
Aug. 1, 2012: When Oculus Asked for Donations - amitkumar01
http://blogs.wsj.com/digits/2014/03/25/aug-1-2012-when-oculus-asked-for-donations/
======
modeless
This is the real shame in the Oculus acquisition. If Oculus had been able to
give away just 10% equity, every single Kickstarter backer would be $20,000
richer today. The sentiment would be completely different. The SEC needs to
get in gear and start allowing equity crowdfunding pronto.

The SEC's classification of millionaires as "accredited investors" who get
first crack at all the best investment opportunities is exactly the kind of
"rich get richer" policy that people ought to be furious about. I think not
enough people understand it.

~~~
icpmacdo
If a crowd funding website that was completely bitcoin based would it be able
to avoid all SEC regulations? If there are regulations in the future is there
a liability to creating this now?

~~~
anigbrowl
It's better to address the problem directly (investor eligibility) rather than
trying to invent technological end-runs around it, because the law is not
deterministic and such technological instrumentalities are very transparent to
regulators..

------
ama729
From Notch:

"And I did not chip in ten grand to seed a first investment round to build
value for a Facebook acquisition."

[http://notch.net/2014/03/virtual-reality-is-going-to-
change-...](http://notch.net/2014/03/virtual-reality-is-going-to-change-the-
world/)

------
cookingrobot
For $300 those backers got the promise of an awesome VR headset. I don't see
why they should get equity for free on top of that.

It would be nice if kickstarter campaigns could add equity as and option in
the reward tiers, but it's not like these people gave their money for nothing
in return.

~~~
kevingadd
You're assuming every backer paid 300. Some donated more, some paid less.

~~~
dlp211
And? They knew the terms of the deal.

~~~
hrjet
This is not a legal proceeding. It is more of an emotional outpouring of
disappointment.

The unwritten deal was that the funders were backing a low-overhead, indie
organisation.

~~~
joesb
So they can never becomes big company?

It's like a pathetic jealousy of wanting to help a homeless as long as you
know they are never going to be richer than you.

~~~
hrjet
You are conflating _big_ with _rich_. It is possible to dislike the former and
yet support the latter.

Often, when companies get _big_ , the motives change from "making a great
product" to "milking the user for more money".

------
phantomb
"a $2.4 million early-stage investment in what would become a $2 billion
business in a year and a half, in return for 0.0% equity" No. Those backers
weren't investing in a company, they were purchasing a prototype device and
software package. In practice, that's how Kickstarter works. Sure, there will
be a lot of backers who are happy that their deferred purchase is helping a
project actually get off the ground, but I guarantee every person who handed
over the $300 read over the rewards carefully.

------
shittyanalogy

        1) Kickstarter is not an investment platform.
        2) Kickstarter is not a store.
    

Kickstarter is ONLY for _giving_ your money away to ideas you want to see
succeed. The _perks_ are a gamble at best and misleading at worst.

If you give money to a kickstarter for any other reason, despite what the
campaign or your friends or some blog tells you, you're quite unfortunately
doing it wrong.

~~~
nemetroid
The perks are _not_ a gamble. If the project creator fails to deliver, you are
entitled to a refund. Straight from the Kickstarter Terms of Use:

> Project Creators are required to fulfill all rewards of their successful
> fundraising campaigns or refund any Backer whose reward they do not or
> cannot fulfill.

~~~
shittyanalogy
Through what enforcement?

------
mehwoot
Well you can't have it both ways. If you put your money in on kickstarter and
expect to get a product in return, you have bought the product. You didn't
invest.

Of course, how much people who put money into things on kickstarter expect to
get a product versus how much risk they are expecting to take is an open
question.

------
booruguru
I've always found it bizarre that people would willing give hundreds (if not,
thousands) of dollars to fund a business venture for some paltry token of
appreciation while the founders (and investors) receive all of the financial
rewards. (The "Veronica Mars" movie comes to mind.)

Also, I find it deeply upsetting that I am be allowed to give my life savings
to a startup founded by a friend or family member, but I can't do this with a
stranger...because the government wants to protect me or something.

But, really, I can't really blame regulators for this paternalistic policies
since most people blame the banks for the financial crisis while pitying those
impoverished home owners who stupidly purchased homes they couldn't afford.

~~~
interpol_p
It wasn't a "paltry token" of appreciation in this case. It was the actual VR
headset, unlike anything else you could purchase commercially, for $300. I am
glad I got mine and knew what I was getting when I backed the project — a
really fun toy I could mess around with.

------
icambron
I'll just say it: Kickstarter is for suckers. When you give money to a
project, you're doing one of two things:

1\. Making a donation to a company. [1]

2\. Preordering something that hasn't been built yet.

Doing 1 is silly, since you don't really get anything in return. "But it makes
it more likely that this thing I want will happen!" In some tiny marginal way,
sure, but mostly it's going to happen because other people donate (or fails to
happen because they don't). Don't be the fool who tries to personally take on
the collective action problem. And stop trying to make other people rich out
of the goodness of your heart.

Of course, as the WSJ fails to make clear, most of Oculus's Kickstarter money
wasn't straight-up donations; it was preorders of the Rift. That's obviously
not a donation, but it's not a good idea either. As the buyer, you bear the
risk that it never ships at all. "But I'm compensated with a discount!"
Essentially, you're making an investment in which your returns come in the
form of future discounts on a product. Forget that you like the Oculus Rift
for a second; is this a wise investment structure? If someone set up a VC
company that did that instead of buying parts of companies, would you think
that was smart? Did you do any kind of analysis that suggests this is actually
works out to be a good investment? Do the potential returns even justify that
analysis? Do you think of other consumer products this way, or only shiny
electronic things?

Or to think about it a different way: imagine if someone set up a store that
worked like this: you take your item to the counter, where they don't actually
let you buy the item. Instead what you can do is pay the price minus n% and
then they roll this big roulette to decide whether you get the product (m%
success rate). If you win you get to keep the product and if you lose it goes
back on the shelf and they keep your money. To spice things up, they don't
tell you what n and m are either, just the price to play and whether you get
the item. Now, it's possible--though unknown--that m and n work out that
you're EV positive here. But would you really shop at that store? Especially
when there's another store next door that just sells you the same stuff at a
known price (i.e. just buy the Rift when it comes out).

The fact of the matter is that you're aren't pre-buying the Rift on a rational
basis. You've been convinced by clever marketing to shoulder risk for a
company because it _seems cool and feels good_. Total sucker move. That
probably explains why it tastes bitter when the company whose capital
requirements you fronted rolls that into a $2 billion dollar acquisition.

[1] Maybe it's not a company. Maybe it's a cause you support like improving
CoffeeScript or something. For those cases, I withdraw my objections.

~~~
InclinedPlane
Who cares?

You seem to live in a universe where everything goes according to plan, that's
not any real universe I'm aware of.

Kickstarter is about being a _patron_ of _creators_ for specific projects.
Sometimes those projects are by people working in good faith, sometimes not.
Sometimes those projects succeed, sometimes not.

The idea that this is somehow unusual is ridiculous. The idea that it should
be discouraged is actively harmful. One of the most powerful things anyone can
do with their money is to fund the development of things which change the
world. Create products they wish existed, create art they desire, support
creative or productive people, help others, etc.

------
daemin
So perhaps the answer is for Kickstarter to not allow any sort of companies to
be funded, but rather only keep it for once off art projects...

~~~
phantomb
I understand that's what the Kickstarter team is most interested in. But what
would that accomplish besides causing all the companies to simply move to the
next crowd-sourcing site?

If Kickstarter doesn't want a cut of that money I'm sure Indiegogo will be
happy to take it

~~~
daemin
It's a tough question Kickstarter might ask itself, but then again since it
gets a cut of all the funding that comes through it, why would it want to stop
(over)funding these company projects. I think at this stage it won't change
unless it is forced to from a third party.

------
blazespin
Actually, in all of this anger, there is great news. This is validation of the
crowdfunding format in a big big way. I hope this is just the start (well, the
start of getting actual ROI for your crowdfunding investment. Enough of this
Donation silliness..)

------
shurcooL
This is all that I'm reminded of:

[http://mashable.com/2010/04/02/facebook-acquires-
divvyshot/](http://mashable.com/2010/04/02/facebook-acquires-divvyshot/)

------
dalek2point3
my complaint is mainly with the headline. if the word "kickstarter" was
anywhere in the title I would not have clicked. d'oh.

~~~
maxden
and the headline has changed again...

it was "18 months ago Oculus did one of history's smartest rounds $2.4M for a
0.0% stake (wsj.com)

------
fiatjaf
If the government let it, every small company or utopian project would sell
stocks, not empty dreams, to believers in the internet.

------
refurb
Did Oculus raise more money after the Kickstarter or did these guys own 100%
of the equity?

~~~
djloche
They did a $75M round recently and have been hiring like crazy.

~~~
jes5199
at this point, we should read "hiring like crazy" as "trying to get acquired".
Having a lot of employees boosts your valuation but does little for your
ability to deliver a product

