Tuesday, 1 April 2014

Kickstarter investor pain

The dream of sidestepping corporations via Kickstarter might be over. It might never have been realistic to begin with. Two recent events have led me to start thinking this way. There is, of course, the VR headset Oculus Rift being bought out by Facebook. There's also the Veronica Mars movie, whose backers were promised digital downloads and sorta-kinda got them, as long as they use Warner Bros crippled, horrible, device-limited DRM system. The promise of these Kickstarter projects wasn't just for the producers of these works, being able to get funding without needing to kowtow to big venture capitalists. The promise was also to the backers, that, when they put up the cash to make the project happen, they get the investor rewards.

That hasn't been happening. As soon as a project reaches commercial viability, big companies are swooping in and taking over. And, in a way, that's okay, I guess. It's the way business works in a capitalist economy. The problem, to me, is that the ones being paid aren't the backers.

I think Kickstarter might need to grow up a little bit here. Instead of offering different rewards at different levels of support, the campaigns may need to offer a buy-back price option. Once their business or product gets off the ground, they can start buying back shares from their supporters at a given percentage rate, low for low investors and higher for those that risked more. This isn't quite the way Kickstarter has worked so far, and it might be a bit of a big cultural shift in their operations, so it should also be possible to offer their more "traditional" rewards as a selectable option for the buy-back. You can have our revolutionary 3D printer as a reward, or we can buy back your $100 worth of shares in our company for $110.

This isn't the form of investing that everyday people are used to, though. The promise of a $10 reward six months down the track might not inspire them to put up the cash, but it probably wouldn't leave quite as sour a taste in their mouths as the buy-out/kick-teeth model that is taking over.

Mokalus of Borg

PS - Or maybe not. I'm not an expert on investor relations.
PPS - I'm not even an amateur or hobbyist. So, you know. Grain of salt, etc.

No comments: