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Comment by fusiongyro | Hacker News Reader

Well, that's the grey area, isn't it? It's one thing if I invest in something and it fails. It's another thing if someone pretends to take your money as an investment and instead goes to Vegas and blows it. In other words, the difference between merely a bad investment and fraud.

Kickstarter can't afford to conflate the two, or people will stop investing. So they're in a tricky spot, trying to ensure that users understand that they aren't customers and that the startups can fail, while also ensuring that customers have faith that the vast majority of startups will succeed.

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The vast majority of startups fail.

It used to be said that the majority of software projects run by big stable corporations would fail, i.e., be cancelled before delivery for cost and time overruns.

I don't know what Kickstarter is really trying to be exactly, but it would be probably be the wrong thing to "ensure customers have faith that the vast majority of startups will succeed".

That would be the eBay solution, right? Make life hard on the vendor and easy on the consumer. Unfortunately, eBay is very successful despite the imbalance. Kickstarter has survived without really picking sides on this issue, but they're ultimately going to have to define their position a little more firmly and make sure both sides are getting the same message, loud and clear. If they make launching a kickstarter twice as onerous, they need to be sure they can lose half their projects. If they aim to make investments succeed less than 50% of the time, they need to be sure they can lose half their users. If they don't take a firm position one way or the other, they'll just come across as unreliable.

The annoying thing about educating your users is you're never done.

Isn't the problem with that whole argument that, in reality, the vast majority of startups do not succeed?

I'm glad that Kickstarter is trying an alternative business model, but I do worry for their long term viability/growth prospects. People reading HN probably understand concepts like investment and lack of guaranteed rewards. People who sign up to a $1,000,000 project for what looks like a really cool game that their friends showed them, and who then get told they weren't really buying anything but a possibility, might not. And in the long run, whether or not those people should have understood their role, they are the only ones who get a say in whether they open their wallets again in the future to support someone else's project.

Just because startups as businesses generally fail, doesn't mean projects (which is more what Kickstarter launches) must generally fail. The metrics are totally different. While a startup needs traction, growth, and all those other difficult things, a project faces much more concrete objectives.

Honestly, if the creator is realistic with expectations, goals, and required funding, it seems to me most every project on Kickstarter ought to be able to complete and thereby succeed. Not many are truly speculative "This could turn out to be impossible" sort of affairs.

True, but a lot are "This could turn out to be far more difficult and expensive than we anticipated" sorts of affairs.

Yes, but this can be addressed with better budgeting, and possibly an exploratory phase or doing a huge project in steps made of small projects. The point being it isn't inherent to the nature of Kickstarter projects, that only a few succeed.

You make it sound so simple! If all projects were addressed with better budgeting and done in steps made of smaller projects, software projects would never miss a deadline. You should email Fred Brooks about how you just discovered the solution to his Mythical Man Month, maybe you'll even win a Turing award for your insight. </sarcasm>

You don't have to hit every deadline on the nose for a successful project. Nor am I saying every project can succeed. We're getting off track here; the point is, I just think that success rates on Kickstarter projects are not inherently related to the success rates of startups.

But maybe there IS a Silver Bullet[1], veemjeem!

[1] Fred Brooks, "There Is No Silver Bullet" http://en.wikipedia.org/wiki/No_Silver_Bullet

> "People reading HN probably understand concepts like investment and lack of guaranteed rewards."

Investments usually have an upside commensurate with the perceived risk.

"Pay the regular price of a game, and you have a 50% chance of getting the game, and 50% of getting nothing" is not really an investment - it's a charitable contribution to someone's dream that you might see something out of.

This is why I think the current Kickstarter model is doomed in the long run. Once it becomes clear that a large portion of Kickstarters will never deliver anything close to what they promised (if they deliver anything at all!), the whole concept of crowdfunding will become a whole lot less attractive to a lot of people.

Not unless prospective projects were willing to take a substantial discount to soften the risk - but that destroys the viability of Kickstarter for many projects.

It'll work for music and art and literature; that was the point originally, right? But I agree with you that it seems like a dubious replacement for venture funding.

Well, maybe instead of offering product, they could offer... I don't know, equity? Then, perhaps, sell stakes in their future profits it some kind of public offering...?

> Investments usually have an upside commensurate with the perceived risk.

My mental model of Kickstarter is more like giving money to the EFF: maybe they give me a hat (they did, actually; I didn't want it; they seemed to refuse to let me leave without the hat... it was weird, as it almost made me want to give them money less, as they apparently were spending some of it on hats people didn't want, but hey: maybe it was some accounting thing), but the real reason I do it is I know I contributed to something that I believed in, even if it sometimes doesn't accomplish the things that they wanted to get done.

When I see a Kickstarter, I think the same way: I think of it more like deciding whether or not to give the guy on the street corner some money in the hat (more hats...) that they have next to them; I don't really get anything in return for that money (arguably I got the music they already played, but I could have easily freeloaded that): I'm just contributing to his life as an artist, in the vague hope that I've helped something beautiful exist in the world.

That may be your mental model, but what's enforceable is the terms of service, not your mental model.

No: this has nothing to do with terms of service, this is "what do people use the service for". If your mental model of Twitter is "a place to have group discussions, in public" (a common use case), I think you are pretty crazy, but it obviously has nothing to do with the terms of service. The EFF gave me that hat: they seemed to consider it imperative that they did so; I did not for a second consider myself to be purchasing a hat.

I maintain that if Kickstarter is "pay money now for gifts later" then they are not in compliance with either Visa's terms of service (no delayed renumeration for payments, a policy explicitly there to avoid "I have money ten months ago, and am now angry"), as well as laws regarding collecting sales tax (which are quite clearly written in a way that keeps you from just claiming "oh yeah, this thing where people give me money and I give them products? trust me: that's not a purchase... don't tax me, bro").

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