What happens if you don't deliver on Kickstarter?

[shmokes]

Ever since Doublefine collected $3 million dollars from it's Kickstarter campaign, I keep seeing videogame project after videogame project "greenlit" with Kickstarter financing. Wasteland, Shadowrun, Carmeggedon, Space Quest (not yet fully funded, but I assume it will be) . . .

But what happens if the studio fails to properly predict costs and manage the project and the studio runs out of money halfway through? Have any of you funded a Kickstarter project? Do you get anything laying out investor rights of any kind, in case the project leaders don't deliver on their promises?

[HaRuMaN]

Kickstarter says:

"If I am unable to complete my project as listed, what should I do?

If you are unable to fulfill the promises made to backers, cannot complete the project as advertised, or decide to abandon the project for any reason, you are expected to cancel funding. A failure to do so could result in damage to your reputation or even legal action on behalf of your backers."

[opt2not]

...and they break your knee caps. 

[DrArcade]

From Kickstarter's own FAQ

Who is responsible for fulfilling the promises of a project?

It is the responsibility of the project creator to fulfill the promises of their project. Kickstarter reviews projects to ensure they do not violate the Project Guidelines, however Kickstarter does not investigate a creator's ability to complete their project.

Creators are encouraged to share links to any websites that show work related to the project, or past projects. It's up to them to make the case for their project and their ability to complete it. Because projects are usually funded by the friends, fans, and communities around its creator, there are powerful social forces that keep creators accountable.

The web is an excellent resource for learning about someone’s prior experience. If someone has no demonstrable prior history of doing something like their project, or is unwilling to share information, backers should consider that when weighing a pledge. If something sounds too good to be true, it very well may be.

So there you have it, Looks like the scam artists will be out in force once they figure out they can scam the kickstarter funders.

Mr. CAST

[Mysterioii]

Really I think you'd be screwed.  They're "expected" to cancel their funding but that doesn't mean they haven't blown through it all first.

I participated in a couple of kickstarters for which I had low expectations, didn't go in for a ton of money and so far they've both come through.  But I saw a LOT of people posting in the comments there that seemed to feel that they were actually purchasing something.  It's not a storefront, you're pledging your support and in return they generally offer a "reward".  It's sorta like the the public broadcasting pledge drives where if you pledge $100 you get a coffee cup...  Dang that would be an expensive coffee cup... but you're not TECHNICALLY buying a coffee cup.

I take it really like you're being a "patron of the arts".  I personally wouldn't put up more than I felt comfortable putting at risk.  I honestly don't know if there would be any legal recourse if someone was unable to come through with the rewards they promised, but I think it's just a matter of time before we find out.  Eventually, someone on a high-profile, high-dollar kickstarter will fail to come through.  It will be interesting to see what happens.  

Just a week or so ago I saw a thread about a kickstarter project for a video game that turned out to be blatant fraud, lifted promo art from other sources etc. and made rediculous claims.... luckily it was exposed before it was funded, and they cancelled it.  But eventually a fraud like that is bound to make it through to funding, if it hasn't yet.

[DrArcade]

I've been waiting on "The Phantom" console to come to kickstarter.. I'll be a backer. But only if David Foley brings it to market. 

Mr. CAST

[lanman31337]

I've been waiting on "The Phantom" console to come to kickstarter.. I'll be a backer. But only if David Foley brings it to market. 

Mr. CAST

For 5 dollars you'll receive the slice of plain white bread he received for dinner one night.

[shmokes]

The funds seem wildly unregulated. Like, if your game is being funded by a regular publisher they're not just gonna hand you a check for the entirety of the expected costs of the project. You're gonna have to meet milestones regularly. You might even have to self-fund until milestones are met, at which point you'll be paid for your work. The financiers are careful with their money, and they're watching it all along to make sure that it's being used appropriately. But here . . . what's stopping Tim Schafer, aside from his own integrity, from spending $1 million on the development of his videogame and $2 million on strippers and Big Macs? As far as I can tell, there's no oversight at all. I mean, the guy initially asked for only $300,000 or $400,000, so he presumably thought he could put together a compelling adventure game for that much money. If so, I'm guessing he doesn't really need more than $1 million to make a phenomenal adventure game. But he has $3 million. And as near as I can tell, he has no obligation whatsoever to account for how that money's spent. It's interesting.

All that said, I'll likely contribute (the Kickstarter's over, but you can still contribute through Paypal). I am, of course, a huge fan of his games, and I watched and loved the first segment of the documentary they're making for this new game.  

[kahlid74]

It's a shady area.  By law, Kickstarter uses very interesting language to protect themselves from legal gaffs or other sticky situations.  In the end this is very similar to you "donating" money to a charity.  You expect them to use your money wisely.  If you find out they didn't, you can try to go after them legally but most of the time said businesses go out of business due to poor financial management and there is nothing to give back to you.

In short, you're entitled to nothing.  You've "donated" your money to them and they've promised you a reward.  You can argue about their promise to you of said reward but you'll probably never get anything.  That's why it's smart to back the projects by known good entities and projects with lots of visibility.

If it smells, looks and quacks like a duck, it's probably a duck (referencing projects who promise you the world in 6 months and haven't actually started coding yet.  Big red flag).

[CheffoJeffo]

As someone who likes to see cool projects done by small teams, I like Kickstarter.

As a business owner and investor, Kickstarter makes limited sense to me from a financial point of view.

When I invest in a venture, I expect that I can lose my investment (like Kickstarter) with the potential to participate in any upside (not like Kickstarter).

It seems that, in return for a larger number of smaller investments, Kickstarter limits any upside potential (by capping the upside at what is essentially a purchase of goods/services) without mitigating any of the downside and without any of the rigour that real investors would demand.

There will be scammers and those who view the funds as risk-free, so don't do all of the things that they would with demanding investors.

I like that some cool projects that would otherwise never come to fruition are finding funding, but I find it ridiculous that established companies like Farsight Studios (the Pinball Arcade guys are seeking funding to add TZ to their stable of virtual pinball tables) are looking for what are essentially preorders, without having to assume the legal responsibility associated with preorders. I love Pinball Arcade and buy new tables for my iPad  as they become available, but this just doesn't smell right to me.

In the realm of videogames, I like the way the Almost Human handled the development and release of Legend Of Grimrock. Self-funded, low price and great value. They deserve the profit that they make.

[Samstag]

I've only funded the Double Fine project, because I felt like there was very little chance I wouldn't get my money's worth from those guys (even if it had only received the minimum funding).  I think the documentary videos and project updates they've been releasing are already worth the $30 I spent even if I don't like the game.

My criteria for funding boils down to:

• The project needs to really grab my interest.  Not just "I would buy this in the store" but more like "I would send these guys money if it might convince them to release more content".
• I need to be familiar with the people behind the project and have confidence in their ability to deliver.

[CheffoJeffo]

I like that some cool projects that would otherwise never come to fruition are finding funding, but I find it ridiculous that established companies like Farsight Studios (the Pinball Arcade guys are seeking funding to add TZ to their stable of virtual pinball tables) are looking for what are essentially preorders, without having to assume the legal responsibility associated with preorders. I love Pinball Arcade and buy new tables for my iPad  as they become available, but this just doesn't smell right to me.

To follow-up on this ... it seems like high licensing fees are the reason why Farsight turned to KickStarter (e.g. to raise enough to cover the fees before taking on a potentially money-losing project), so I withdraw my previous objection.

[danny_galaga]

Kickstarter is basically venture capitalism for beginners. Lesson number one: Expect to lose your money. This is the risk the big boys take, and why I guess they deserve to make the big bucks if it turns out well. Being a 'little big boy' means same risk/reward scenarios, only scaled down...

[shmokes]

Except venture capitalists share in the reward, not just the risk. 

[Samstag]

Except venture capitalists share in the reward, not just the risk. 

This.  The whole point of venture capitalism and investing in general is the possibility of getting more than you paid for.

Kickstarter isn't investing, it's preorders and donations.

[Ginsu Victim]

The reward is getting to play a new game from someone who may not have been able to make said game without your support.

[CheffoJeffo]

Kickstarter ain't a bad thing ... it just sure as hell isn't investing ...

[Vigo]

The cynical side of me says that this Kickstarter stuff is nothing more than a marketing survey that you get paid to conduct. 

There is a non-cynical side? 

[Samstag]

The cynical side of me says that this Kickstarter stuff is nothing more than a marketing survey that you get paid to conduct. 

There is a non-cynical side? 

He's only cynical on the outside.  On the inside it's nothing but Cindy Crawford fantasies.

[danny_galaga]

Except venture capitalists share in the reward, not just the risk. 

This.  The whole point of venture capitalism and investing in general is the possibility of getting more than you paid for.

Kickstarter isn't investing, it's preorders and donations.

Oh, I hadn't realised. Thought there was more in it for your investment. So it's a pre-order service. Why is that better than getting a pre-order the usual way? Ha, actually, I just realised I'm asking the same question as the OP!

[Vigo]

I think most accurately, it is a pledge drive service. The rewards are not necessarily the product. For example, you could pledge $25 to a musician to make an album, and rather than promising you an album, he could promise you that he will write a song about you and post it on youtube.

[shmokes]

Why is that better than getting a pre-order the usual way?

Also, and this could be better or worse depending on how you look at it, but the usual way of getting a pre-order is you pre-order an item that has already been made and is on the verge of release. In the case of Kickstarter, you're placing a pre-order on an idea rolling around in someone's head. It's an idea that may never be realized even after the person takes your money, hence the risk that doesn't exist with a typical pre-order. And it's an idea that likely won't ever be realized if the artist or whoever can't find some funding, which I suppose is where the pledgee's reward comes in--the benefit of having helped someone realize an idea that you would like to see realized and that probably otherwise would not.

[Mysterioii]

I think most accurately, it is a pledge drive service. The rewards are not necessarily the product. For example, you could pledge $25 to a musician to make an album, and rather than promising you an album, he could promise you that he will write a song about you and post it on youtube.

Agreed.  It's not exactly a pre-order engine.  People can list whatever reward tiers they want.

"I'm trying to make a movie, for $5 you can have a copy of the script, for $50 you'll get a dvd of the movie when it's done, for $1000 I'll put you in the background as an extra."

"I'm an artist and I want to reprint some books of my webcomic.  For $25 you can have a book.  For $50 you can have a signed copy.  For $100 I'll sketch you a basic illustration and sign it.  For $2500 you can have all the books and I'll draw you in as a cameo sometime this year."

To me it's a "patron of the arts" sort of thing.  Like when public television asks for donations and offers stuff like coffee mugs, dvds, books and whatever.  Some people might pledge because for some reason they really want a $50 coffee mug.  Others may pledge because they like the shows they're currently running and want them to order the next season.  Others may pledge because they just like public television in general.