Althouse: "We gave Palmer our hard-earned cash to help start what we thought was the beginning of a VR revolution by a small intensely-focused group of visionaries and engineers."

March 26, 2014

"We gave Palmer our hard-earned cash to help start what we thought was the beginning of a VR revolution by a small intensely-focused group of visionaries and engineers."

"Having them sell out to Facebook, which is widely seen as the embodiment of all that is wrong with the new digital economy, is truly heart-breaking."

This is about Facebook, virtual reality goggles, and the sense of entitlement felt by folks who fork over money on Kickstarter.

Heart-breaking? Everything's heart-breaking these days. How are people still living with such fragile hearts? You gave somebody money to try to make something, which he did, and then he cashed in, and you can't say "what the fuck" loud enough and your heart is broken? Maybe you've been spending way too much time inside virtual realities. Get back to real reality and recalibrate your expectations and emotions.

42 comments:

damikesc said...: I'd argue this is different than usual. They did significant fund-raising thru Kickstarter, which is certainly not made up of venture capitalists.

Then they sold the company at a tidy profit for themselves.

Kickstarter isn't the usual venture capital path by any means. It has effectively killed their project (game developers, such as Mojang (who makes Minecraft) are already cancelling Oculus projects).

Raising money from average consumers and not venture capitalists brings different dynamics to the table.

If this was the path they wished to take, they could've bypassed Kickstarter totally and gone the usual venture capital route. They didn't and they are reaping the issues.; 3/26/14, 6:03 AM
Ann Althouse said...: @damikesc Yes, I know. My point is these Kickstarter people are incredibly naive. But they do have the control that is social pressure and disapproval. They just seem really dumb to me. They retained no rights to determine what was done with the operation they funded (I don't think!).; 3/26/14, 6:20 AM
Ann Althouse said...: The usual venture capitalists would set it up so they'd get a big cut of the profits at the point of cashing in. That's the difference, and it hurts to see it and be left out. You feel like a chump. Welcome to non-virtual reality… in which you are not a superhero (like in those games) but a baby. Cry then. But grow up!; 3/26/14, 6:22 AM
lgv said...: The problem with Kickstarter is that the money is a gift, it is not venture capital. It is not equity. So be it they now hate Oculus. For Oculus to be a success it needs huge capital and to appeal beyond Kickstarter investors.

You give $100 to your crazy uncle to start a robotic dog poop pickup business. You receive nothing in return. Then you gripe because he sold it the Koch brothers for $1billion. You don't have a right to gripe. Keep your $100. Pick up your own dog poop. Your $100 doesn't give the right to determine what "success" is for the company.; 3/26/14, 6:30 AM
stlcdr said...: Kick starter brings your average yobbo to venture capitalism. The same with stock markets and investments. Most people are not good at it.

It is a risk. People invest because of the potential for a big payoff. Greed and gambling are also elements.

Also, big companies don't just decide to buy smaller, potential, companies; the smaller company decides to sell. There's a price for everything in a capitalist world.

I, personally, don't like facebook - more so that people don't see it for what it really is (a wagon for marketing) but it's a company selling what people buy. People think they are socializing; they buy something that makes them feel good.; 3/26/14, 6:31 AM
Ann Althouse said...: "It is a risk."

No it isn't. You give up your money and your money is gone. 100%.; 3/26/14, 6:51 AM
CWJ said...: Never heard of Kickstarter before this. You can dress it upwith words like investment, but It sounds like charity without the tax deduction. Dumb.; 3/26/14, 6:55 AM
damikesc said...: They have no rights...but a lot of these people bitching are the early adopters who will make the product a success (Minecraft was one of the big announcements for it). Without early adopters to show it to friends, then the more casual consumers won't end up buying it either and it will die on the vine.

Facebook has shown no capacity to make anything outside of their core business remotely interesting (and the core business is dying now) . Nobody wants a VR and social networking hybrid. It defeats the purpose of VR.; 3/26/14, 6:59 AM
SJ said...: There's a law about private investment in non-public companies. (I think the concept dates back to the Great Depression era...but the most recent legislation was part of the Dodd-Frank Act.)

That law requires all such investors to have a minimum net worth. The idea appears to have been to protect poor people from hucksters who would form a private company, attract investors, and disappear with the money.

Kickstarter can be used to work around such laws.

Except that, the way Kickstarter is structured, they are asking for donations, not investors.

The terms of the contract don't give Kickstart donors any control of the project funded.

This particular project must have been promising. Did Palmer approach FaceBook, or did FB approach Palmer?; 3/26/14, 7:10 AM
Xmas said...: I agree with Dami. The buzz about the Oculus Rift was all the small and independent game developers looking to build games and apps for the hardware. The types of people that like those things that also use kickstarter to support those sort of developers are turned off by big money and the strings attached by big money investors.

Basically, the small money folks are upset that their unspoken-assumption, boutique-product strings have been cut and replaced with Facebook, revenue-maximizing strings.; 3/26/14, 7:20 AM
Xmas said...: SJ,

I dunno who approached whom, but the Game Developer Conference is happening now. Several game companies where showing off games built for the OR that were big hits at the conference.; 3/26/14, 7:24 AM
damikesc said...: Heck, they got John Carmack to join them. People can criticize his game design choices, but he is the best coder and smartest guy that business has seen.; 3/26/14, 7:44 AM
damikesc said...: I was personally stunned Microsoft didn't buy it since Sony has something similar in development.; 3/26/14, 7:45 AM
Paco Wové said...: From the ever-reliable Wikipedia, "People who back Kickstarter projects are offered tangible rewards and special experiences in exchange for their pledges."

Are the Kickstarters still getting whatever it was they were initially promised? It's not clear from the WaPo article. If they're not, I don't blame them for being cheesed off.

It does seem like a pretty big flaw in the Kickstarter 'business model', though, if the recipients can just take the money, turn around and give a big Nelson-Muntz "HA-ha!" to the Kickstarter donors.; 3/26/14, 7:48 AM
damikesc said...: Which has happened a couple of times. Kickstarter won't last a long time like this.; 3/26/14, 8:15 AM
The Crack Emcee said...: "Get back to real reality and recalibrate your expectations and emotions."

Amen.; 3/26/14, 8:23 AM
'TreHammer said...: Someone's mellow just got harshed.; 3/26/14, 8:43 AM
'TreHammer said...: Someone's mellow just got harshed.; 3/26/14, 8:43 AM
CWJ said...: Paco Wove,

I read that Wikipedia article before commenting above. I looked for specific examples of the tangile rewards and special experiences without success. Did you find any?

Tangible rewards and special experiences is what you say when you can't say equity stake.

I'm sticking with charity without the tax deduction.; 3/26/14, 8:52 AM
Paco Wové said...: Here is the Kickstarter page for Oculus:
https://www.kickstarter.com/projects/1523379957/oculus-rift-step-into-the-game

And here is a CNET story that offers a bit (not much) more detail than the WaPo:

http://www.cnet.com/news/what-does-the-facebook-oculus-deal-mean-for-kickstarter/

The Kickstarter page describes what the backers got for their support. It varied by $$$ donated. Mostly schwag like T-shirts and posters, plus free copies of the SDK for big donors.

To me, it sounds like the Oculus people satisfied all their implied obligations to the Kickstarter donors.; 3/26/14, 9:04 AM
CWJ said...: OK, this is funny. If you click through to the Washington Post article, and then click the "kickstarter's forum" hotlink, I believe you'll find Oculus' tangible rewards and special experiences listed down the right hand margin.

These range from a "sincere thank you." ($10) to flying you out to Oculus to spend a day with them ($5,000). In between, are various other levels of knicknacks like Oculus posters, t-shirts, and development kits.

Now if they only had an Oculus coffee mug it would be a full-fledged PBS pledge drive. Charity without the tax deduction indeed.; 3/26/14, 9:15 AM
CWJ said...: We cross commented but got to the same place. Well done Paco Wove!; 3/26/14, 9:16 AM
Known Unknown said...: I looked for specific examples of the tangible rewards and special experiences without success. Did you find any?

For example, you fund a short independent film. For $10, you get a poster. For $25, you get a DVD. For $50, you get a script/poster and DVD. For $1000 you get your name in the credits. For $5000 you get a producer credit.

Those are the incentives built into Kickstarter. It's not a traditional ROI model, but just another way to get funding for independent projects.; 3/26/14, 9:30 AM
Known Unknown said...: Sorry, commented late.; 3/26/14, 9:30 AM
Paco Wové said...: Yes, the extra-dark French Roast keeps my fingers flying in the morning. I am the Speedy Gonzales of commenters! ¡Andale!

Back on topic, it sounds like most of the Kickstarter donors are upset because Oculus is more concerned with filthy lucre and base commerce than remaining cØØl and 133t. Charitably, I'd say the donors' concerns are ... unrealistic and naive.; 3/26/14, 9:31 AM
madAsHell said...: No it isn't. You give up your money and your money is gone. 100%.

At best, Life imitates South Park.
"Another rube self identifies" h/t Instapundit.; 3/26/14, 9:47 AM
CWJ said...: At this point, the ".....and all I got is this lousy t-shirt" joke seems apt.; 3/26/14, 9:51 AM
Wince said...: The heart-broken Kickstarters should thank the government for "protecting" them.; 3/26/14, 10:02 AM
mccullough said...: Welcome to the game.; 3/26/14, 10:11 AM
YoungHegelian said...: There's no reason why a Kickstart funding proposal can't promise stock in a privately held corporation to funders.

That Oculus wasn't giving stock at a nominal value (e.g. $100 for one share) should have been the tip-off to donors that Oculus was just out to grab their hard-earned cash & sell out.; 3/26/14, 10:13 AM
richlb said...: My favorite indie band just got signed to Atlantic Records? I'm never going to buy another one of their albums.; 3/26/14, 10:53 AM
George said...: There are a lot of small companies that use Kick Starter to basically pre-sell a product before they make it.

I have participated in 6 kick starters like this. In every case, I have gotten the promised item, although sometimes it has been very late. In one case it was a year late.

But Kick Starter has a lot of success and happy customers in addition to the folks like Oculus Rift where the backers are unhappy.; 3/26/14, 11:32 AM
Paco Wové said...: If the Kickstart donors have received the trinket they were promised in exchange for their donation, in what sense are they still "backers"? It's not as though the company has any legal or financial obligation to them anymore, if it ever did.; 3/26/14, 11:39 AM
cubanbob said...: "It is a risk."

No it isn't. You give up your money and your money is gone. 100%."

Fools and their money soon part company. Perhaps these fools will learn that a gift isn't an investment.; 3/26/14, 12:15 PM
Sigivald said...: "I'd rather have them maybe fail from lack of money than get money from CORPORATEZ" is how I read that.

Which is lame.

Did the Kickstarter people not get something they were promised? (Mostly posters and other stuff, and some prototypes and dev kits. AFAIK every Kickstarter reward was delivered...)

Is the device going away?

Hell, I think it has a much better chance of success now that it has a giant pile of money behind it.

Not that I'm really sanguine about its prospects, or VR in general; just like 3D movies, it's less awesome than it seems.

(I have happily donated to Kickstarter campaigns for games and comics, and gotten exactly what was promised as a donation reward.

But I'm also not a kneejerk anti-"corporate" reactionary.); 3/26/14, 12:37 PM
Fred Drinkwater said...: Want to complain about the behavior of a Kickstarter project? Fine, knock yourself out. But, you do not actually own any part of the company when you "invest" this way - it's really a no-strings donation.
Want to be an owner, with rights? Then read up on SEC rule 506 (in particular, 506c), and look for companies soliciting funds through that path. Or look up your local Angel investor organizations and see if you qualify as an "accredited investor".
Want to avoid all that hassle? Open a Schwab account.; 3/26/14, 3:59 PM
Dr Hubert Jackson said...: I have said that about Kickstarter from the beginning. It's basically a VC fundraising that doesn't give you anything except the promise of a product later but only if it's successful.

Some things it's good for. I've seen some gaming supplements use the Kickstarter model "if 1000 people each pay $20 I'll write a book adapting Walking Dead to Dungeons and Dragons" or whatever. But when it comes to VR gaming technology it's silly to the extreme.

Everything good about Kickstarter is basically an unregulated selling of "stock" except you get no upside if the product you funded is wildly popular.; 3/26/14, 5:16 PM
Smilin' Jack said...: I'm thinking about teaching some traditional etiquette — like boys opening doors for girls and boys asking girls to dance — and having girls' sports different from boys' sports.

Not to mention teaching girls the proper techniques for fellatio. I'm constantly surpassed at how many recent graduates of Christian schools are sadly deficient in that area.; 3/27/14, 1:46 AM
Kirk Parker said...: This comment has been removed by the author.; 3/27/14, 4:15 AM
CWJ said...: This comment has been removed by the author.; 3/27/14, 6:12 PM
rcommal said...: Oh, my.; 3/27/14, 11:52 PM
rcommal said...: In terms of both virtual and non-virtual reality, I still say that real life involves "ands" more than "ors."

I still stand by that, full stop.; 3/27/14, 11:54 PM