> And I did not chip in ten grand to seed a first investment round to build value for a Facebook acquisition
He really puts his finger on one of the reasons why this deal feels so weird here, I think. Nobody who contributed to the Oculus Kickstarter did so because they were hoping Oculus would get flipped to a mega-corp. They didn't do so because they wanted the Oculus team to have a big, splashy VC-style exit. They did so because they wanted the Oculus product. And the history of products that have been swallowed by mega-corps, after the swallowing, is not encouraging.
It's an outcome that strikes directly at the heart of the Kickstarter ethos. Everybody wins in this deal -- except the people who donated to the Kickstarter. Those folks... well, they kind of end up looking like suckers.
> They did so because they wanted the Oculus product.
Let's not forget that a huge part of the pitch was to be part of a developer community that sets out into an as of yet unknown realm.
I don't think people are worried about what Facebook might do to Oculus, the product. They have a hard time seeing Facebook the social engine and Oculus, the developer community coexisting peacefully. In a way, they're already making a rather concrete case against it.
That is a very strong point I had not considered. Facebook does not have a smooth relationship with developers. Oculus requires involvement from the developers in order to further develop their product. I reason the Facebook culture of move fast-break things (but don't document it too well) might hurt Oculus.
Plus, I saw Oculus as a technology to build upon. I was already planning to use it with robotics. Now, its merely a pawn in Facebook's game.
I see this as Oculus being a pawn in the Google/Facebook war for the future of owning all of us. Google is doing Glass(which admittedly is nothing like Oculus) and here comes FB buying Oculus.
I'd like to know why Oculus sold to Facebook. That's bullshit. If there's ever been a company that didn't need to sell because its so obvious they are going to be huge, its Oculus.
You know what the money during the kickstarter campaign was for? The first DevKit! They raised money for the dev kit and guess what? The people you chipped in got their dev kits.
As far as I can see, people got exactly out of the kickstarter campaign what they wanted. They helped to start the business of Oculus and in return even got the DevKit to experience the first results on the road to VR.
I hardly think just cause you started your business with a kickstarter campaign and gave the backers what you set out to give them should exempt you from ever getting acquired by another company somewhere down the road. If that were true, why go on kickstarter at all? That would basically mean you will always stay a small time player. If you can survive at all because you will have to do it all by yourself. Next thing you know, kickstarter backers demand that you also don't accept other investors money because then, these investors would also have a say how to do things.
You are oversimplifying things as well. On the "cash on the table" side of things you are right: people put cash on the table and got the goods.
On the other hand, Kickstarter is a platform where people invest in future of some geeks. A successful funding drive plays on emotions, on promises and a glimpse of the future.
A lot of the people that got a dev kit were closely monitoring what Oculus was doing and were pleased. Those people feeling let down by Oculus not staying independent is perfectly reasonable and fine to state. It is also fully okay to withdraw your future support because they are now part of a company that shows not general interest in helping any companies but themselves.
>On the other hand, Kickstarter is a platform where people invest in future of some geeks.
And because of that it should be a rule that no other investors or partnerships should be possible once you go to kickstarter?
What about the past two rounds of investments Oculus went through? Did all backers threw fits like this? How many other entities have given money to Oculus and have a say in how things should be run at the office?
They never threw fits cause they a) didn't know who invested and was now calling the shots or b) didn't care enough to find out.
Only thing different is that is is well publicized that fb and oculus are now in business together. Had they done this quietly, nobody would have freaked out like this. Is it really too much to ask to put the freaking out on hold until there is actual evidence that things are being run into the ground? fb does not have a track record of acquiring and then fucking up the acquired tech. Examples are still instagram and whatsapp. They are also part of an open hardware initiative and they make contributions to open source. As far as a software company goes, they do things right.
So long as they keep their promise to let oculus work independently nothing changes other than oculus now has one big money source instead of many many smaller ones that all want a say how to do things. Unless the last two rounds of investments were all angel investors and not venture capitalists, I'd say a single silent money giver is better than many small noisy ones.
> And because of that it should be a rule that no other investors or partnerships should be possible once you go to kickstarter?
I have neither implied nor called for that.
The only thing I explained is that the reactions are perfectly understandable and should be taken seriously - Oculus played the Kickstarter game as much as the backers.
>> Kickstarter is a platform where people invest in future of some geeks
And then those same backers complain loudly when those geeks succeed at business. Oculus just sold, before launching a product, for a quarter of the value of Electronic Arts (revenue: $3.7B). Perhaps Oculus (the business) was too successful for its backers, but there's not a lot of teams that would have turned down a deal like this.
Nitpick: If EA's revenues are $3.7B, their value is much more than that.
Generally you could look at market cap, or derive the present value of future expected cash flows (meaning how much would you have to invest today in order to receive $3.7B in interest payments annually).
> Everybody wins in this deal -- except the people who donated to the Kickstarter. Those folks... well, they kind of end up looking like suckers.
It's kinda a twist to the normal Kickstarter warnings—if you back a product, it might not ever succeed, jut disappear. This was a product that people backed, that was too successful, and looks like it's about to disappear.
Unfortunately there is a difference between "backer" and "investor", even if they both chuck money in the project. Would there be such a thing as a kickstarted kind of thing where backers can become shareholders? Or could this simply be a case of "if you invest 10 grand, you get x shares"?
This way there could be a way for investors not to ride on the back of backers later on?
Or am I being totally silly?
* You can't see it as investing, because you're not getting any share.
* You may see it as pre-ordering a product that doesn't exist (and I think that's how most backers see it), but you don't get any consumer protection if the project fails or doesn't live up to your expectation.
* All is left is seeing Kickstarter as a charity. You're giving charity to a for-profit organisation.
Kickstarter is patronage. It can't be considered anything else or they get into some legal trouble with one or more US bureaus. You can't see it as investing because then the SEC gets involved. You can't see it as prodding a product because then, as you said, consumer protection act gets involved. And you can't see it as a donation because then the IRS gets involved (more involved, as backers will want to take deductions).
Kickstarter, as a company, cannot and does not promote any view of backing except patronage. You are literally a sugar daddy for the people working on the project. Backing buys their time. Time they have promised to use to make a thing you want, but your only recourse if they don't is to not buy anymore of their time.
They generally require a deliverable, though. If the product is successful, backers get some form of tangible benefit.
I don't see why this can't be some share of the company. Giving away 10% for a huge chunk of seed money ($2.4m in this case) is actually way better than you'll ever do from angel investors or any kind of incubator. So if the product is successful, throw a unit at a backer as well as a tiny percentage of the company. Just so they can not feel cheated when you sell for a multi-billion dollar exit that is not in the interest of your backers, because in that case they all get their money back.
You don't have to say "your backing guarantees you X% of the company", you just say "in addition to receiving a VR, you will also receive an X% stake in the company if we are successful."
The SEC can get involved precisely now, not when the funding happens, but rather when the options are given out.
Someone who's read the terms of use and licensing and all those other jazzy legal documents could correct me if I'm wrong, but is there anything stopping a company from having one of their promises an equity stake in the company?
Say, I'm running a kickstarter and put a tier of funding as "equity". I put aside 10% ownership of my brand to those willing to pay $1,000 or more (for instance). If I set up terms that those who pay above $1k get equity relative to how much they contributed would that be wrong?
An example, 10 people paid $1k to each earn 1% equity in my new company. Or, say 20 people each paid $1k, would get 0.5% each. (20k total, 1k contribution).
Terms are loose, and this is all speculation, but at a theoretical level is there anything wrong with the founders creating such an incentive?
These products or services are not guaranteed by Kickstarter or Kickstartees though, so we backers aren't paying for a product alone. In many cases, the value of the product is not commensurate with the money paid. Notch certainly didn't get his $10000 worth from getting a kit and meeting Carmack—he could have picked up a kit after the campaign and met Carmack at GDC or Quakecon or wherever. It's more akin to donating $100 to PBS and getting a tote bag and a $70 tax write-off, without the write-off. As others have said, it's a charitable donation to a cool project from which backers could possibly get some benefits.
Even when they don't shut them down, they can often turn gold into shit. See Delicious, Flickr (before Melissa Mayer) and so on...
Google actually does a better when they decide to keep the product (Android, Blogger, Google Docs...), but it's impossible to know whether they're buying the product or the team until they either integrate the product or shut it down.
Yeah but Pixar was already a mature business minting money by that point, with a mature business model, which is very similar to Disney's:
Make animation. Release to the big screen. Profit.
No need to tinker. It's not like when you buy a startup that's bleeding money with 50 engineers that you could add to your existing products.
I've wondered whether Pixar would have ventured into making more grown-up movies if they hadn't been bought by Disney (not that I don't enjoy their current stuff, even as an adult).
A very good point. Pixar is notably a huge fan of Ghibli studios, which has ventured into less child-friendly fare in the past. But they have always been a big proponent of universal stories, stories which do not demean children nor sacrifice their integrity to subtextually cater to adults. I would bet that they would be making the same movies that they are now, but Disney would not have released Frozen (as a childless 20-something duder, I was absolutely ecstatic watching that old-style Disney musical.)
Disney had extensive successful experience with animated movies prior to acquiring Pixar.
Facebook with games? HN's community and most people who would buy something solely for games would disagree. But who knows, maybe we'll see Facebook operate a successful diversification strategy by perfectly catering to both casuals and hardcore gamers. Unlikely but one can dream...
Actually, it was the other way around: Pixar took over Disney and they kept both names going, but the entirety of Pixar's management team replaced their counterparts at Disney. Sounds to me like Pixar did the taking over there.
> Actually, it was the other way around: Pixar took over Disney and they kept both names going, but the entirety of Pixar's management team replaced their counterparts at Disney. Sounds to me like Pixar did the taking over there.
Yeah, corporate acquisitions are often not in substance what they are superficially described as...in technical terms, Disney "bought" Pixar, but they did so entirely with Disney stock, $7.4 billion dollars worth, and made Steve Jobs by far Disney's largest single shareholder, and, while Pixar remained a distinct entity within Disney, much of Disney's management was replaced with Pixar management (who retained their roles in Pixar, as well.)
How is pre-ordering not just a form of fundraising on Kickstarter that skirts the laws around crowsourced investing? Couldn't a startup just go on Kickstarter, promise some type of product to be delivered x months in the future, raise their seed and focus on getting bought w/o ever having to give up any equity?
If it had been 'investing', the funders would have gotten a piece of facebook's two billion acquisition bucks, right? That's what investing means, right? As you mention, "without having to give up any equity."
I think kickstarter funders on technology projects are frequently suckers, but it's not got a lot to do with 'skirting the laws around crowdsourced investing'.
Agreed. This is a "gamble to win a product that you want" game, not a "gamble to win a stake in a company that you like" game. The very product-based focus of the transaction is intended to discourage thinking of it as an investment. I think Notch was perfectly reasonable in his analysis. He got the product that he wanted, but was disappointed that their tactics after fulfillment were to cash out and align their direction with Facebook's. And he doesn't trust facebook.
I think many people _do_ give to kickstarter campaigns when it's a group of people they _feel like helping_. This is a bigger part of non-technology project kickstarter transactions, but I think it's probably a part of technology projects too, as can perhaps be seen in the way they are pitched on their project pages, or how funders respond to them -- obviously Notch didn't give $10k just as a 'pre-order'.
It's not _just_ "I want to pre-order this not yet existing tech thing which hopefully will exist", it's also "I want to help these guys succeed, I understand they're scrappy nobody's who might not be able to do it without me, I'm willing to take on some risk and perhaps pay a premium in part because I want to help them, and I know they're taking on risk themselves." It's not about equity, in fact it's more... charitable? Solidaritous? Helpful?... than equity.
I mean, consider, if Facebook itself started a kickstarter project to fund some new device or platform -- do you think people would fund it on facebook?
I think it's both predictable and understandable people feel 'sold out' when they thought they were funding some scrappy strivers who were putting themselves on the line for the project too, only to have those scrappy strivers make a huge amount of cash by selling out to major corporation -- before the product you thought you were helping to make possible was even finished.
What is all the FUD around Kickstarter here on HN? Kickstarter isn't investing. It is a form of pre-order donation, helping to bootstrap a viable market for a product the backer believes in. From the terms of use[1]:
"Kickstarter does not offer refunds. A Project Creator is not required to grant a Backer’s request for a refund unless the Project Creator is unable or unwilling to fulfill the reward.
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.
Project Creators may cancel or refund a Backer’s pledge at any time and for any reason, and if they do so, are not required to fulfill the reward."
So, if you go on kickstarter and never have any intention to deliver rewards, you're breaking the TOS. How often have this actually happened? I'm sure some number of funded projects have probably disappeared -- but is it really a significant number considering the scale of Kickstarter?
I also see that roughly 45% of projects are funded -- so that's a pretty decent filter right there. For my own anecdotal experience with Kickstarter, I've yet to be "cheated" -- a couple of games I've bought/supported are still under development, but seem to be right on track (Elite, Start Citizen, Torment and Wasteland 2). I've backed some one-off projects, and helped kick-start three businesses: hexbright.com, Printrbot and peakdesignltd.com/capture/
Why should I be upset that my "reward" for supporting these are a subsidized great little product, and not half of a share of the company? I mean, the risk investing in something like any of these seem on average much larger than "most probably getting a cheap, unique product". Yes, the reward is less too -- but I don't understand why people seem to think this has something to do with investing?
Kickstarter provides actionable market research. That's it. It's a chance to trial selling your product, proving it's viability.
Sure, if I had a million dollars lying around, it might have been great if, say the founder of hexbright came to me and asked me for captial, so that I could be the one benefiting from his idea, not him. But for "real" me, that haven't got any substantial capital to invest, that outcome would've been worse. I think it's great that Kickstarter helps lower the need for up front investment for starting a business.
Yeah, that thought makes me a little bit uncomfortable. Kickstarter campaigns were interesting precisely because they didn't equate investment with profits. They attempted to align investment with niche product delivery.
>> "10K drops by an individual are no different than an angel investor."
They are different. An angel investor is investing - they may lose that 10K. Someone dropping 10K on a crowd funding project is told the rewards they will get up front and receives them when the project is complete.
There's no guarantee that you'll receive anything. If the product or project fails, you get squat, or maybe a t-shirt. An investor gets a stake in the company, if it succeeds their investment grows. A backer gets nothing extra if the project succeeds beyond the promised reward.
> 10K drops by an individual are no different than an angel investor.
So far accepted. The difference is that the angel investor buys equity share with their money, while the individual gets a piece of the product if its development and production will succeed.
A better analogy - fans pay an artist up front to record an album, said artist then uses the resulting success to produce a different genre of music for a major label under an exclusive contract.
Band wants to release music. Have a sucessful kickstarter and release an exciting first album to backers. Everyone is excited.
Band then signs to a label that won't let people listen to the music without signing in to a social network first, and who will post "Joe Bloggs likes Band!" on your wall, and who only let you listen to the music in their app.
The funny thing is, every major game company does exactly that. Want to play this offline, single-player game? Well, let's first create an account in our service, so we can enhance our experience! Wow, you collected your first item! Here's an achievement that will show up on all of your friends' feeds, along with how long you've been playing. Surely you want to announce to the world you spent your last twenty hours playing Lawnmower Simulator 2014? Hey, how about we add a button to your controller to make it even easier to share videos with all our friends?
He really puts his finger on one of the reasons why this deal feels so weird here, I think. Nobody who contributed to the Oculus Kickstarter did so because they were hoping Oculus would get flipped to a mega-corp. They didn't do so because they wanted the Oculus team to have a big, splashy VC-style exit. They did so because they wanted the Oculus product. And the history of products that have been swallowed by mega-corps, after the swallowing, is not encouraging.
It's an outcome that strikes directly at the heart of the Kickstarter ethos. Everybody wins in this deal -- except the people who donated to the Kickstarter. Those folks... well, they kind of end up looking like suckers.