Recently, the game Nosebound ran a kickstarter and failed to reach its goal. I encountered it when it had about 80 minutes to go, and $3,000 left to raise.

Today, I was thinking about this, and realized that $3,000 wouldn't be an unrealistic sum of money for one person to contribute to a Kickstarter, if they wanted to. And I started wondering about the viability of donating larger sums of money to Kickstarter campaigns, and in return asking for a percentage of the finished game's earnings. That's basically what investors and publishers do, is it not? If I had extra money I wanted to invest, it might not be a bad way of investing it, and it would let me help other indie devs out.

I was wondering if the more legal/business savvy of you guys have any advice about this. Whether or not it's a good idea, what I'd need to know legally to make u[p a contract template (I assume I'd want to consult with a lawyer to do this?), etc.

My gut tells me that would make Kickstarter an unlicensed securities dealer which would cause them all sorts of legal trouble.

Far as I can see, on KS you are simply donating money and have no means to bring up such a contract. So therefore a terrible idea to go in with that frame of mind - same as people emplying designers that expect for whatever pittence they pay, to own the final product (Thats essentially a work for hire contract and not exactly legal in many territories now without a prior contract).

If you were to contact them privately on the other hand... you could maybe work something out - just dont be surprised if you get told "no!".

Me, if I was putting something up on KS, I'd actually be happy to award a % of the product to the backers (still not the rights to the IP mind) - but then I'm a different breed.

Why would I want to fund a crowd?

Almost - I'm saying, that KS (as I know) doesnt give any such option, and thusly such a contract would not be legally binding, but arrange a contract privately and its a different matter entirely. Thats how games used to be made - HOWEVER - by doing so (ie demanding some ownership and not just a profit share based on investment - as outlined in my prior post), you would also be acting like the AAA companies that demand DRM - slippery slope!

So yeah, contact em privately, offer to invest in return for a profit share (and of course repayment on terms you see fit) and that would be mutually beneficial I think (IF you have confidence in their marketing abilities). *points at neckbeard

So what you're essentially talking about is being a shareholder? Or buying actual shares in a potential future money making endeavor, that may or may not succeed. Well it happens in other forms of media projects like movies- people invest in those. No reason, i suppose why it couldn't work, except that for the relatively small sums of money involved for indie games, all the legal stuff may make it hard to be cost effective.

More like, "I'll provide you this sum of money right now, in exchange for a certain percentage of the game's sales when it comes out." Not with any ownership in the final product, just the right to a certain percentage of the earnings.

Its a donation - many people would realise and understand this. it isnt an investment.

Like others have pointed out that's most likely illegal to do within Kickstarter in its current state.
I suppose you could become a sort of a shareholder by reaching an agreement outside of Kickstarter.
The question is, in a scenario like Nosebound's you described (if they are $3,000 away from the goal near the end of the campaign and you want to "rescue" them): is it possible to change the funding goal once the campaign is live? By that I mean decreasing a $18,500 goal to $15,500 to accommodate your $3000 investment and complete the Kickstarter campaign successfully. I might be wrong but I doubt Kickstarter allows devs to do that. If that's the case I don't see how this would be possible to do even if the dev is willing.
This is assuming a dev would be willing to agree to such a deal. I believe part of the reason small devs do kickstarter is because they don't want such ties or take up (more) loans.

There's always "That Guy" in a Kickstarter campaign (usually in the comments or on the game's official forums) with a self-important attitude that thinks his contribution is an "Investment" which entitles him to have the most important opinion about the game's direction. Usually they shut up when someone with enough patience explains to them that Kickstarter is a donation, not an investment.

On top of whether it's legal or not... I'm fairly sure Kickstarter forbids projects from selling shares in it's rules (probably because they're not allowed)...
But there are other platforms that allow it, I just don't think many indie developers use them though.

No, as far as I know it's not possible to change the funding goal once the campaign begins.

Just to clarify... I'm talking about offering to donate a certain amount to a project's Kickstarter campaign (likely contacting them privately over email), in return for a share of the profits once the game releases (not any ownership of the title). Is this really something that Kickstarter has any right to forbid, legally? Since it really doesn't involve them at all, except as the way the money gets "transfered." Isn't it just basically another tiered reward? It just seems kind of odd to me that Kickstarter would even have any legal right to forbid this sort of thing.
I guess I'm going to have to take look.

Ok, I scanned through the Terms of Service and didn't see anything relating to this: https://www.kickstarter.com/terms-of-use?ref=footer

EDIT: it does appear that campaigns aren't allowed to offer financial rewards as a reward tier (https://www.kickstarter.com/rules/prohibited). I guess the big question is if this rule applies in reverse: if backers aren't allowed to request financial compensation for a pledge.

I think I'm just going to try asking Kickstarter directly.

Unfortunately, Nosebound almost reaching its goal it's something that just happened to two other kickstarters I backed; Tiny & Tall: Gleipnir failed at 85% of its funding ($1,200 short) and Megamagic: Wizards of the Neon Age (from the creators of Nihilumbra) at 90% ($1,800 short). That never used to happen. When a project is so close to its goal, people normally helped them across. So, yet another sign of the decline of crowdfunding (ignoring occasional big projects that help hide this fact).

Which is a unfortunate, as I'm quite invested in crowdfunding. But the amount of great games we got from it gets overshadowed by the occasional failures and scams. In the other hand, it was bound to happen, as people didn't understand the waiting involved. And then there were the inevitable disappointments due the insurmountable expectations towards some of the first games funded.
And the model didn't work from the get go. Most of the games backed where due to a small amount of people pledging a large amount of money. Thus increasing the risks for those backing. For a while now I only back at the minimum amount to get my drm-free game. It's the only way for the platform to work over time.

And then there's the crowdfunding ceiling, which some "experts" consider in the $4M - $6M range. And that's the reason for the creation of Fig, a heavily curated crowdfunding platform for both backers and investors. Although the only game backed over there, barely made it.

Pitchforks don't buy themselves?