
Attention Suckers: Please Send Us Your Money - lazydon
http://www.bloombergview.com/articles/2014-03-26/attention-suckers-please-send-us-your-money
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garry
I bought an early Oculus Rift developer kit as a part of the Kickstarter. I
paid $300 for it and it was worth every penny. I had no expectation of equity
from it, because the product was cool and something I wanted. It's the wrong
thing to criticize Oculus Rift for the simple reason that hardware
crowdfunding has unlocked a whole new world of things that could be built if
only you could prove people want it.

The crowdfunding campaign Oculus Rift ran proved people wanted it. We see this
over and over again — if you can create a new class of consumer behavior
(Uber, Google, etc) then you can create a valuable company.

Articles like this are sensational in that they sometimes incite misguided
lawmakers to regulate. But in this case, crowdfunding is creating new economic
activity, and any new regulation would actively squelch that — and kill viable
new products and companies in the process.

~~~
pauleastlund
I get this "it was money in exchange for goods" point of view, and I certainly
find this article stupid and misleading.

But I'm still a little uneasy about what happened with Oculus, and the trouble
that I have is, if you look at the the pledge levels, a lot of that money was
nothing near a "cash-for-goods" exchange. 7 people pledged more than $5000 to
get to meet the Oculus team. 100 people pledged $75 for a poster and a
t-shirt. Those aren't purchases of goods for market prices; those are
donations for token rewards, no different than when you give to public radio.
Oculus solicited private donations to continue their work, and if the Facebook
acquisition results in a dramatic change of direction for Oculus I think that
will be a betrayal of donor trust.

~~~
pfraze
> Oculus solicited private donations to continue their work, and if the
> Facebook acquisition results in a dramatic change of direction for Oculus I
> think that will be a betrayal of donor trust.

That's what I think is the issue, not the equity. If Facebook's software is
attached to the device, it's a different device (more like Google Glass) and I
don't want to use it.

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logn
... Except $25 for a t-shirt and $300 for a developer kit are about market
rate for such items. Not anymore of a scam than buying t-shirts to help a rock
band who might later make it big. And those fans usually complain too about
sell-outs.

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scythe
I think the point of this article is not that people think they got a bad
deal.

The point is, if those 9500 people had pooled their money together beforehand
and negotiated as a collective -- maybe you could say they _incorporated_ \--
they could have probably gotten a much _better_ deal. This is to say,
hindsight is not very clear, because you don't know what the other road looked
like.

If y'all had sent your $2.4m to professionals to actually negotiate the
funding of Oculus, I'm pretty sure you'd have walked away with at least 500%
return on investment. Instead, you're defending your decision by saying you
got at least 100% return, maybe, even though the target price for the product
is < $300.

And you're right -- this _is_ a Wall Street-like way of thinking. It also
turns out to be pretty effective, overall.

~~~
jesusmichael
Well the reality of that is that 1 in 1000 start-ups make money.

The odds are, they would lose money.

They traded a 1 in a 1000 shot at big bucks for a guaranteed 100% return, that
is the small investors take on risk mitigation.

The wall street take on risk mitigation is to take and hold large chunks of
equity, hoping for future growth which only occasionally materializes. They do
this with other people's money. Those being people who can afford to take such
risks.

The people that "bought" into O have a different risk profile and appetite for
loss and acted appropriately.

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ianstallings
That article is a very large troll. Any valid criticism seems to be run over
by the bulldozer of BS. To extend that argument to _all_ of crowdsourcing from
one event seems dubious considering he works for a company that was built on
money from wall street markets and is very closely tied to traditional
finance. Could wall street handle the same scrutiny?

People will get more savvy regarding crowdsourcing but was anyone really
duped? No lies were told afaik.

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DanHulton
While I agree with the author that people need protection from themselves in
some situations, Kickstartering ain't one of them.

I paid $300 for a dev kit and funded a company to do serious research on VR -
the first serious research in oh, forever. They now employ John Carmack and
Michael Abrash TOGETHER to work on this problem. This is AMAZING and the next
few years are going to be AMAZING because of it.

Honestly, it's stated in every Kickstarter campaign that things might not turn
out the way you want. You may fund a game that never comes to fruition.
There's specifically a section on "risks" that campaign starters are supposed
to fill out so that backers are properly informed. We know this going in, that
things might not turn out the way we hope.

That doesn't mean the model is broken, and it doesn't mean we're all sheep.

I want to take a screenshot of this article and add the classic political
cartoon caption: "Christ, what an asshole."

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dec0dedab0de
I'm really not sure what this article is suggesting, but it makes me angry. At
first glance it seems like it is simply trolling for clicks, and in that
regard it seems to have succeeded. However, its stance on investor regulation
and somehow relating it to crowdfunding is confusing. Are they suggesting that
anyone thought they could make a profit by funding Oculus? Are they calling
for tighter regulation that would outlaw crowd funding? Or perhaps they think
there should be less regulation to allow the masses to purchase equity in
startups? It just feels like they are purposely misrepresenting the facts, and
have some sort of agenda.

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crazy1van
"In the case of Oculus, where you weren’t even promised equity, you simply
revealed yourself as clueless naifs."

This article has a fundamental misunderstanding of why people contribute to
kickstarters. I think most people's motivation is closer to charity than it is
to investing and I think people understand that difference.

Ironically, the author implies he knows what is best and needs to protect the
"sheep" from this "scam", yet he obviously doesn't have an even basic
understanding of why people contribute to kickstarter.

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ghaff
A much less click-baity pice on the same site by a differentauthor:
[http://www.bloombergview.com/articles/2014-03-28/crowdfundin...](http://www.bloombergview.com/articles/2014-03-28/crowdfunding-
is-not-a-scam-it-s-market-research)

A valid point is that what a kickstarter is exactly can be a bit ambiguous and
Kickstarter arguably makes it more so. It's not an equity investment. OK. It's
also not a pre-order. OK. But (according to Kickstarter's terms of service) if
you don't deliver on the promised reward you have to refund the money. OK?
Well, doesn't that sound a lot like a pre-order. And where's the money coming
from if it's already been invested in an idea that just didn't work out?

Now, in practice, things generally work out. Lots of projects fail and most
rational people realize that sometimes stuff just doesn't play out like they'd
wish. (OTOH, one can certainly find discussion boards filled with unreasonable
people talking lawsuits etc. for failed projects.)

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lemma
This article is pretty misinformed. Title III of the JOBS act, which would
allow crowdunding-for-equity, is still pending SEC rulemaking [1].

[1]
[http://en.wikipedia.org/wiki/Jumpstart_Our_Business_Startups...](http://en.wikipedia.org/wiki/Jumpstart_Our_Business_Startups_Act#Provisions_of_the_bill)

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jesusmichael
The author of this piece is pretty naive on what average people actually
"Contributed" to Oculus. $25 - $5000 for actual material goods is akin to pre-
orders, at market prices.

Everyone sees risk differently, the "contributors" for Oculus, saw paying $300
for a dev kit as a risk they were willing to take vs. $10K for a .01% of the
company that may never produce a return.

The sale to facebook (of all places) was not reasonably foreseen and
especially at the price paid.

If the author would have looked at contributions thru the lens of risk
mitigation, he would see that the "contributors" actually made a very sound
financial decision.

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lawl
Agreed, the current crowd funding model is broken.

Though interestring, if you backed Oculus with $300 and got a devkit for that,
I think that's reasonable.

So the lesson should probably be only do crowd funding when it's essentially a
pre order?

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pdxgene
The oddest thing about this article is that the author seems to think that the
JOBS act is to blame for Kickstarter backers being fleeced, which is just
weird.

Unless I'm missing something, JOBS doesn't have anything to say about non-
equity crowdfunding:

[http://en.wikipedia.org/wiki/Jumpstart_Our_Business_Startups...](http://en.wikipedia.org/wiki/Jumpstart_Our_Business_Startups_Act#Provisions_of_the_bill)

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chrismcb
I don't get how this is a scam. Did the people get their thank you, their
tshirt, or development kit? AND didn't the company get kickstarted? So the
people got exactly what they paid for, and presumably exactly what they
wanted. So where is the scam?

