As an older gamer who doesn't understand the complicated modern games industry (I'd rather just play games) I've noticed a thing called Kickstarter and was wondering why it came into existence in the first place, what exactly it is and how it works ? I understand that it is an "alternative" way of funding the development of games in that it's gamers and games fans themselves who do the funding, rather than publishers / developers, who just come up with the ideas. But I was wondering what happens to this money (already donated by backers) if :

1. The project does not achieve its funding target.
2. The project does achieve its target but the game is not made for some reason or other.

I read (somewhere on the internet, can't remember where) that only about 1/4 of Kickstarter projects actually result in games actually see the light of day. So what happens to the money when a project fails for some reason ? Do backers always get their money back, or only sometimes, and if the latter then under what circumstances ? Who regulates this whole thing ? Are there any measures in place to prevent people (games creators) from just pocketing all the donations and "doing a runner" ?

If it doesn't reach funding level then basically nothing happens. They don't get your money and they have to try again or give up.

In the second case, I think a lot of those cases are massive delays. I think at least 2 of the projects I backed had delays of over a year. But several of the other projects had none or negligible delays.

There isn't really any regulation that goes on here, provided that they don't get caught engaging in actual fraud. So long as they spend the money on the project, there probably isn't much that you could do if it fails.

If he project doesn't achieve it's funding target, nothing happens; your bank isn't charged until after funding is achieved.

If the project is funded and then the game doesn't get made ... you eat the loss, probably. Kickstarter's TOS require that the person either fulfill the promised rewards or refund the money, but Kickstarter doesn't have any mechanism to actually make that happen, and often, by the time it's clear the game isn't being made, there's no money left to refund.

1. Money is refunded to donators (or not being taken in the first place, depending on the crowdfunding platform, Kickstarter is only one of several). In any case, there shouldn't be any loss for the donators. But check the terms of service of the respective crowdfunding platform for details.

2. The money is lost. You're not "buying" anything when you back a crowdfunding project. Many people have underestimated this risk when crowdfunding was new. Some people may also have exploited the system by collecting money for projects they knew would never see the light of the day; it's hard to tell. You have no viable way of getting your money back and you will not get any recompensation. But again, check the terms of service for details.

Ahh thanks everyone. I was assuming that you paid immediately and lost your money even if the funding target wasn't met. As I said these were naive questions from an older and out-of-touch gamer. Sounds a lot less sinister now !

Thanks for point no.2. I suppose it would be easy enough for a scammer to dream up a brilliant game, reach the required funding target, fail to make the game and then just "disappear" and make off with the proceeds ? I suppose what I wanted to know is whether there are any checks in place to make sure that this kind of thing can't happen ? If not then it just sounds like an open invitation to scammers. I'm sure Kickstarter is an awesome idea dreamt up for all the right reasons but I would need to be sure of all this stuff before I considered donating to a project.

There is no working in-system protection against scammers because it's impossible to prove that the project starter never intended to complete his project. Projects may fail even if there wasn't any scam involved. It's your responsibility as a backer to check whether a project seems honest and realistic - usually, project starters will provide credentials of former projects to show that they are real.

But it's important to understand that, by backing a project, you don't really have any contestable claim to anything. In theory the project starter is supposed to give the remaining money back if a project failed, but as someone else said already - if a project failed, then this usually means that there is no money left to give back. If there were money left, the project wouldn't have failed yet and the team would most probably put that money into the project.

In short: Only back a project if you think that the project starters are trustworthy, the project plan and budget are realistic, and you deem the idea good enough to risk losing your money. Crowdfunding is a great platform to get projects done that regular publishers wouldn't touch, but be careful.

Ive backed quite a few Kickstarters - more than a few have been delayed (but completed). Well known devs are probably safer to back. I only know of one instance where project got funded but no end delivery - it was for a graphic novel/comic - the guy used all the money and ran out....couldn't deliver.

That may be true, but its all about using some discretion when backing projects. Don't back a project by a bunch of kids that has unrealistic goals unless you don't care about losing money.

I have backed 11 funded projects.

2 are finished and are great.
2 have released half of the games (and I understand are good, but I'm waiting until finished to play) and should release the second half this year.
2 will be released within the next few months.
4 have been giving regular updates and seem well on their way to completion, possibly by the end of the year.
1 has been quiet for a while - no updates in 10 weeks, but I'm not too concerned.

You definitely should avoid Kickstarter if that's how you feel about it. The insurances that you would like to have aren't there, and can't be there, in fact wanting them to be there is probably a sign that you are misunderstanding what Kickstarter really is. It is, primarily, not a way to get something as a customer, although that's a very beneficial side effect and great for the backers if it works. It is a funding platform. As a backer, you have all the risks that a "professional" publisher would have as well. Gaming projects fail all the time (professional ones well as crowdfunded ones). Projects get cancelled all the time. Publishers burn money all the time because some development studio doesn't deliver, or delivers crap, or even scammed them (Aliens: Colonial Marines might be such a case). If you are not willing to accept the risks of funding, don't fund - it's as simple as that. If you want security, buy finished products, this gives you customer protection. Funding is inherently, and necessarily, risky.

Yes but what does "using discretion" mean ? I know absolutely ZIP about modern developers so am I supposed to hire a private investigator ? If you're happy with the state of affairs which you've just described then that's great, but I want more, to take the onus off me : I want a GUARANTEE that if I donate to a project which fails - either before OR after it fails - then I DEFINITELY get my money back. That's not too much to ask in a decent world.

Again, you are arguing from the mindset of a customer. There's nothing wrong with that, but funding a project is a completely different thing from buying something as a customer. It can work out great, but it may also fail. If you can't accept the risks, don't do it.

It's a bit disconcerting though that you seem to think that it "should" work with a guarantee. How is that supposed to work from an economic perspective? Where is the refund money supposed to be coming from when a project has failed? It has been spent on _trying_ to make the project work, but it failed, now there's no money left. Do you think that the project starter should be obligated to refund you from his own private money? If that's how Kickstarter was organized, who would ever try to start a product there? If someone has enough money to refund potential backers after a potential failure, why would he need to obtain external funding in the first place?

All I can say then is that I HOPE it's a resounding success for everyone involved - as long as nobody gets conned. But there's absolutely no way I would take part in such a project unless I had 100% assurance that I wasn't just entering a web of deceit. Regulation of this industry is badly needed and since it's now such a huge industry it's a wonder governments have just ignored it so far.

Government regulation? Sorry, now it's getting ridiculous. Why on earth would government regulation be needed on a platform where private funding of private projects is taking place? And how would that even work?