pay $1000 now for the promise of >$1000 return in the future.

You can't promise people a return in real investing either. It always says in the prospectus that there is a good chance you will lose it all.

So it boils down to kickstarter, founders have no responsibility not to mismanage the money and in real investing officers have a responsibility not to mismanage the money.

I can't see how this could last, even if is is not legally investing kickstarter is eventually be filled with virtual panhandlers, buskers, and flat out scam artists that it will have to be regulated as real investing or cease to exist.
posted by Ad hominem at 10:37 AM on September 7, 2012

I can't see how this could last, even if is is not legally investing kickstarter is eventually be filled with virtual panhandlers, buskers, and flat out scam artists that it will have to be regulated as real investing or cease to exist.

Kickstarter works really well for a lot of things. For artistic projects that are basically in the can and need a production budget via an established production technology (printing, pressing vinyl, etc.) it works great, I've funded several projects in this matter. As a means of giving donations to a project that doesn't necessarily produce a lot of tangible goods (which is perfectly legitimate, you don't have to be a non-profit to solicit donations as long as you pay taxes on the income and advise your benefactor that their donation is not tax-deductible) it works great.

As what amounts to a pre-order on a manufactured item, well, how well it works depends on what you're dealing with and people are learning this now. If you give a lot of money to a person without a credible background in bringing a physical product of the sort under consideration to fruition, if that person is proposing to do something implausible (develop and manufacture a product that would normally require a budget of millions for tens of thousands - this is an exact description of the ZionEyez project in my opinion) well, like I said, I think caveat emptor works just fine. You don't ever have any kind of guarantee except for the usual legal recourses when you give someone money for something. Like I said above, these million dollar pie-in-the-sky projects are a very small component of what's going on there and there is still plenty of good use for Kickstarter.
posted by nanojath at 11:04 AM on September 7, 2012

How do you (or more to the point, what regulation will) tell if the hard-SF cyber-steampunk peformance art you funded is 'mismanaging' your pledge? Regulations can work for real investments because they're all reducible to a common denominator of money and profit, but when you're funding something where the 'return' you're hoping for isn't financial, how exactly do you go about auditing it? If the author of the cyber-steampunk performance art spends half the money on Absinthe and marijuana, who's going to make the decision of whether that's a mismanagement of funds or a legitimate part of the artistic process?
posted by Pyry at 11:06 AM on September 7, 2012 [1 favorite]

"Perhaps, I will lose."

That, my friends, is the game. Not the game of the player. No, the player wishes simply to win. That, right there, is the game of the house, the market, the society. Not to say that -- because the house always wins -- but to make that very experience for the players. The game is entirely to create a situation where risks don't pan out and players don't riot. Because in the real world, the ball sometimes lands on green. But if you only bet on sure things, you're guaranteed to lose (because there aren't enough sure things, or because those that are sure have enough of a premium that they're still unprofitable).

KickStarter is an interesting approach that attempts to include customers into the risk equation, using their own presence as social proof and distributing rewards to those who provided it. This is interesting on many levels. KickStarter's biggest problem is that rewards should arguably not include the delivery of the product itself. It's like a lottery that guarantees winning, if only enough people play. But if people aren't actually betting on the final delivery, just associated rewards that don't include success, then the system doesn't measure the desirability of the final product as much as the rewards along the way.

It's messy and fascinating and I actually don't think it'll be regulated out of existence, modulo the same sort of corruption threatening Uber.
posted by effugas at 11:06 AM on September 7, 2012

If the author of the cyber-steampunk performance art spends half the money on Absinthe and marijuana, who's going to make the decision of whether that's a mismanagement of funds or a legitimate part of the artistic process you are halfway to a guarantee that it is going to be So. Freaking. Awesome. What do you mean I totally missed your point, like, look at my brass ray gun, man, PEW PEW PEW PEW PEW

(hi I'd like one cyber-steampunk performance art please. with extra monacle)
posted by nanojath at 11:12 AM on September 7, 2012 [1 favorite]

If the author of the cyber-steampunk performance art spends half the money on Absinthe and marijuana...

The trick would be to pay for the tier where you can get in on that shit:

PLEDGE $25 OR MORE
10/250 Backers
DUDE come hit this shit.
posted by griphus at 11:16 AM on September 7, 2012 [5 favorites]

The first project I ever backed (FTL the game) was just delivered on time, and it is a very fun little game.

In two weeks FTL will be released to the public, for 10 bucks, and you should all get it, as it is awesome. It is a fun little rogue-like in space, and aside from the severe lack of sleep has been a lot of un.

I've backed ~20 projects, but mostly this year with future payoffs.
posted by graventy at 11:34 AM on September 7, 2012 [1 favorite]

Just because they aren't charities, doesn't mean it isn't a donation. I've never done this, but I can see making a small pledge for something that simply looks like a cool project that I'd like to support.

The thing that I have done is evaluated a Kickstarter like I would any other purchase on the internet: Do I think this person will come through with what is promised if I send them my money? (The same question I ask when I buy something off of eBay.) That was back when Kickstarter was invite-only, so I had a better comfort level. Right now I do feel like most projects are too big or too far off in the distance to be a good risk. It is a cool site to browse, but I rarely see anything that seriously tempts me to pledge.
posted by He Is Only The Imposter at 11:50 AM on September 7, 2012

If the author of the cyber-steampunk performance art spends half the money on Absinthe and marijuana...

That's the thing, it isn't like there are regulations in real world saying don't spend investor money on absinth, I'm sure plenty of investor money has been spent on absinthe. In New York, minority shareholders get the right to review all financial statements and records, the officers must show "loyalty and care" and if 20% of the shareholders get together they can petition the court to dissolve the company and return money.

So if I, and other shareholders don't like that they spent money on absinthe, we can shut the company down. On the other hand, maybe the investors agree absinthe is the best use of the money. Who knows.
posted by Ad hominem at 11:52 AM on September 7, 2012

Every state is different, some state are more friendly to minority shareholders. There are some other rights a shareholder might get such as protection against "shareholder oppression" and protection from "freeze-out" mergers where majority shareholders engineer a merger with a corporation they also control, since they dictate the terms on both sides of a merger, they can force minority shareholders out of the company by dictating they take a cash payout. Minority shareholders may also sometimes initiate lawsuits on behalf of a corporation they have a stake in.

You know what, fuck it. Lets just keep this friendly and let the steampunks enjoy the weed and absinthe. I'll stop shooting my mouth off and hope some cool stuff can get funded.
posted by Ad hominem at 12:11 PM on September 7, 2012

Is there any regulation that says PBS has a fiduciary responsibility to the people who send them a hundred bucks for a tote bag? Because short of busting or panhano, that strikes me as the best analogy.
posted by Holy Zarquon's Singing Fish at 12:19 PM on September 7, 2012 [1 favorite]

In New York, minority shareholders get the right to...

And Kickstarter doesn't involve buying shares, making an investment, having a stake in a company, getting a return on your money. It isn't an investment. It doesn't have any of the characteristics of an investment. It is not claiming to be an investment. At most it amounts to a pre-order.

I understand that you are pointing out that there is very little provided by way of assurance. It's definitely worth keeping people aware of this fact - that nobody is formally vetting these things beyond Kickstarter's very modest project requirements review and the whole thing is pretty literally a stress-test on how well "the crowd" can really do at judging what is reasonable.

But I just don't see that the rules governing investment are in any way relevant. I do think the concerns are a lot less relevant when you're not dealing with preordering a vaporware manufactured electronic product: again per KS's stats "Technology" products represent about 2% of the total launched projects and about 6% of successful funding by amount pledged. There is perhaps some overlap with the "Design" category which represents 3% of launched projects and 15% of the successful funding.

I don't discount your skepticism about the gadget side of all this but I don't think, even if that part of the model foundered completely, it would spell the end of Kickstarter. Most of the action is people giving much more modest amounts to human-scale art projects and doing so with the grain of salt most people would naturally apply in giving money to an artist for a speculative art venture.
posted by nanojath at 12:30 PM on September 7, 2012 [2 favorites]

If you haven't seen it yet though, Ad Hominem, may I humbly suggest the always-painful "Shit-Starter" Tumblr? (NSFW).
posted by nanojath at 12:36 PM on September 7, 2012 [1 favorite]

And Kickstarter doesn't involve buying shares, making an investment, having a stake in a company, getting a return on your money. It isn't an investment. It doesn't have any of the characteristics of an investment. It is not claiming to be an investment. At most it amounts to a pre-order

I realize all that. Lets get real. People are going to get burned and there is going to be a call for action. It may be now and it may be 5 years from now. Saying it is "a pre order" where they have no responsibility to actually ship you anything isn't going to fly.


Is there any regulation that says PBS has a fiduciary responsibility

PBS foundation is a 501(c)(3) non-profit. They have their own regulation what they can do with the money. The funds must be used in the manner set forth in the filing. You can actually write PBS for financial statements. I guess people at PBS could go to jail if they spent the money on weed and absinthe
posted by Ad hominem at 12:38 PM on September 7, 2012

Saying it is "a pre order" where they have no responsibility to actually ship you anything isn't going to fly.

That's not what the TOS says. The situations that are like pre-orders involve rewards and do incur obligations on the part of the project creator. If it doesn't involve rewards, you're making a donation.
posted by Jpfed at 12:44 PM on September 7, 2012

People are going to get burned and there is going to be a call for action.

Well it will be interesting to see how it pans out. Kickstarter has been making these nominal changes (beefing up and drawing attention to their terms of service, making technology projects jump through a few more hoops with respect to demonstrating capability) but you may be right, failed, higher-money, high-profile projects may spur revolt or just mass abandonment of the platform. If it happens I owe you an organic artisinal cola from my organic artisinal cola kickstarter project (funders at the $45 level or higher get a six-pack!)
posted by nanojath at 12:45 PM on September 7, 2012

I've backed about ten projects, and all of them have come through. Part of that is probably that most of them have been performances — I backed a friend's opera, for example — and so there's a date and a plan and it's like, "Well, we just need this much for costuming and renting the space, etc."

I'm actually thinking about putting one up to do an art show, which would be just basically covering the cost to rent the space so that it could be free for attendees rather than having to charge at the door (which is kinda a hassle).
posted by klangklangston at 12:55 PM on September 7, 2012

you're making a donation.

Just as it isn't investing because you don't get equity, it isn't a donation because these aren't non-profits. You can't write these off can you?

I'm all for loopholes and grey areas. But loopholes get closed.

I hope it works out for kickstarter and I hope all kinds of steampunks and artisinal cola projects get funded.

I am just of the opinion that kickstarter will start to attract scamsters who have no intent to produce anything. Sure, the TOS can say "buyer beware" just like the dry cleaner says they aren't responsible for my shirts. Guess what, they are responsible for my shirts no matter what the sign says. This is going to end up being decided by the courts.

If legit projects drift away due to the steady drip of bad press and kickstarter is left with only fraudulant projects, what are they going to do?
posted by Ad hominem at 12:55 PM on September 7, 2012

"Just as it isn't investing because you don't get equity, it isn't a donation because these aren't non-profits. You can't write these off can you?"

Uh, you know that a) something doesn't have to be incorporated as a non-profit in order for it to be a donation, and b) that being able to write something off doesn't determine whether or not an entity is a non-profit, right?

I'm all for loopholes and grey areas. But loopholes get closed."

I'm not even sure what you're trying to say here.

"I am just of the opinion that kickstarter will start to attract scamsters who have no intent to produce anything. Sure, the TOS can say "buyer beware" just like the dry cleaner says they aren't responsible for my shirts. Guess what, they are responsible for my shirts no matter what the sign says. This is going to end up being decided by the courts."

Actually, that very much depends on the state you're in. In Michigan, the warnings don't diminish consumer rights (thanks to a strong attorney general and legislature, ironically under Romney); in California, they absolutely do, and the sign is treated as the caveat for the emptor.
posted by klangklangston at 1:08 PM on September 7, 2012 [1 favorite]

Uh, you know that a) something doesn't have to be incorporated as a non-profit in order for it to be a donation, and b) that being able to write something off doesn't determine whether or not an entity is a non-profit, right?

Dude, keep up. They been telling me it isn't an investment because it isn't legally an investment, I'm just pointing out it isn't legally a donation either. I don't care what people call it.

I'm not even sure what you're trying to say here.

I'm saying playing word games by saying it isn't legally an investment, kind of like how the dude at the head shop won't talk to you if you use the word bong, but will sell you a "water pipe" is a grey area. This is how politicians make political hay out of an issue. All it is going to take is one "5 on your side" expose of kickststarter.

Actually, that very much depends on the state you're in. In

That would be Even worse for kickststarter, backers and founders. I don't envy them fighting lawsuits in all 50 state. My dry cleaner only has to follow NY state law, not CA, NY and PA law.
posted by Ad hominem at 1:18 PM on September 7, 2012

I don't think people are trying to clarify that it's not an investment legally; I think they're trying to clarify that it's not even an investment conceptually.
posted by Jpfed at 1:21 PM on September 7, 2012 [3 favorites]

I'm trying to get people to tell me if it isn't an investment, what is it? I understand I get no shareholder rights.
posted by Ad hominem at 1:23 PM on September 7, 2012

If you tell me it is like handing money to a homeless guy. I will accept that. I still maintain that it is not a viable business model.
posted by Ad hominem at 1:24 PM on September 7, 2012

...what is it?
posted by griphus at 1:25 PM on September 7, 2012

The issue is not whether Kickstarter is "legally" an investment. The issue is whether it involves "the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value." That's the definition of investment. There is no expectation of profitable return with Kickstarter, so it's not an investment.

if it isn't an investment, what is it?

It's crowdsourced funding. Funding has traditionally been done through investment, but that does not mean that all funding is investment.
posted by vorfeed at 1:25 PM on September 7, 2012 [4 favorites]

the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value

So I give them money to grow the company hoping at one day In the future they will produce a product, that I may have to spend more money on. That product is obviously of value to me. Maybe I want to keep it and show it off, maybe I want to sell it on ebay. I am hoping to get something of value in return. Not see the money fall into a black hole.
posted by Ad hominem at 1:32 PM on September 7, 2012

By that interpretation donating to charity is "investment" because you value the warm fuzzy feeling you get from helping to feed the homeless, or want to someday benefit from better cancer treatments, or whatever.
posted by Holy Zarquon's Singing Fish at 1:35 PM on September 7, 2012 [2 favorites]

It's pretty obvious to me that "hoping at one day In the future they will produce a product, that I may have to spend more money on. That product is obviously of value to me" is not equivalent to "interest, income, or appreciation in value". These words have meanings, and "I paid money hoping to receive an item in exchange" is not among them. You are describing buying, not investment.
posted by vorfeed at 1:39 PM on September 7, 2012 [1 favorite]

This is all about intent then.

I could be investing in charity because I want educated workers to produce my widgets and make me more profit.

I could be investing because I think the artisinal soda will appreciate in value on a secondary artisinal soda collecters market.

You guys may be expecting nothing, I agree, that is not investing, that is throwing money away. I want something of value to be produced, that is investing.
posted by Ad hominem at 1:40 PM on September 7, 2012

You are describing buying, not investment.

Wha? giving money so they can build a company I can buy the product from is like no buying I ever heard of.

If it was straight up buying, they would be obligagted to actually deliver, which they aren't
posted by Ad hominem at 1:42 PM on September 7, 2012

"Dude, keep up. They been telling me it isn't an investment because it isn't legally an investment, I'm just pointing out it isn't legally a donation either. I don't care what people call it."

And I'm pointing out that a) it's neither legally nor conceptually an investment, and b) your legal definition for "donation" is wrong.

So, dude, the problem here is that you're wrong, not that the rest of us aren't getting what you're laying down. Keep up.
posted by klangklangston at 1:48 PM on September 7, 2012

Since we are all pulling out definitions of words here:

donation n. gift. If made to a qualified non-profit charitable, religious, educational or public service organization, it may be deductible as a contribution in calculating income tax.

And from my perspective, I expect something of value in return so it most certainly is an investment, even if not by the legal definition.

We are going aroung in circles. I am prepared to accept that for you guys it is a donation, even though it isn't legally a donation. Accept that I want something in return that is of value to me.
posted by Ad hominem at 1:53 PM on September 7, 2012

I am hereby announcing my Alpha Centauri sequel Kickstarter campaign. Send me the moneys; you know you want this made.

Disclaimer: I do not hold the rights to Alpha Centauri. I have no experience in art, art direction, video game design, or sound. My writing experience consists of numerous (failed) NaNoWriMo attempts, and I have no staff. However, that last aspect is a plus, as I have no management experience.
posted by Durn Bronzefist at 2:01 PM on September 7, 2012

The SEC was invoked as the appropriate regulatory body for Kickstarter projects. It is not. The SEC regulates securities and investments, most commonly stock in corporations. Kickstarter doesn't sell investments. If you don't understand that I suggest you do some basic research so you can speak the same language as the rest of us here. SEC and Investment are two Wikipedia articles to get you started.

The FTC is the federal authority that generally addresses consumer fraud.

if it isn't an investment, what is it?

For many Kickstarter projects, like the rewards for the Ouya being discussed here, it is an explicit promise by the Creator of the project to provide goods to the Backer. For instance, for $99 Ouya promises "GET AN OUYA: console and controller. Guarantee we will have one available for you ... Est. delivery: Mar 2013". The $99 is a prepurchase agreement. This is not a hard concept to understand.

For some Kickstarter projects, people say what you are getting for your promised money is good feeling. Although I can't find any examples like this; even the lowest backing levels on all the projects I know include explicit deliverables. The Ouya $10 level gets you a reserved username, a measly $1 for Gaymercon promises your name on a thank you page. Even Chris Crawford's unfunded Kickstarter included specific deliverables even though what he was really looking for was funding to produce a product he was going to give away. These "you're a member!" rewards are pretty flimsy; I imagine most people backing a project at these small levels are doing so out of kindness or wanting to belong to the movement.

I'm not aware of any IRS tax exempt charities raising money through Kickstarter. In English we sometimes use the word "donation" to talk about giving of money even if the recipient is not tax exempt. But if that seems unclear maybe more ambiguous words like "tip" or "gratuity" or "thanks" or "financial contribution" are more appropriate. I suggest you avoid the word "investment", even if it is colloquially used for this kind of money giving occasionally, since it has a specific legal and regulatory meaning that does not apply.
posted by Nelson at 2:08 PM on September 7, 2012

The SEC was invoked as the appropriate regulatory body for Kickstarter projects. It is not

Nah, I said it is because of stuff like this why we have laws and the SEC. I didn't call on the SEC to do anything here.

for $99 Ouya promises "GET AN OUYA: console and controller. Guarantee we will have one available for you ... Est. delivery: Mar 2013". The $99 is a prepurchase agreement

They can call it a prepurcase, but the TOS also says I am not guaranteed to get it am I? All I can do is go after the company for my $99 back.

What about the levels below the prepurchase level. What about kickstarters where they don't try to call it a prepurchase.

The rewards really are flimsy, the barest fig leaf. I know we keep going to drugs here but they are like the rose in the crack stem.
posted by Ad hominem at 2:22 PM on September 7, 2012

But stuff like Kickstarter is not why we have the SEC. The SEC regulates investments. Kickstarter is not selling investments. You seem to not be able to understand this and I'm done trying to explain it. As to the Kickstarter TOS, please read it again as I quoted up thread.

Some projects offer flimsy rewards. They are basically asking for tips or good will funding. Those projects don't worry me nearly so much, presumably the Backers understand all they're getting is a good feeling. I'm much more worried about projects like the one we are discussing here, a $9 million hardware project financed with pre-purchases of goods that may well never be delivered.
posted by Nelson at 2:29 PM on September 7, 2012

But stuff like Kickstarter is not why we have the SEC. The SEC regulates investments. Kickstarter is not selling investments. You seem to not be able to understand this and I'm done trying to explain it

We have securities laws and the SEC because people got ripped off, or felt they got ripped off. They felt they were investing, felt they had some recourse, but they were getting scammed.

I have never said the SEC regulates kickstarter, I have called it "backdoor investing". Who the fuck is going to regulated unregulated investing.

Call it whatever you want, donation, busking, handouts. People want stuff in return.

People are going to feel ill-used when the stuff they prepurchase never shows up and we end up with more laws. This will have to be treated as some kind of "investing" or "donation" or simply massive fraud.

I'm done with this also.
posted by Ad hominem at 2:39 PM on September 7, 2012

In two weeks FTL will be released to the public, for 10 bucks, and you should all get it, as it is awesome.

Ha, I forgot that I'm playing the beta. I believe it comes out on the 14th, and I have been enjoying it immensely. I've gone to bed way too late twice this week because of it.
posted by adamdschneider at 6:41 PM on September 7, 2012

Just to throw some numbers in for a lot projects…

I've backed some 67 projects that have succeeded. I don't track projects that don't reach goal for obvious reasons.

Of the 67 projects, 32 have delivered.

2010 and earlier projects have two waiting on delivery. The oldest undelivered project saw the creator change his work-focus, neglecting the project, and then stop updating. Updates recently resumed; apparently the creator suffered a mental breakdown and some friends rallied around him to help out finish the project. The other is a book that is being written.

My 24 projects in 2011 have seven that haven't completed. One is either in the mail or close to being in the mail according to updates, one ran into production issues and they're working on it, but slowly. Two are films that are being edited, one hasn't given me plans yet (about ready to write them off), one went dark after getting paid to see the last shuttle launch, and the last worked with three factories and had serious quality issues and is now doing everything in a garage by hand.

The 33 projects backed in 2012 only have nine completed. Most are either working and close to done or are slow burners, like video game projects or books. I have a feeling these projects have been better about updating and being realistic about goals. I'm optimistic about these projects completing.
posted by caphector at 10:30 AM on September 10, 2012

Kickstarter is not a Store; new policies requiring a Risks & Challenges disclosure, reigning in the use of conceptual renderings, and limiting sales of multiples.
posted by Nelson at 5:37 PM on September 20, 2012 [1 favorite]

Kickstarter re-commits to ideas instead of pre-orders.
posted by Nelson at 7:11 PM on September 21, 2012