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*sigh* Guess it is may then...


zedin
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At this point I believe there is only one case of someone suing a project creator due to fulfillment They won and took every last cent the project creator had left forcing them into bankruptcy over a $90 pledge...

 

Obviously though most of this has little to do with Reaper. Reaper is delivering everything per the terms of use.

 

You're referring to Neil Singh suing the creator of the Hanfree. He didn't "win" in court, he got summary judgment in absentia, which means the person he was suing didn't show up, and he convinced the court that they had all the facts they needed and the power to declare judgment even though the defendant wasn't present. The next step would have been to contact the New York courts with his Arizona summary judgment to get them to accept it, and demand Seth pay the $70. If Seth didn't, he could use a variety of means of trying to forcibly collect, most of which probably would have failed but in any case would have cost hundreds of dollars. In this case the project creator, Seth Quest, filed for bankruptcy before Neil got his judgment due to a number of financial problems, including rampant credit card debt. There's also solid evidence that he co-mingled the KS funds in his personal checking account, paid/hired "friends" with the money who never did the work nor signed any contracts, and cannot produce an accounting of what the money was even spent on. In other words, a total cluster****. If Seth had been smart enough to incorporate prior to running the project, and hadn't been so reckless in accounting, he would have been shielded from his backers completely.

 

Further complicating the case was Seth's language in the campaign, calling it a "pre-order", and saying things like "You will receive one Hanfree device" or two, or three, etc. for your "payment". Project creators really should say things like "If I successfully create the product, and have enough funds left to pay for shipping, you will receive..." but the reality is, it will cost you many hundreds if not thousands of dollars to ever use the legal system to collect your unfulfilled pledges. And like Neil, you probably won't ever get a dime.

 

In other words, NOTHING like Reaper. These guys are knocking it out of the park on one of the most successful campaigns ever, and some people are flipping out over a few weeks delay in a small company fulfilling 2 years worth of orders in one shot. I backed a project one year ago that was supposed to deliver 10 months ago and still hasn't, and I'm still ok with it. It's one guy, with a day job, and he got his books printed but shipping cost increases have left him several thousand dollars short of being able to ship them to backers. So he's selling copies at retail price and using the profits from that to ship his backer's rewards. If you don't have a the temperament to deal with the twisty winding road that is product development, KS probably isn't the place to be spending your money.

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Saddly, it seems far too many people view Kickstarter as a store, where it's more akin to Wall street with better guarantees. You are not buying something, you are agreeing to invest in something, with the agreement that you will get product back in return for your investment should enough investers be found to move forward.

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Saddly, it seems far too many people view Kickstarter as a store, where it's more akin to Wall street with better guarantees. You are not buying something, you are agreeing to invest in something, with the agreement that you will get product back in return for your investment should enough investers be found to move forward.

Sadly, most projects do nothing to dispell the notion of a store. (For obvious reasons, but perhaps KS itself should step up?)
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Wow, that article is completely different from everything else I've read about that. Way to go journalism?

 

 

I think, with it's current terms of use, from a legal stand point kickstarter is very much like preordering (if payment is collected at the time of the order, which varies by seller). You give them money, in return they promise to give you goods at a later date, they are legal bound to deliver those goods or give a refund. That's not a lot different from a preorder is it? If I preorder from a store and that store goes bankrupt the result is also the same.

 

There is absolutely no way to draw a similar parallel with anything having to do with wall street.

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It seems to be used that way a lot. But that's not Kickstarters declared purpose. That they are essentially allowing people to use them as a storefront for pre-orders is, In my oppinion, a failing on their part that could have a lot of ramifications down the line. Including, if a few bad incidents happen, such as the one mentioned previously, it could cause Kickstarter itself to go out of business, because of a loss of faith in them. Kickstarter was intended to be a way of bringing ideas and investors together, in an open and easily accesible, not to mention user friendly, form that encouraged people to invest who would normally not in something such as the Stock Market, with the agreement to take product in place of a share of the profits

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Cmorse, Reaper needed cash to pay to have steel molds created. They could have gone to a commercial bank for a loan, sold stock, issued bonds or a whole host of other methods. In exchange for the use of my money, they are giving me a consideration. I am not sure how that differs from anything that Wall Street offers.

 

Using KS gave them the cash needed, saved the interest costs and also saved them costs of most of the other options. If it were a pre-order, there would have been a catalog from the start.

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Cmorse, Reaper needed cash to pay to have steel molds created. They could have gone to a commercial bank for a loan, sold stock, issued bonds or a whole host of other methods. In exchange for the use of my money, they are giving me a consideration. I am not sure how that differs from anything that Wall Street offers.

 

Using KS gave them the cash needed, saved the interest costs and also saved them costs of most of the other options. If it were a pre-order, there would have been a catalog from the start.

 

 

Selling stock is transferring ownership of part of the company in return for capital. Kickstarter does nothing of the sort. If you think you now own part of Reaper you are misguided.

 

Commercial loan? You can't pay back a commercial loan in product at any bank I know of. They give you money in return for the promise of repayment of that money along with interest. This type of transaction is not allowed via Kickstarter. A bond is very similar to this and is also not allowed via Kickstarter.

 

Reaper needed cash to pay for molds. In order to do this they pre-sold the merchandise that would be created with those molds. A product does not need to exist yet for this to happen. What Kickstarter did was create a structure for Reaper to say that they wouldn't take any preorders unless they could get at least $30,000 worth.

 

Kickstarter has other functions as well, but when in comes to merchandise it's most comparable to a pre-purchase in both legal terms and effect.

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Legally speaking I think cmorse is correct. If Kickstarter allowed creators to offer part of their company in exchange for backing, they'd be in a heap of trouble with the SEC. The language the project creators put into the text of their campaign, main page, updates, comments and e-mail correspondence constitutes an open offer to the public, with the specific words chosen making all the difference in the world. If they say "Give me $50 and I'll decide if I ever give you anything in return" then those are the terms of the offer. If they say "Give me $50 and I *will* give you this product, shipped to your door, guaranteed by this date" then those are the terms of the offer. If you accept the offer with consideration (meaning doing something to commit to your half of the deal, i.e. paying them money) then they have a legal obligation to hold up their end of the offer, or they're in breach of the contract. It doesn't matter what happens that leads to the breach, you can sue them for it and collect damages of a variety of sorts. Reaper gave an estimated delivery date, so no, you're not going to win suing them for finishing their shipping six weeks later. Reaper did promise the products selected by the backers, and if they failed to deliver for any reason, you'd be legally entitled to recover damages (your money back in this case, plus interest).

 

Your relationship with Kickstarter is governed by the terms of use, and forms a separate contract. You'll also notice you never actually pay Kickstarter anything. Any more than you pay Amazon. You pay the project creator, with Kickstarter as an intermediary, and Amazon as the payment processor (who collects a fee for running your credit card). Kickstarter takes their fee from the project creator for the service of hosting their project. So at least in court I think Kickstarter and Amazon are in good shape.

 

Peoples' perceptions of what they're getting into is a valid concern, and Kickstarter could potentially do more, but they have already said they don't guarantee anything and you're entering into an agreement with the project creator. I'm not sure what exactly would help that soak in with people. If someone rings your doorbell and offers to deliver cookies next month if you give them $20, you're in a similar situation... you're taking them at their word that they're going to come through, and the cookies themselves haven't been made or held in stock. They're going to take all the preorders, place a larger order, and then distribute them. You're legally covered if you never hear from them again, but you should at least be aware that there's substantial risk in the agreement you're entering into and that you're never going to get your money back via the legal system without spending a lot more than $20 in the pursuit of it.

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I'm actually going to disagree with a lot of what people are saying here. That is, while the legal responsibility of a project creator is somewhat murky, backers have a right to be unhappy if the project fails to go through. So do investors, if the person who took their money doesn't fulfill his promises.

 

Let's say I make a Kickstarter to make an SCP boardgame, selling it as HeroQuest meets Men in Black. I say that I'm going to have it done by November 2013. If March 2014 rolls around and I haven't given any updates, people have a right to be cross with me. If December 2014 rolls around, even if I've given reasons, people are not going to like me very much. If in January, I roll out a cheap board that's basically Candyland with SCP art instead of candy, people are not going to feel I have lived up to my promise.

 

Now, I might be legally in the clear, if I can argue I've made a good faith effort. But people are not going to want to do business with me again. There comes a point where either I haven't given the project the attention it needs, or else I wasn't competent to try it in the first place. Maybe I didn't do my research, and it was just much more than I could actually handle. Maybe I used the money unwisely. Whatever the reason, there comes a point where I start to look like a bad investment.

 

Don't misunderstand me. Things happen. Sometimes things get delayed, like the final shipment with customs. Maybe one of the artists involved takes a bit longer, or there are technical issues that couldn't be foreseen. If it's something minor, people are generally going to understand, which is why communication in a Kickstarter is so vital. The better backers can understand that the creator did everything in their power, the less angry they'll be. There will still be some stigma if a project completely falls through, but it could be the difference between, "Never gonna do business with that guy again," and "Eh, I'll just go for a lower tier this time around."

 

There's also a question of assumed risk. Something that's entirely new, hasn't been tried before, has a much greater risk than, say, publishing a book, or making pewter miniatures. So long as the creator is up front about it, people are going to be more understanding if things get delayed, or even cancelled. It's a very clear gamble. Someone making a relatively common, tried product, isn't taking the same technical risks.

 

Now, none of this applies to Reaper. They're fulfilling their promise. They got everything ordered, they've received everything, and they're sending it out. Where they've been forced to deviate from their original plan, they've been very open about why. They've explained what made it necessary, and at least in the case of customs, they were clear about the possibility from the start. The only place I see they have any real fault here was not realizing the issue with the paint bottles in time. Unfortunate, but with all they had on their plate, it was understandable.

 

My main worry is the idea that people should be given a pass just because it's Kickstarter. Far West was supposed to be out over a year ago. Cairn may not happen because the creator mismanaged funds. The creators aren't necessarily bad people, but they are not good business risks. They should be called out for not delivering. Backers should be upset with them. Maybe they aren't legally liable, but people should be wary about working with them. I know I won't back anything by Mike Nystul again unless he has someone with a lot better business sense in charge of the purse strings. Doesn't mean we should be growling at every delay or making accusations every time something goes wrong, but there does come a point where the project creator needs to be pointed out as an example of what not to do, who not to back.

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...

you asked for a parallel and I gave you nothing more. In the loosest sense, both involve putting up money in return for a consideration. And I am aware that I have absolutely no ownership of Reaper.
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The fact is, there isn't a perfect analogy for what Kickstarter is. It's not quite a pre-order, it's not a real loan, it's not an investment. It probably comes in closest somewhere between a grant, a loan, and a pre-order, depending on the nature of the Kickstarter. It's new. We're still figuring out what it is and how it should work.

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Saddly, it seems far too many people view Kickstarter as a store, where it's more akin to Wall street with better guarantees. You are not buying something, you are agreeing to invest in something, with the agreement that you will get product back in return for your investment should enough investers be found to move forward.

Give an example of a way in which it resembles, legally, an investment.

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...

you asked for a parallel and I gave you nothing more. In the loosest sense, both involve putting up money in return for a consideration. And I am aware that I have absolutely no ownership of Reaper.

If you're calling that a similarity, then you cannot deny that it has the same level of similarity with a purchase. There is nothing in that sentence that does not also apply to buying a hamburger at McDonalds. They are only similar in the broadest sense that money is involved, vaguely.

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