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Comment by fragmede | Hacker News Reader

That's a cute viewpoint, but the mere mortals get screwed, same as always.

Let's say a VC invests $2.4 million dollars in a company. Let's assume the company does well and sells out to Facebook for $2.3 billion. The VC, being wise in the ways of finance, profits handsomely from that $2.3 billion.

What if, instead of a VC investing $2.4 million dollars, it was a large collection of mortals each investing a small sum, say $300.

The collection of mortals would simply give the company $2.4 million, and after selling out to Facebook, the company... screws over the puny mortals and simply pockets it all.

Sure, the company gets to keep out the eeeeevil VC and bankers, but the little guy sees no return on their $300.

Yay?

Wait, no, we all got a shiny Oculus Rift out of the deal to play with.

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You forget the 'mere mortals' working at the company. They keep their equity rather than the VC.

On the Oculus example: I got what I paid for. Did they ever say equity? Did they ever say that backers got decision making rights for a company on the financial high-wire (both IP and hardware capital expenses).

Really, I thought the outcry against Oculus just exposed how little people think through the hard choices of running a business and how entitled they feel for so little expenditure.

The sense of entitlement in this is difficult for me to understand.

Kickstarter works by a person paying for something in advance. Often backers get discounted prices, in return for taking on this risk of backing. Obviously your example diminishes that value of the "shiny Oculus Rift", but it isn't at all clear why.

Your post seems to indicate that you think the backer should get both the product, and a piece of the company for the same price.

How's the economics of that supposed to work?

Specific to the Oculus Rift example, I understand that people resent the company being bought out by a company (Facebook) whose philosophy differs to what they thought Oculus's should be. I can see why people resent that, but I don't think it counts at "getting screwed" in any economic sense at all. I think it is more a moral violation of values they though were shared with a company. I'm not sure how this problem can be solved in any easy way.

I see that slightly differently.

I, as a "mere mortal", have already _given_ $200 to Pebble, and $400 to ZPM Espresso.

I got exactly the return I wanted and was entitled to from Pebble, I've had a smart watch on my wrist for ~2 years now and _their_ company has thrived (and they are not under any legal, moral, or even politeness related obligation to offer me anything more except perhaps an opportunity to participate in their next big idea. I certainly don't expect a cut of their eventual acquisition payday).

I got an outcome that, while not my most desirable one, was certainly one of the outcomes I was prepared for from ZPM - a bunch of updates indicating they were working furiously trying ti achieve their dream - and finally a message says "sorry people, didn't work out". And I'm perfectly fine with that too.

I know not everyone views Kickstarter that way (and the "blame" for that falls firmly on both project creators and Kickstarter themselves), but if you expect it to work like a shop - buy your stuff from a shop - they'll ship it with close to 100% certainty, you'll be covered by consumer protection laws and credit card fraud policies and other similar well know remedies. "Kickstarter" even implies in it's name they're not like that. You're often funding pre-manufacturing ideas - along with all the risk associated with the assumptions of getting things finalised and manufactured, and hopefully benefiting by getting your trinket well before the general public and probably at a discounted price for assuming some of that risk.

I've _never_ been "screwed" by Kickstarter - even though I've funded several failed projects. That's part of the Kickstarter game. The same as all those non 1000x exits the VCs fund - they're not getting screwed there, they're playing the risk/reward number game. If they didn't want to get "screwed" by the 99.5% of the companies they invest in failing to return 1000x, they'd be investing in government bonds or blue chip stocks.

You only "get screwed" by a successful (or failed) Kickstarter project/company if you choose to view yourself as a victim (or have a tremendously overactive sense of entitlement).

This is why I'm excited about the possibility of the crowdfunding provisions in the recently passed JOBS Act. In theory, this should allow companies to sell small pieces of equity (up to Math.max($2000, 5% of investor's yearly earnings) per investor and up to $1 million total) without having to go through the headache involved with an SEC Public Offering registration. While the potential for fraud needs to be dealt with, this opens the doors to something like "Kickstarter with Equity".

You are essentially pre-ordering one of their watches for a $20 discount. What's there to complain about? Sure, in unproven items you are gambling somewhat (they may not deliver) but you should evaluate that risk when you put your money in.

None of us think we are buying equity when we put money in, and yet clearly 31,000+ people are willing to put their money in to pre-order the product without equity. Good for that company, that they have that level of pre-order demand, no?

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