Since launching in 2009, Kickstarter has become the household name for crowdfunding platforms. Creatives, entrepreneurs and “idea people” of all stripes have taken to the site to make their case, drawing the support of hobby investors flush with cash. Of the almost half million total projects posted on the site, just over one-third meet their funding goals.
With more than 15 million people contributing to projects and a staggering four billion dollars pledged over the site’s lifetime, Kickstarter has become no small element in the landscape of personal investment – if you can call it investing at all.
With so much money changing hands in just under a decade, a company like Kickstarter has to lay down some hard guidelines.
As a benefit corporation, Kickstarter is categorized as a for-profit company that is “obligated to consider the impact of their decisions on society, not only shareholders.” Though they pay the same tax as standard “C” corporations in the United States, Kickstarter has additional legally defined goals they must strive to follow.
Here’s an abridged version of how it works: Your average C corporation, like Ford or Microsoft, has one goal: maximizing profits. If a company director is found to be putting other interests before making money for shareholders, those groups have 100 years of precedent to sue them, and will likely win. A B-for-benefit corporation, however, doesn’t have that simple structure. Directors of companies like Kickstarter or Patagonia have protection against lawsuits attacking so-called “non-financial interests.”
For B corporations, there is a greater commitment to accountability, public benefit, donation of profits and other altruistic pursuits. B corporations allow entrepreneurs to build publicly-minded companies without fearing revolt from their shareholders, whose intentions for the direction of the business might not be so benevolent.
That being said, Kickstarter and its contemporaries still have an obligation to protect themselves. The rules for what can and can’t be kickstarted are cleanly presented on their website, discouraging those who wish to fundraise for charity, send live animals by mail or award equity to their backers from signing up. That last one is perhaps the biggest cause of trouble for most people; despite how much it may feel like one, a Kickstarter donation is not an investment, nor is it necessarily a payment for services rendered. This is perhaps Kickstarter’s most important rule: No refunds, no recourse; no takesies-backsies.
Money down the drain
Throughout crowdfunding’s brief history, there have been a multitude of projects failing to meet deadlines, backing out of promises and even refusing to deliver a product at all.
In 2012, YouTube network The Yogscast partnered with video game developer Winterkewl Games to create Yogventures, an open-world survival and crafting game. After raising $570,000, which is more than double its original goal, the game never saw release. In 2014, The Yogscast announced the game was cancelled and the money raised for the project was gone. In a gesture of thanks, backers were awarded download codes for a similar game, TUG, one that notably hasn’t left the pre-release “early access” stage to this day.
In 2016, Backzips, a backpack with zippers that aren’t discretely accessible to anyone but the wearer, debuted on Kickstarter as the solution to pickpocketing. The company’s August campaign ended with over $150,000 raised, along with another couple thousand from IndieGoGo. A series of delayed shipping dates in November, December and late January came and went, followed by complete radio silence. In March of 2017, GeekTime reported that attempts from backers to get in touch with the company proved fruitless and evidence rapidly began suggesting that the whole venture was a scam.
Reaching for the stars
The zenith of crowdfunding disappointment, however, comes from a project of a different scale. In 2012, Cloud Imperium Games launched a campaign to create Star Citizen, an open-world, massively multiplayer space trading and combat game.
Boasting a vast selection of features including first-person shooter elements, real-time space battles, an in-game economy and more, the campaign gathered attention quickly. In the years since, Star Citizen has amassed a total of $200 million in donations from crowdfunding sources including pledges, pre-orders and purchases of in-game spaceships with a maximum price tag of $2,500.
At the beginning of production in 2011, Star Citizen was slated for a 2014 release. A sweeping series of postponements have occurred since then due to expansions to the game’s scope, switching the engine from CryEngine 3 to Amazon Lumberyard and other concerns.
In the media, Star Citizen has earned a reputation of broken promises and shady business practices. The Escapist, an online games magazine, butted heads with Cloud Imperium CEO Chris Roberts following their coverage of the controversy. An out-of-court settlement ended with comments from both Roberts and The Escapist getting deleted.
The game has won such accolades as the Wired’s “Vaporware Award,” describing games and programs that fail to materialize, and “Most Likely to Flop” from MassivelyOP; two years running.
The jury’s still out on whether Star Citizen will deliver, but for some fans, it’s been long enough. One backer sued for his $4,500 pledge to be refunded but lost the case. Another disgruntled backer was Derek Smart, a game developer and blogger who has made it his mission to hold Roberts and Cloud Imperium accountable. Smart and his lawyers have repeatedly demanded for a detailed account of how they money has been spent, but have not been successful. CIG co-founder Ortwin Freyermuth has described Smart’s claims as defamatory.
At time of writing, Star Citizen’s website does not display a release date. As we approach the seven-year milestone since the launch of the original Kickstarter campaign, Star Citizen stands to remind potential donors of the dangers of grandiose promises, and the threat of pledger’s remorse.