Quote:
Originally Posted by August
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I'm really quite aware of how Kickstarter works. Compare the model of KIVA to this.
Kiva - you give small amounts, 'micro-loans', with a defined interest rate depending on loan amount and risk associated. The recipient of the money then uses this capital to develop their product/service and then pays back the loan. This allows small companies/individual proprietors to raise funds where they otherwise couldn't, and the investor not only helps out small business, but gets their money back + interest. There is a risk of default, but that is what the interest rate is for.
Kickstarter - you give small amounts, 'micro-donations', where the only required payment is the 'levels' defined by kickstarter. The recipient of the money then uses this capital to develop their product/service and then sends out their level-payments. This allows small companies/individual proprietors to raise funds where they otherwise couldn't, and the investor helps out small business as a donation - they may get a small reward (or not). There is a risk of default, but you donated your money so there's no obligation. They don't even have to pay out the levels if their project falls through.
They are very similar, except one is accountable and the other isn't. Your claim of small electronics would be just as well funded by micro-lending. Kickstarter has, and always will be, a scam. It acts as if it's a public funding enterprise (like PBS) and accepts donations, no 'equity'.
And yes, $10 isn't enough for anything. However, I've seen kickstarter campaigns that have levels for $100k - i think that's some equity money right there (but you could be an EXTRA IN A MOVIE!).
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If I want these dog treats, and I pay $10 and get them, then great - my goal has been achieved. From the outset, I just wanted the dog treats that I can't currently get, not a continued share in the company's success or potential failure. If the goal doesn't get reached and my dog treats never get made, then I end up getting refunded anyways.
If I want equity in a company, then I know already that kickstarter is not the place to get that. I didn't care about whether or not I get the dog treats and owning 1.25% of a small home-based business probably wasn't worth the trouble to me or the business if we're talking $10 to begin with.
Both models have their place and it's absolutely infuriating when people try to wax smug on the kickstarter model as if these plebeian 'donators' have no idea how much they're getting 'suckered' by these small businesses. Kickstarter is allowing consumers to facilitate the role of investors without changing their role as a consumer or changing the business' role to that of a partner, and sometimes that's just what the consumers and businesses want. Most people don't have the 10's of thousands of dollars to throw around that would be necessary to interest a business in taking them on as a partner, and most small businesses don't want 50% of their ownership fragmented across 2500 different people.
As a consumer, not a venture capitalist, I appreciate what the platform offers and have received a number of neat products through it that probably wouldn't have become available on the open market otherwise.
If a friend of mine pre-orders a video game in order to get the deluxe edition when it comes out, I don't call him a moron because he didn't ask for a 0.00043% share of the company. Would you?