22 October 2018 | 65 Comments
Recently I stumbled upon an opinion of Kickstarter that, despite being completely new to me, seemed to be fairly widespread (at least among people who talk about things on the internet).
The sentiment, which I first read in the comments of this article and then saw again on Reddit a few days ago, is that Kickstarter backers provide an interest-free loan to creators with no consumer protection.
It’s truly fascinating to me that some people feel this way. Even though my opinion vastly differs, today I’m going to try to see through the eyes of that type of backer, and then I’ll share my own opinion.
Through Their Eyes
I recently backed a game called Project L on Kickstarter. I made a choice to give $40 to the creators, and I will receive no interest on those funds. At some point in the future, I hope to receive a copy of the game, but there is no guarantee that will happen.
Here’s how one person put it in the comments of the above article: “Kickstarter is a pre-order mechanism to transfer all of the risks of production to the consumer.”
In their mind, I think they’re comparing it to a non-Kickstarter pre-order, which typically falls into this category: A product a company is already in the process of making, and they’re just accepting orders for those incoming products. Money does not exchange hands until the product is shipped (or digitally transferred) to you. I can see how, with that direct comparison, someone may be a bit jaded about Kickstarter.
In My Opinion
I have lots to say here, so I’ll try to break it down a bit. My opinions are influenced by my time on Kickstarter as a creator, but I’ve only been a backer for the last 3 years, so experience has most of the impact on my perspective.
Interest: When I buy something, even if there is a gap in time between when I pay and when I receive it, I’m making a choice not to invest that money elsewhere (i.e., in a mutual fund). That’s my choice. I don’t look at the $20 bill in my wallet and think, “My wallet should be paying me interest.” Same with Kickstarter: I’ve never expected to receive interest on my pledge. It doesn’t make the interest statement untrue, but it also doesn’t mean it’s a valid statement to make. Similarly, I could shout to the world that I haven’t received even a single kitten in all of my years as a Kickstarter backer. Technically that is true, but is it relevant?
Loans: Transactions aren’t loans. When you order pizza for delivery, you’re not loaning Papa John’s $15. You’re paying for a pizza. Rather, a loan is a borrowed sum of money that is usually expected to be paid back with interest. That’s not a Kickstarter pledge–when you pledge to a reward, you are providing money, and in return you’re getting a reward (most likely at an appealing price). However, if you still feel like your Kickstarter pledge is a loan, and that makes you uncomfortable, don’t do it. Just like a loan, no one is forcing you to pledge those funds to the project.
In the comments, Kevin mentioned that a Kickstarter pledge much more accurately fits the definition of an investment, not a loan. An investment is an expenditure of “money with the expectation of achieving a profit or MATERIAL result by putting it into financial schemes, shares, or property, or by using it to develop a commercial venture.” You invest money, and the return on investment is the reward (e.g., a game).
Risk: As a consumer, when I pay money for anything, there is some level of risk involved. I may not like the book. The special-edition Oreos may taste weird. The app may be too confusing for me to figure out. When I back a Kickstarter project, I know there’s risk. Sometimes I make the choice to make that risk; other times I don’t.
Accountability: Kickstarter is a transaction platform; it’s the creators, not Kickstarter, who are liable if they mess up. I’m perfectly fine with that–like, if someone buys something from our webstore and we send them the wrong game, it’s not Shopify’s fault–it’s mine. There seems to be the perception that creators aren’t liable, as if using Kickstarter makes creators immune to prosecution if they cheat, lie, or steal, despite there being a legal precedent to refute this.
False Equivalency: Kickstarter does not equal Kickstarter creators, nor are all creators the same. Basically, I don’t blame Kickstarter in the rare case when a creator fails to delivery–I blame the creator. When that happens, I don’t blame ALL creators–I only blame that specific creator. For me that usually means I don’t pledge to their future projects.
Act of Creation: Last, I think it’s worth pointing out that the vast majority of Kickstarter projects truly are acts of creation, which delineates them from pre-orders or other purchases. When I back a project, I’m enabling it to be made, I’m making it better via stretch goals, and I may even get to share my opinion about certain aspects of the project. When I buy a chocolate bar at the grocery store or even when I pre-order the new Red Rising book, I’m not participating in the creation of those things. They’re final and inevitable.
In conclusion, I don’t think it’s fair to directly compare Kickstarter to pre-orders, purchases, or loans–crowdfunding is its own thing that I choose to participate in.
My hope is that at least some of the people who spread their opinion that Kickstarter provides interest-free loans to creators are people who genuinely WANT to like Kickstarter–they’re just looking for some improvements before they give it a try (or revisit it after getting burned). If that’s the case, I totally appreciate their constructive criticism.
What do you think? Please state opinions as such. In the comments on my blog, it’s okay to disagree with me or others, as long as you do it respectfully.
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