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by Paula Bernstein
March 27, 2014 3:33 PM
4 Comments
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The Crowdfunding Backlash: What Do You Owe Your Backers?

Zach Braff's "Wish I Was Here."

Oculus VR chief Palmer Luckey turned to Kickstarter to raise $2.4 million to create prototypes for the Oculus Rift headset. Billed as "the first truly immersive virtual reality headset for video games," the crowdfunding campaign attracted more than 9,500 backers. But now that the company has been sold to Facebook for more than $2 billion, some of the backers feel duped.

Countless backers of Oculus Rift vented their frustrations on the Oculus Rift Kickstarter

"I am saddened that the independent dream that was Oculus is now selling out to Facebook," wrote one of the project's backers. "Honestly, I feel that every single donor should get a "kickback/refund" from that $2 Billion (they'd still have plenty left over!) to put towards a Kickstarter project that isn't a masquerading golddigger. The whole idea of Kickstarter is to support people in making the world a better place through original ideas and technology, not selling out to corporate America. We already have enough politicians that do that - and you see how good that's worked out for the country. A shame and disappointment to everyone who backed Oculus; it's a damn shame."

It's reminiscent of what happened when Zach Braff's Kickstarter-funded "Wish I Was Here" sold big at Sundance and some of the film's backers complained that he had forgotten the little folks who helped the film get made. 

Part of the reason that crowdfunding works is because it allows people to feel part of a larger community -- whether it's a community of Zach Braff fans or a community of online gamers.

In both cases, fans felt so connected with the campaigns they backed they felt betrayed once the creators sold their works. But in both cases, the projects fulfilled what they promised. Rewards were delivered. Expectations were clear. There was never a promise to remain true to any idealized vision.

Aside from some gratitude and whatever backer rewards promised, what do crowdfunding campaigns owe their backers?

"I understand the position of the backers as feeling like they were instrumental in starting the company. However, they were also pre-purchasing a product," said Emily Best, founder and CEO of Seed & Spark, a crowdfunding platform. "If I were to pre-purchase a download of a new Radiohead album (maybe I'm showing my age here), I don't feel like that entitles me to a piece of the back-end of the entire album's success. I get to feel like I was there first, I get to be among the early listeners, I get to participate in the promotion of artists I care about - so that they succeed. (And I get paid back by an album I will listen to 123 times the first month...)."

The larger question is: will the backlash over Oculus Rift and other projects which are viewed as "sell outs" hurt future crowdfunding projects? 

"The pressures on tech crowdfunding are different from film crowdfunding because you'll never have a film sell to $2 billion to Facebook, or anyone," said Best. "So the possibility of this kind of backlash on a single film is much lower."

Also, once equity crowdfunding is open to the public, it remains to be seen whether "value exchange" crowdfunding a la Kickstarter will continue to thrive. Kickstarter declined to comment for this story, but in the past has made it clear they will not go the equity crowdfunding route.


4 Comments

  • Anon | March 28, 2014 3:04 PMReply

    It's time for equity crowdfunding! Already legal in Georgia for GA companies/residents. SparkMarket, an intrastate equity crowdfunding platform, just successfully completed its first project raise - check out their site.

  • Sean | March 28, 2014 1:51 AMReply

    No one has worked harder or gave as much to the backers as Braff. He has been putting a clinic on since day one.

  • Nothing | March 27, 2014 8:50 PMReply

    Remember kids, Kickstarter is a Donation (or Presale in some cases), not an "Investment", so yeah, these companies owe nothing to their backers apart from some gratitude and the perks/merch they promised.

  • James M. | March 27, 2014 3:48 PMReply

    Emily Best is so misguided. Pre-purchasing a Radiohead album, which is already produced and packaged, is very different from someone providing seed money for a project that hasn't even started. Best probably also isn't the...um...best source for opinion, considering she's the CEO of a crowdfunding platform. As far as returns for backers, I support it. If you provide Zach Braff $100 to make a movie or who's-its-what's-its name $20 to produce a VR prototype, you should be entitled to a piece of the pie when either of those products takes off. I suspect this issue will end up in court.