Do You Even Understand How Crowdfunding Works?

So you think you understand how crowdfunding works? Spoiler alert: You don't. Now let me enlighten you so you don't look like a dumb-ass.

Crowdfunding is a brilliant way for individuals and companies to raise money for a project they want to get going. Not everyone can - or will - go the venture capitalist route, and for them, sites like Kickstarter is an alternative way to fund their adventures.

The Kickstarter posts I’ve published over the last year have been exclusively about the dark side of crowdfunding. They have told the stories about game development campaigns that have either failed miserably, or are long overdue on their estimated delivery dates.

Although it might very well look like it, I’m not trying to shame anyone (too much) in these posts. Software projects are incredibly complex endeavors, and getting everything you promised delivered on time is basically impossible1.

In this post, however, I’ll do something a little different. I won’t focus on the crowdfunding campaigns themselves. Instead, we’ll turn the spotlight the people pledging to them. A lot of these people don’t seem to understand how crowdfunding actually works, and it’s really grinding my gears!

What is a Pledge!?

Failed Kickstarter campaigns are not hard to find. Confederate Express turned out to be a fascinating story about scams and Airbnb squatting. The team behind Core Worlds Digital promised the (digital) world, but went incommunicado before the project was finished. And Limit Theory was one man’s all too ambitious dream of a procedurally generated universe, a dream that turned into a nightmare that finally shattered when the creator realized the task for too daunting for a mere mortal.

In all of these examples of failed projects, many pledgers have demanded their money back. To them I say; “you dimwitted idiots, you.”

Before pledging to a Kickstarter campaign, you have to understand what a pledge is! It shouldn’t be too hard, because it’s right there in the very definition of the word:

Pledge (noun): something delivered as security for the payment of a debt or fulfillment of a promise, and subject to forfeiture on failure to pay or fulfill the promise.

– definition of “pledge”.

So if you pledge to something, the pledge is forfeit if whoever received the money fail to deliver. Yes, you gave someone your hard earned money, and got nothing for it. But, please, stop crying for your money back, you knew that could happen.

Is it an Investment!?

Many projects also tend to fall way behind schedule. One such example is XO, a retro sci-fi strategy game. The game was supposed to be released in March, 2016, but as of right now, it’s not even in alpha. Unsurprisingly, people are getting a wee bit grumpy in the campaign’s comments section. Most of all, pledgers are complaining that it’s been three years since the game should have been released.

That the project has slipped that far behind schedule is a legitimate complaint. But some of the pledgers are going on about how their investment has failed.

I hate to be the bearer of bad news, but a pledge is not an investment! Here’s the definition of “investment”:

Investment (noun): the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value.

– definition of “investment”.

A Kickstarter pledge is like throwing your money into a black hole, hoping it will somehow defy the laws of gravity, and miraculously turn into something remotely resembling what the project promised. A crowdfunding pledge will never gain profitable returns unless you consider getting whatever you pledge for as “profitable returns” - which it’s not.

The front page of a The Financial Times Newspaper showing stock market information.
If you want to invest, perhaps you should consider the stock market instead of crowdfunding. Photo by Markus Spiske on Unsplash.

What the Hell is an Estimate!?

Many Kickstarter pledgers also need to look up the definition of “estimate”.

Estimate (noun): An approximate judgment or calculation, as of the value, amount, time, size, or weight of something.

– definition of “estimate”.

When you estimate how long something will take, you make a half educated guess. It’s often based on your former experience with doing the same thing, or something similar.

Try to estimate how long it will take for you to do a mundane task you do every single day. Eating breakfast, dressing, or traveling to work are good examples. Not too hard, right? But what if a few monkey wrenches are thrown at your precious estimate?

Let’s say you drive to work, and that it normally takes 30 minutes. So, naturally, your estimate the time it will take to get to work to be 30 minutes. But today, there’s a huge pile up on the freeway, and the drive suddenly takes 90 minutes. That’s three times as long as you estimated. And the delay was caused by something that was entirely out of your control.

Now try to estimate doing something you don’t do every day, like creating a god damn computer game.

You will fail.

All together now

So, in summary, here are three basic Rules of Crowdfunding.

  1. Your pledge is forfeit if the campaign fails to deliver. You gave away your money in good faith, and someone fucked you over - perhaps even intentionally. You will never get your money back.
  2. Your pledge is not an investment. It’s a pre-order of a product that doesn’t exist. And perhaps it never will.
  3. The campaign will not deliver on time or with all the features they promised. It just won’t happen. Ever.

If you can’t stomach these simple facts, then pledging to crowdfunding campaigns is not for you.

  1. At least when they are planned using the old-fashioned, waterfall model of a typical Kickstarter campaign. ↩︎


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