Kickstarter is very far from how investment works, it's a lot close to charity.

Great. Then please stop it. It was fun the first two time. Maybe.
Actually it's a lot closer to a store. Which is why they go to some pains to say it's not a store. You're pre-ordering, but with a risk. Most people pay the lower tiers and expect to get a product (and various other things) for that pledge. Most project creators price that product lower than they expect to sell it afterwards, so that "Kickstarter buyers" will feel they're making a good deal.

Not really, it's just a form of investment. In general you don't give to charity with the intent of any of it coming back to you in a direct manner, leaving aside the greater good and blah blah.

Kickstarter is like an investment because you give money for a specific purpose and you expect some sort of return, whether it be a game or a widget or whatever. Some investments fail and you, as either a 'shareholder' or as an unsecured creditor, are at the bottom of the list in terms of repayment priority. Point is that when things do go tits up then typically it's because there's nothing left and you won't get anything. That is the very nature of investment and limited liability.

Except that with real investment you have some sort of contract giving you some legal recourse in case things goes wrong, it doesn't prevent all the risks (and you have no warranty to ever get a single cents back) but at least mitigate some of them.

Here it's more based on "good will", you give them your money without any strings attached, without any contract, and you hope they will be nice enough to make a game out of it and maybe send you some trinkets depending of the amount your pledge.

But if instead they decide to take your money and use it on booze, well too bad for you, I don't think there is that much you can do legally against it. (especially if you live in a different country)

That's true, but it's only a theoretical difference, insofar as there are plenty of scams even when it comes to "legitimate" investment opportunities, and in the vast majority of cases Kickstarter projects are honest. I honestly don't remember hearing of any actual scam tied to KS, have you?

In the end, whatever legal recourse you may or may not have makes little difference, since for small investments, trying to recover them is not worth the time, effort or money involved in whatever legal proceedings you may have to deal with.

n/m

Indeed, investment means that you're contributing something in exchange for some form of asset. A product that you receive if the product is successful is generally not an asset.

There are a small number of KS where you do get something which could potentially be regarded as an asset. I know that Serpent's Tongue allowed people to buy rights to future expansions and boxes when new cards come out. Assuming that it's successful enough to have ongoing expansions.

But, in general KS backers don't get an equity stake, nor do they receive anything which would represent wealth.

Calling it an investment is really not accurate in the normal financial sense. It's more of a donation to the greater good.

No, I'm afraid even if it was a real investment you'd be seriously screwed given that you were an extremely minor stake holder. Stockholders are investors too, much on the same scale of the average KS backer. How remunerated are they when a stock tanks? Not at all, is how much.

I don't know what all the vengeance is about, anyway, everyone should know any KS might fail and you get bupkiss. That's how it works.

People perceive KS as a 'store' for 'pre-orders', or some shit.
In truth.. if you were to make a triangle of pre-orders, charity, and investments.. KS would fall smack in the middle. It has elements of all 3.

Now, in the specific instance of the referenced project:
There was clearly some underhanded shit on the part of the creator, including (but not limited to) trying to 'vanish' so as to shirk the litigation he was facing.

I do not agree with litigation over just a failed KS. For this instance though, it seems that it was far more than just a 'failure'. A project like this one, $35,000 is a fair number for finalizing production and getting a small run (500-1000) produced.. hell, I could probably build something close to this as a 1-off from off the shelf parts for $20-50, depending on the cost of the joints needed.

It seems in this instance he genuinely squandered his investors money, putting it towards things other than what they actually invested in. In that instance, I do believe litigation is an appropriate course of action, if others avenues of pursuing reparations are exhausted.

What I do not agree with, is the people crying fowl on KS's part. KS is a service which puts projects in touch with backers. This seems comparable to crying fowl at eTrade because your stocks crashed.

It is equally important for backers to remember that the project could fail and they could be SOL, and for creators to put forth their best effort and to ensure that their backers funds go to what they promised.

Kickstarter is a retail preorder service, nothing more.

Funny. You've just accused me of the complete opposite of what everyone else accused me of.

Fixed that for you.


... sorry, I couldn't resist. I'll be quiet now.

WINNER!

You couldn't be more wrong. The vast majority of public investment is unsecured.
You buy shares and the company goes belly up. Unless you have a guarantee or risk participation or anything along the lines, you get diddly squat. That is the entire rationale behind investment - limited liability. The concept is that someone has an idea and there are other people who are willing to back it. Unless they secure their investment, they will will be last in the list when it comes to liquidation. Typically a company goes into liquidation because they are in debt. The money goes to pay off the debt, shareholders come last. That is the reason for why you have credit agencies. People make a lot of money researching the viability of investments.

Kickstarter works exactly in the same way. Instead of getting a share certificate (which by the way has the nominal value of an used sheet of paper) you get to have/get/receive whatever comes from that investment. If it doesn't work out, it is just another failed investment, which would in the IRL case make your share certificate absolutely worthless.

Now if as in your example the person simply goes and drinks your money away then your most likely recourse is through misrepresentation / fraud. If the investment just fails, then that's it.