Poll: Should Kickstarter Adopt an Equity-Based Investment Model?

May 8, 2014 - Andrew Eisen

If someone comes up with a cool project and tries to fund it on Kickstarter, you can chuck a bit of money at them to help them make their dream a reality.  Chuck enough money at 'em and you're usually entitled to various rewards ranging from a "thank you!" to a copy of whatever the heck the project is to a dinner-date with the project creators.

However, no matter how much bread you chuck at a project, you don't get a say in the direction of the project.  Oh sure, the creators may solicit backers for opinions but at the end of the day, what the project creator says, goes.

Because you're a backer, not an investor.

But what if an equity-based investment model was an option?  Ignore the copious red tape and legalities surrounding such an idea (and the fact that Kickstarter co-founder and current CEO Yancey Strickler shot the idea down earlier this week), is this something you'd be interested in seeing?

Vote in the poll and let us know!  Or don't, and keep us guessing!  EZK and I will reveal the poll results on next week's podcast and discuss any ideas and opinions you leave in the comments below.  We may even offer a few of our own!  We're generous like that.

"vote label" © Tribalium / Shutterstock. All rights reserved, used with permission.

-Reporting from San Diego, GamePolitics Contributing Editor Andrew Eisen


Comments

Re: Poll: Should Kickstarter Adopt an Equity-Based ...

I think it should be left as an option for the creators, and not a requirement. A lot of time and resources go into getting feed back and information from backers. And as the saying goes, time is money. It's possible, even with a significant amount of money that they wouldn't be able to go through all the input. It would require pretty much it's own little work force within the developers that are dedicated to processing just the feed back and input. And with how many people back these projects, even if only 5% of them communicate to the devs of changes and what not, that is still a significant number to cause problems, especially with smaller or inexperienced devs.

So yeah, leave it as a option for the devs, and don't hold them legally bound to it. They might later down the line find out that they took more than they could chew, and the best option there for them to continue work is to outright ignore their backers, at least for a set amount of time. It may not sound like a good thing, but it's how the reality of the matter is. When you get overwhelmed, you got to be able to back away to get breathing room.

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Re: Poll: Should Kickstarter Adopt an Equity-Based ...

This seems like an idea that would be better suited to a site geared around that as its focus. The legal hurdles are not small and would greatly complicate the site which I assume is at least partly why they don't want to go down that road. Different services/sites for different purposes, Kickstarter is not an investment platform.

Re: Poll: Should Kickstarter Adopt an Equity-Based ...

Look at the epic levels of butthurt that happened when projects fell through for whatever reason and people didn't get their game, or their electric waffle launcher, or whatever.  That has always been a risk when backing a project, as anybody with two brain cells to rub together and some basic reading comprehension ought to have known.  But anyway, imagine how those same people are going to react when they are "losing" the money they are "owed".  I don't even want to think about it.  I think people in general are too ignorant and immature for this.  I think it's a terrible, terrible idea and Kickstarter is right to flat-out reject it.

Re: Poll: Should Kickstarter Adopt an Equity-Based ...

The more I read about how things work, the less sure I am that these new investment routes are even a good idea.

For kickstarter, I do not think it would be compatible with the branding they have built so far, it would probably push their target audience off their site.  However, there is no reason they could not use their infrastructure and know-how to launch a second site with a different branding that does handle crowd investing.

The general case though, I have mostly been in the camp that is grumpy about the requirements for someone being allowed to invest in pre-IPO companies locking those without significant wealth out.

However, I started reading about all the dirty tricks you can pull on such investors, including writing IPOs in such a way that they legally wipe out all the equity early investors have.  It is not unusual for this to be done to co founders or small investors when investment banks get involved and show the current board how to screw other people out of their equity.   Generally this is done to people who do not meet the normal accredited investor category but have equity due to some other legal connection with the entity.

One of the reasons for the wealth/knowledge requirements the SEC puts forward is to try to make it so people getting involved in that domain both have the knowledge and the resources to watch for such tricks and fight them when they happen.   This early investment space is a lot nastier then the stock markets and things that amateurs going in thinking should be fine, well, often are not.

Re: Poll: Should Kickstarter Adopt an Equity-Based ...

A defense against this, however, could be that the website take equities as well and act as a silent watcher. If they have enough know-how, they could shield their clients from dirty tricks while not influencing decisions and gaining trust from creators.

Re: Poll: Should Kickstarter Adopt an Equity-Based ...

That is taking a lot of responsibility on for the website, which would likely mean they get exclusive about who they let run projects and who they let invest in them, at which point we are right back with the current system where companies deal directly with investment banks or accredited investors and those people package things up for regular folk, if we are lucky.

 

 
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