This comment stuck in my craw a bit, and I'm trying to disect the comment and why it bothered me.
I have backed several kickstarter project, received the results of a couple, funded a project via kickstarter and promoted several projects. You could say, I'm a fan of the kickstarter model.
On the other hand, I've been predicting that one of these high-profile (likely physical hardware) projects in going to dramatically fail, and then we'll see the fallout.
I guess what stuck in my craw is "complicity allowing this sort of scam-project". Mainly because this feels like an unwarranted accusation.
To try and reassess my feelings, I visited the Kickstarter page to read the copy and get a feel for how protective they are of the backers.
How it Works
"Every project is independently crafted, put to all-or-
nothing funding, and supported by friends, fans, and the
public in return for rewards."
(Ok, so, explicitly stating that the funding is in exchange for rewards.)
"The filmmakers, musicians, artists, and designers you see
on Kickstarter have complete control and responsibility
over their own projects."
(Ok, this suggests that kickstarter isn't guaranteeing success... but does feel more like ass-covering.)
"Rewards are things like a copy of what's being made, a
limited edition, or a custom experience related to the
project. This isn't Best Buy — rewards aren't shrink-
wrapped and ready to ship. Once the project is funded, the
journey to bring them to life begins."
(Another really... hedged statement. This just implies that it might take a while to get the rewards, not that they may not be delivered.)
Clicking "Back this Project" on Lifx
FREQUENTLY ASKED QUESTIONS
Who is responsible for fulfilling the promises of this project?
Kickstarter does not investigate a creator's ability to
complete their project. The claims and responsibilities of
this project are solely its creator's.
(This is interesting, and prominent on the backing page.)
Guidelines
Are creators legally obligated to fulfill the promises of
their projects?
Yes. Kickstarter's Terms of Use require creators to
fulfill all rewards of their project or refund any backer
whose reward they do not or cannot fulfill. (This[1] is what
creators see before they launch.) We crafted these terms
to create a legal requirement for creators to follow
through on their projects, and to give backers a recourse
if they don't. We hope that backers will consider using
this provision only in cases where they feel that a
creator has not made a good faith effort to complete the
project and fulfill.
(Now, that was really interesting to me, as I had never seen that. It's pretty explicit.)
So, basically, whether kickstarter is complicit comes down to a couple questions in my mind:
1) How much responsibility do they bear to vette each project for likeliness of funding?
2) Are they messaging backers well enough about everybody's responsibilities in these scenarios?
... And I don't know the answer to either. The information is there on the site, but a little hidden and the recourse for failed projects seems non-existant. Most of these larger projects are new LLCs set up for the project, and if all the money is gone, suing them is likely going to be fruitless.
(So... yeah, I've got no answers. Just some exploration.)
For kickstarter, this isn't only a question of strict legality and having the right weasel-words in their small print. It's also a question of reputation.
There's already a bunch of stories in the press about projects failing to deliver, and the more backers get shafted the worse this will get. If no-one wants to invest in Kickstarter projects that'll be bad for kickstarter.
There's a whole bunch of different things Kickstarter could do about hardware projects failing to deliver. Why they aren't taking action yet is a mystery to me.
"There's a whole bunch of different things Kickstarter could do about hardware projects failing to deliver. "
Such as what? Like offering insurance for failed products? Doing due diligence into creators? Or?
Any solution you come up with (and I do really want to hear your suggestions) has problems. If they vet it puts more liability on them and legally that would place them in a different position. If they offer insurance then they have to vet and the risk shifts to them which isn't the idea of what they are trying to do. So your thoughts are specifically?
> Such as what? Like offering insurance for failed products?
In a perfect world, Kickstarter could do just this - or even better, set up a prediction market* on whether the stuff will (eg.) ship on time. Then users could check the market price and decide whether the risk is small enough for them, and even directly hedge against loss.
Kickstarter could change their fee model to better align their interests with backers. For example, they could choose to not take their fee until the project creator has delivered on their project. This gives the Kickstarter team more of an incentive to vet the quality of projects and their creators.
I don't see why vetting would put any more liability on Kickstarter - all the 'responsibility lies with the creator' legal mumbo-jumbo can remain in place.
If you browse this thread you'll find lots of suggestions from different people. Probably other people will have better ideas than mine, but for what it's worth: I'd require projects successfully raising a large amount (say, more than the price of a midsized car) for hardware to agree a series of milestones, releasing the funds to them in stages. The precise milestones would be agreed on a project-by-project basis, but could include: Some money up front, some money when they have a preliminary electrical schematic and prototype on breadboard, some money when they have a costed bill of materials and a final prototype, some money when they have a feature-complete mobile app, and some money as the products start shipping and the invoices from manufacturers start arriving.
To put it another way, creators can't have any pudding if they don't eat their meat.
"to agree a series of milestones, releasing the funds to them in stages. The precise milestones would be agreed on a project-by-project basis, but could include"
My first reaction is that that's a good idea. But on second thought this would create quite a burden and bureaucracy at kickstarter to monitor and make sure the right thing happened. I would imagine that for that reason alone they wouldn't go for that but I could be wrong.
Well, in the case of the 'LIFX' bulb mentioned in the article, they've made a 5% commission on the $870,447 raised and I can't imagine too much of that would go on administration.
I agree admin costs would be a problem for smaller projects; if Kickstarter was only making $2500 total on a project they couldn't afford a thorough technical design audit. Some costs could be kept down with technology, e.g. prototype demo youtube videos, which creators should be doing to keep their backers engaged anyway. You'd risk rigged demos, of course.
Crowd funding is still a developing industry at the moment, and it's mostly assumption on my part that makes me think creators failing to deliver is going to be a problem. It's going to be interesting seeing what develops.
You feel there are there are enough crowd-sourced hardware startup failures to warrant any action? I know the interest from this site is primarily tech products but it seems to have grown in proportion to the site which is still heavily arts/crafts saturated. I don't believe the sample size is really close to large enough to be come to the conclusion that that vaporware is as big a issue as the article claims. Providing failsafes for investors ruins the unique accessibility that Kickstartr provides for aspiring project managers.
Of course people want to see their projects realized but I believe that far more good will come from disappointing projects. The horror stories will serve to remind people that these are still investments and as such: it would be best to consider funding these projects with non-profit-esque expectations rather than some hipster product marketplace.
The only recourse would be through the courts and I am quite sure Kickstarter will not be paying anyone's legal bills. They do have this language so that they or their Backers could take legal recourse if required. They do not have this language because they promise to ever do such a thing.
I have backed several kickstarter project, received the results of a couple, funded a project via kickstarter and promoted several projects. You could say, I'm a fan of the kickstarter model.
On the other hand, I've been predicting that one of these high-profile (likely physical hardware) projects in going to dramatically fail, and then we'll see the fallout.
I guess what stuck in my craw is "complicity allowing this sort of scam-project". Mainly because this feels like an unwarranted accusation.
To try and reassess my feelings, I visited the Kickstarter page to read the copy and get a feel for how protective they are of the backers.
How it Works "Every project is independently crafted, put to all-or- nothing funding, and supported by friends, fans, and the public in return for rewards." (Ok, so, explicitly stating that the funding is in exchange for rewards.)
(Ok, this suggests that kickstarter isn't guaranteeing success... but does feel more like ass-covering.) (Another really... hedged statement. This just implies that it might take a while to get the rewards, not that they may not be delivered.)Clicking "Back this Project" on Lifx
(This is interesting, and prominent on the backing page.)Guidelines
(Now, that was really interesting to me, as I had never seen that. It's pretty explicit.)So, basically, whether kickstarter is complicit comes down to a couple questions in my mind: 1) How much responsibility do they bear to vette each project for likeliness of funding? 2) Are they messaging backers well enough about everybody's responsibilities in these scenarios?
... And I don't know the answer to either. The information is there on the site, but a little hidden and the recourse for failed projects seems non-existant. Most of these larger projects are new LLCs set up for the project, and if all the money is gone, suing them is likely going to be fruitless.
(So... yeah, I've got no answers. Just some exploration.)
[1]https://ksr-assets.s3.amazonaws.com/creator-responsibility.p...