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Comment by michaelt | Hacker News Reader

For kickstarter, this isn't only a question of strict legality and having the right weasel-words in their small print. It's also a question of reputation.

There's already a bunch of stories in the press about projects failing to deliver, and the more backers get shafted the worse this will get. If no-one wants to invest in Kickstarter projects that'll be bad for kickstarter.

There's a whole bunch of different things Kickstarter could do about hardware projects failing to deliver. Why they aren't taking action yet is a mystery to me.

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"There's a whole bunch of different things Kickstarter could do about hardware projects failing to deliver. "

Such as what? Like offering insurance for failed products? Doing due diligence into creators? Or?

Any solution you come up with (and I do really want to hear your suggestions) has problems. If they vet it puts more liability on them and legally that would place them in a different position. If they offer insurance then they have to vet and the risk shifts to them which isn't the idea of what they are trying to do. So your thoughts are specifically?

Kickstarter could change their fee model to better align their interests with backers. For example, they could choose to not take their fee until the project creator has delivered on their project. This gives the Kickstarter team more of an incentive to vet the quality of projects and their creators.

> Such as what? Like offering insurance for failed products?

In a perfect world, Kickstarter could do just this - or even better, set up a prediction market* on whether the stuff will (eg.) ship on time. Then users could check the market price and decide whether the risk is small enough for them, and even directly hedge against loss.

* http://en.wikipedia.org/wiki/Prediction_market

I don't see why vetting would put any more liability on Kickstarter - all the 'responsibility lies with the creator' legal mumbo-jumbo can remain in place.

If you browse this thread you'll find lots of suggestions from different people. Probably other people will have better ideas than mine, but for what it's worth: I'd require projects successfully raising a large amount (say, more than the price of a midsized car) for hardware to agree a series of milestones, releasing the funds to them in stages. The precise milestones would be agreed on a project-by-project basis, but could include: Some money up front, some money when they have a preliminary electrical schematic and prototype on breadboard, some money when they have a costed bill of materials and a final prototype, some money when they have a feature-complete mobile app, and some money as the products start shipping and the invoices from manufacturers start arriving.

To put it another way, creators can't have any pudding if they don't eat their meat.

"to agree a series of milestones, releasing the funds to them in stages. The precise milestones would be agreed on a project-by-project basis, but could include"

My first reaction is that that's a good idea. But on second thought this would create quite a burden and bureaucracy at kickstarter to monitor and make sure the right thing happened. I would imagine that for that reason alone they wouldn't go for that but I could be wrong.

Well, in the case of the 'LIFX' bulb mentioned in the article, they've made a 5% commission on the $870,447 raised and I can't imagine too much of that would go on administration.

I agree admin costs would be a problem for smaller projects; if Kickstarter was only making $2500 total on a project they couldn't afford a thorough technical design audit. Some costs could be kept down with technology, e.g. prototype demo youtube videos, which creators should be doing to keep their backers engaged anyway. You'd risk rigged demos, of course.

Crowd funding is still a developing industry at the moment, and it's mostly assumption on my part that makes me think creators failing to deliver is going to be a problem. It's going to be interesting seeing what develops.

You feel there are there are enough crowd-sourced hardware startup failures to warrant any action? I know the interest from this site is primarily tech products but it seems to have grown in proportion to the site which is still heavily arts/crafts saturated. I don't believe the sample size is really close to large enough to be come to the conclusion that that vaporware is as big a issue as the article claims. Providing failsafes for investors ruins the unique accessibility that Kickstartr provides for aspiring project managers.

Of course people want to see their projects realized but I believe that far more good will come from disappointing projects. The horror stories will serve to remind people that these are still investments and as such: it would be best to consider funding these projects with non-profit-esque expectations rather than some hipster product marketplace.

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