Don't forget Kickstarter and Amazon already took their 5% each, so the authors never saw the full amount, more like $150K. So now they'll have to refund more than they received.
But agree with your original comment: if this goes through till the end (with lawsuits and all the drama), it'll be great for Kickstarter. It'll improve the quality and create a much healthier ecosystem.
Another project that got really close to a class action was OpenVizsla USB Sniffer. The conversation moved out of Kickstarter into the discussion list that was created by/for backers, but the authors finally showed up and recognized (somewhat) the problems, and are trying to fix it.
if this goes through till the end (with lawsuits and all the drama), it'll improve the quality and create a much healthier ecosystem.
I disagree. I think we really need a funding solution where $150k - $170k projects can fail due to poor execution (rather than fraud) without involving lawsuits. As long as everyone is clear about what their money's doing at the outset.
A Kickstarter project can fail without lawsuits if the project creator doesn't offer rewards that are dependent on the project succeeding.
The problem isn't backers treating Kickstarter as pre-order for the product being developed by the project, its project creators doing that by setting rewards that depend on project success.
But often the rewards seem incidental to the project. For example, "Backers at the $1000 level will get a T-shirt signed by the development staff".
The T-shirt and signatures are completely incidental to the project being kick-started, yet the arguments here are as if someone had purchased a T-shirt on Ebay for $1000 and the seller failed to ship.
In the case of purely incidental rewards, the project creator ought to provide the rewards independently of the success of the project, and so as close as practical to the date originally estimated: otherwise, given the KS terms of service -- which require fulfillment or a refund, and require a good faith effort to meet the estimated date -- the situation is pretty much exactly analogous, from a legal perspective, to purchasing a T-shirt for $1000 and the seller failing to ship.
Founders (usually) give updates to their investors. They report the progress, ask for help, explain the issues. When things go wrong, usually investors are the first ones to offer help - providing experience, contacts, or sometimes more money. It's their money that is at stake, after all.
That's exactly the opposite of failed projects on Kickstarter. Usually (and I'm generalizing here; just using my own sample of 60-70 projects I sponsored, with 5% failure rate or so) the authors simply stop providing updates.
They realize they were overly ambitious, or underestimated the costs, or had issues with the team, or simply don't have the competence needed to execute within the time/budget available. Updates become more sparse, and eventually stops. The crowd starts to smell blood and gets angry, digs personal information about the founder, and things get nasty really quick. Just like it happened with the OP, or OpenVizla, or several other pseudo-failed projects.
I still think we need one good public failure, with all the drama associated, to clarify to everybody - authors & backers - some very wrong misconceptions about crowdsourcing. Yes, projects CAN fail, and as a backer you have to accept that risk, or wait to buy the product at Amazon.
But no, authors cannot simply disappear, run ashamed of their own failure. It doesn't matter if you underestimated the effort, or worked really hard over the weekends, or lost your day job, or life got in the way. Nothing will matter, unless you explain, clearly, to your backers. They may get pissed off, but it's better than the alternative.
Authors have to understand that if the ship sinks, you'll have to man up and stay till the end. So be prepared; this is not a free ride, with zero risks.
Another thing that would be very positive is to have public financial disclosure. Authors should be required to submit a financial plan explaining how the money will be used - and another one mid-project explain how the money was spent. I'm sure it'd be eye opening, in both ways (people would see how expensive it is to make, say, a game, and authors would think twice before spending every penny).
Ok... but what you described about how traditional investment works is how Kickstarter tells their project-runners to operate.
My point was that KS and traditional investment should operate in more or less the same way, especially regarding issues - whether that's simply letting people know they've hit a snag and are working on it, or are asking for advice on the best way to proceed. I realize it's difficult to scale the concept of a seed round to hundreds or thousands of backers, but an email blast to 5-10 is just as easy (or hard) to write as one going to 5000.
You just need much better filters on the responses.
But agree with your original comment: if this goes through till the end (with lawsuits and all the drama), it'll be great for Kickstarter. It'll improve the quality and create a much healthier ecosystem.
Another project that got really close to a class action was OpenVizsla USB Sniffer. The conversation moved out of Kickstarter into the discussion list that was created by/for backers, but the authors finally showed up and recognized (somewhat) the problems, and are trying to fix it.