What Happens If a Kickstarter Company Fails? Do You Get a Refund?

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News Posted: Tue, Sep 4 2012 10:16 AM
Kickstarter is the largest crowd funding website in cyberspace, and it's managed to raise millions of dollars for promising projects. One of them is Ouya, the $99 Android game console that originally had a goal of soliciting $950,000 but ended up with nearly $8.6 million in pledges when the dust settled. It's not the only project to blow past its goal, but it does bring up an interesting question. If the project fails, will backers receive a refund?

It's a question NPR presented to Ouya, which admittedly didn't know the answer.

"Technically, from a Kickstarter perspective, I don't know the answer to that," Ouya CEO Julie Uhrman said. "But from a doing-the-right-thing perspective, we will treat our backers the best possible way."

No Refunds

It's a nice thought, but if Ouya were to blow through its $8.6 million pile of cash and have nothing to show for it, then what? We're not saying that's going to happen, mind you, but given how popular Kickstarter has become, it's a question that's inevitably going to be answered, one way or another. As it stands, Kickstarter founder Yancey Strickler doesn't even know the answer.

"You know, that would be new ground," Strickler said when NPR asked if Kickstarter would get involved if Ouya turned into vaporware. "I don't know. I mean, no, I don't think that we would. But certainly, the kind of thing you're talking about is not a bridge that has been crossed yet. Someday it will. And you know, I think if something did go awry, it would be -- it wouldn't be my favorite day."

Ouya has a dozen backers who pledged at least $10,000, thousands who have pledged $140 or more, and over 46,000 pledged $99, equivalent to the cost of the console (minus shipping). There are a lot of eyeballs on this particular project, and with the amount of third-party support that's been announced, it will probably come to fruition. But at some point, a high profile project will drop the ball, and when that happens, the harsh reality is that backers will likely never see their pledges returned.
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Erakith replied on Tue, Sep 4 2012 10:24 AM

An interesting point, and one that I don't hope to see any time soon; especially with Ouya, or any of the projects I've backed like Wasteland 2.

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JOMA replied on Tue, Sep 4 2012 4:46 PM
If I were to give to one of these projects I wouldn't expect to get a refund if things went bad unless it was clearly stated somewhere. The answer from the company isn't very reassuring. I'd be curious to know what they're doing with all the extra money they got since it's way more than they were originally asking for.
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I backed both Double Fine Adventure and Wasteland II Kickstarter campaigns knowing I might never see a completed game. I think it should be implied by the project teams and understood by the backers that donating to the project guarantees you nothing. It's a little more cut and dry in the projects I donated to, since they give you progress reports and have already established themselves in the industry. The risk isn't too great that I'll see no product come to pass. Other projects, specifically the ones that are developing new technologies in a rapidly changing ecosystem, might just have prototypes that just don't cut it, or somebody privately funded comes along and beats them to market. Those are the instances where I see more chance of a failed investment.

At the end of the day, I feel it is the person fronting their money that needs to have their eyes wide open. Just like private investors that fund a project might never see a return on the investment, so might a Kickstarter project backer. It's the nature of the business.

 

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I wouldn't expect a refund, but then again I wouldn't give them any more than I could afford to lose either. (just like at a casino)

Dogs are great judges of character, and if your dog doesn't like somebody being around, you shouldn't trust them.

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Its funny, question you can hide alot of bs I have seen a game fail who father of friend invested millions. He was just out no returns no nothing. But the guy who started project kept all the patents and software and all that was gained. But restarted the project and made a toooooon of money.

Depends if it fails I definitely think remaining asset's should be divided. And all bonuses ect halted cause right before it failed the guy took huge bonus and said whoop's were broke sorry.

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sevags replied on Wed, Sep 5 2012 2:16 PM

This is a risk any investor has to take. When you buy stocks and the company doesn't do well (Facebook) or goes belly up (hopefully Facebook) there is not much you can do. You invested in or supported these companies and you have to be ready to take a loss. Donators on kickstarter should actually expect the companies they donate into to fail at a higher rate than a company already establish and on a stock exchange. These are companies with no investments, no portfolios, and often only a hand full of patents pertaining to the one product they are still researching and developing. There is no safety net for such a setup.

Who I do feel sorry for are the people who donate the minimum amount (which is a lot more than the average person donates) in order to be the first to receive demos units and other free goodybag type gifts. If those people don't receive the gifts the should be refunded because technically they paid extra to receive something not just to seethe company bring their idea to market.

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