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The Crowdfunding Backlash: What Do You Owe Your Backers?

The Crowdfunding Backlash: What Do You Owe Your Backers?

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.

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