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"unless the Project Creator is unable or unwilling to fulfill the reward."

Read that again. If they haven't fulfilled their explicit promises, a refund is required.

I think my statement was poorly worded. "These folks" = the project people.

In other words, they're obligated to refund $170k that they don't have anymore.

I've edited to reflect that.

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.

Isn't that a seed round?

I don't see why crowdfunding should be any different than more formal investors here.

Not at all.

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.

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.

Yeah, I'm saying that's suboptimal and maybe kinda perverse.

So when backing something on Kickstarter you are guaranteed to get either the reward or your money back? I didn't know that.

Well, there is a difference between getting your money back and being entitled to your money back...

Agreed, but I find that clause surprising.

That means that if I'm a recording artist, I would be a fool to make the reward a copy of the finished album because that means that if the album is never completed, the reward cannot be delivered and I would therefore have to refund money I already spent.

No more a fool than an artist who took out a loan to make an album. Business often involves accepting a risk that you won't be able to meet your obligations.

Except that I've never heard of Kickstarter etc. funds being referred to as a "loan." Which puts a much different complexion on them.

Despite how some projects use Kickstarter, if it's done well the risk for your hypothetical is pretty low.

If it's a case of "I've written an albums worth of music, but I need $ for studio time, post-production and pressing CDs", then it should be low risk for the artist. You should know how much those things cost, and set your goal accordingly.

However, if you want the money to take X months off work and write the music, then go to the studio ..., that will create risk for you. What if you don't get a CD worth of music written in those X months? (Short answer: Just record random crap, nothing says people have to enjoy your rewards)

The risks for the producer are: 1) If the project is something that is difficult to cost up-front (like all these games that get funded on KS) 2) Your rewards are things you're inventing just for KS (like T-Shirts). Those things cost you money, that money comes out of your total pool, so you need to put extract capacity into the pool to pay for the production of the extras. Getting that right can be harder than people think.

All those KS projects that amount to fund my (team's) time to develop stuff are high risk for both the backers and the producer (if it goes wrong, the producer will owe money, but the backers won't ever get what they're owed)

The projects that are about funding the production phase of a project after the producer has poured their own time into the design phase are much more in line with what KS's ToS actually expect.

I agree re: inventing rewards just for Kickstarter. Kickstarter should automate the production & fulfillment of those basic items (tees, stickers, posters, etc.) so the buyer never has to worry about the production and logistics.

I've heard too many horror stories about people on KS offering tees for $X only to find that the screen printer didn't mention a bunch of fees relating to setup/fulfillment/shipping and the true cost is $X*2 and the creator ends up spending a ton of energy and money trying to fix the issue.

Disclaimer: I work for Teespring, and this is exactly what we do (so I may be biased).

Note that it doesn't say you the project is required to give you a refund if you don't get your reward. It simply says that they aren't required to give you a reward if you do get your reward. World of difference.

<blockquote>Note that it doesn't say you the project is required to give you a refund if you don't get your reward.</blockquote>

Yes, it does, just not in the excerpt provided upthread. The following bullet point is: "Project Creators are required to fulfill all rewards of their successful fundraising campaigns or refund any Backer whose reward they do not or cannot fulfill."

Unfortunately, I think that statement is written too loosely to hold up in court. It will be too easy for a lawyer to say "my client is both willing and able to fulfill these rewards, he just needs more time/money/etc". Unless there are more specific constraints in the full TOS (which I haven't looked at), this statement won't offer much protection to the backers.

"He is able, he's just not able"?

I am able to get a degree from a college. I just need more money and time.

When talking about abstract capability, sure, but that's never what it means in a legal sense...

<blockquote>Unfortunately, I think that statement is written too loosely to hold up in court.</blockquote>

I don't think its too loose to hold up at all, but I do think there is some question about how courts will construe timing requirements. Certainly, there is no obligation sooner than the estimated delivery date, but its not entirely clear when a deliver-or-refund demand becomes enforceable.

<blockquote>It will be too easy for a lawyer to say "my client is both willing and able to fulfill these rewards, he just needs more time/money/etc". </blockquote>

Saying that you need resources (e.g., money) you do not have to meet an obligation is equivalent to saying that you are unable to meet the obligation. Given the way the time conditions are written, demonstrating that more time was needed, and that that time was reasonable in light of the circumstances, and that the creator did not need other resources they didn't have might work.

to be fair, i don't think there were any evidence that Alex "recklessly" spent the money. a lot of things could've happened for his disappearance: health issue, gf problems, family problems, got lost in the mountain, etc etc

Correct. Which is why I prefaced my observation with "if [...]".

Obviously, if that isn't the case, then my point is moot.

Nope, I waiting to one of the projects to blow up too.

To be sure, this is new territory for all parties.