Caveat Kickstarter: Beware what you back

Caveat Kickstarter: Beware what you back

On the surface Kickstarter seems unbelievable -- a way for anyone with a dream and a game plan to get the funding they need to make that dream reality. In some cases, from LunaTik to Olloclip, that's exactly what it's turned out to be. For others, many others, it's ended in failure to launch and loss of money for the backers involved. Sascha Segan of PCMag

A success rate of 33 percent is good for a venture capitalist, because actual investors expect to hit it big often enough to offset other losses. But when you give money to Kickstarter for a tech product, you're not a real investor. Investors have equity. You're just a buyer who isn't getting your gadget for who-knows-how-long. The longer you don't have the product, the less value your money had - and if you never get that product, well, remember, they don't have to refund your money.

That last bit is the nut. Once a project achieves "funded" status, Kickstarter is paid, the project is paid, and your money is gone. If everything goes perfectly, you get the pledge reward you were promised. If everything goes poorly, you get nothing. Zip. Zero. Zilch.

It's basically gambling, but where the best outcome is simply getting your money's worth, and the worst is losing it all. Of course, "it all" is often only tens or hundreds of dollars for most backers, but it all adds up.

I've gotten a few of the products I've backed on Kickstarter, including the aforementioned TikTok and Olloclip, and they're legitimately awesome. Other products have been delayed or "failed" and I'll likely never see that money again. That's made me more cautious about what I back, but I think that's a good thing. A fool and his money, as they say, are soon parted and we should all be a little more careful about how and when we foolishly part with our money.

And that's the bottom line -- Kickstarter is more entertainment than commerce for users. It's betting on dreams and concept videos, and only has exactly that much promise.

Check out Sascha's article, below, and whether you back Kickstarter projects or not, at least you'll be doing it with your eyes as open as your wallet.

Source: PCMag

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Rene Ritchie

EiC of iMore, EP of Mobile Nations, Apple analyst, co-host of Debug, Iterate, Vector, Review, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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Reader comments

Caveat Kickstarter: Beware what you back

1 Comment

Here's the thing though. While I also agree that Kickstart is a cool idea, typically investors get more return than just the product itself. A venture capitalist either gets an incredible return, or more often, owns the company (51%+ in stock). I suppose one could argue that some of the backer prices are a savings on what the retail price will be, or that the dream of owning such a product is worth the risk. Personally, I think I'd want a pretty good way to check the background and actual viability of such products before making an investment... even a smaller one.

That said, I'm glad for your article in that it is a good reality warning for people. I've only looked at a few items by following news article links, but I hadn't realized how it actually worked. (I assumed, falsely it seems, that there was some kind of vetting process before things got there, and that they were real products being promoted for funding.) I hope that is made really clear while you're going through the cart to fund something.