142 - Ethics of Kickstarter

[matt]

Slacker backing packages are pretty much a no brainer for project creators. I've heard that projects can make 10% of their kickstarter goal in slacker backer packages. We've made a few thousand I think, which is definitely helpful. At a certain point, I'm going to shut off alpha access packages, and I'll probably close the regular backer pages at some point before launch, so we have time to get everyone in the credits who want to be.

Plus, I want to make a big splash at launch on Steam, so we can get in future promos. That seems to be really important to the success of your title these days.

[JPrice]

Well after deliberation, I think I will get that Designers Notebook
Considering you said that you provided a lot of insight into the games creation into it (Which I'm rather interested in reading!)

[matt]

I think the design doc should be pretty interesting. I think it has 3 or 4 rough notes from other game ideas that I merged into Neverending Nightmares, a few revisions on the "big" design doc. We don't do the 100 page design doc that some companies do because they are out of date as soon as you hit print, but I basically spell out what I was trying to do with the game, which may not be obvious just from the game. (It's going to be pretty open ended I think...) I think I'm up to 60 pages with it, and I'm not done yet.

I'll try to cover the broad strokes in the director's commentary, but the design dos is going to be a lot more thorough!

Thanks for your support! I think you'll be pleased with it!

[ranger_lennier]

people like Colin Moriarty at IGN have suggested that we instead use a sort of crowdfunded venture capital model. So a developer could say that in exchange for funding their game, they were willing to sell a set percentage of it.

That actually exists (https://www.fundedbyme.com/en/) and the developers of "U55 - End of the Line" are turning to it to get their game off the ground. You can check it out here.

The problem I see with that is it's a neverending accounting nightmare. Firstly, I look at the numbers on U55's page, and they mean nothing to me. I am lending what, and I get what? When do I get it? For example, with Neverending Nightmares, we worked several months unpaid. If we were sharing the profits, would we pay ourselves out of the revenue before declaring it profit? What sort of expenses are acceptable? What if I decided to fly all over the place to promote the game? That could hurt the value to my investors rather than help it. How many years do you continue to get your percentage? If a game is making $100 a month and you have 0.1% share, do they have to mail you a check for ten cents every month?

On top of that, their valuation is really high. A total of 32,000 euros nets you 3.2% of the project. that means that the entire project is valued at 1 million euros. I'm all for sweat equity, but if I were an investor, I'd want to get a better deal than that.

Plus, I don't want euros because US banks are garbage and screw me over on the conversion. Despite happily funding the kickstarter, I'm not going to touch fundedbyme with a 10 foot pole.

The Funded By Me site is interesting. Maybe a site based in America would be better for American creators, though. I think a lot of the problems you mentioned could be mitigated by being clear beforehand about what the money will go to. It would be reasonable to dedicate a certain amount of funds raised to developer salaries, since they're spending so much time on a project like this. If you want to use some funds for marketing, say so. I think as long as you're clear and honest, then if you can convince backers it's a good investment, you're fine from an ethical standpoint. The main problem I see here is that you might not have enough flexibility to change the allocation of funds as the project takes shape. Maybe investors could vote on proposed reallocation? Of course, I think any crowdfunding venture is bound to have potential problems. People are putting money into something that doesn't exist yet, and you can never be 100% certain that it will turn out like it's initially described.

You're right that it doesn't make sense to mail someone a check for 10 cents. If I were creating a venture like this, I think I'd have the person/company receiving funds periodically give my company a share of the revenues. Then I would distribute that into individual user accounts (after taking my cut). The user could use these funds to back other ventures, or request a check or direct deposit when their account surpassed some minimum value.

[matt]

I think as long as you're clear and honest, then if you can convince backers it's a good investment, you're fine from an ethical standpoint. The main problem I see here is that you might not have enough flexibility to change the allocation of funds as the project takes shape. Maybe investors could vote on proposed reallocation? Of course, I think any crowdfunding venture is bound to have potential problems. People are putting money into something that doesn't exist yet, and you can never be 100% certain that it will turn out like it's initially described.

I feel like this would be hugely time consuming! I forgot about a lot of things in the kickstarter budget and there are new opportunities that come up that I couldn't have known about. I didn't budget for the MIX conference at E3 or Steam Dev Days, but I was able to make the decision that these were worthwhile opportunities and jump at them.

I spend a fair bit of time on developer diaries, community management and all that, but if I had to constantly poll investors for budgeting accounting decisions, it would be a lot of time wasted that I can't afford, and I try not to spend too much time on the accounting/planning side of things because it honestly makes me really nervous and anxious.

Having a few investors would probably require having a board of directors, which sounds like a nightmare. Having a board of directors that included everyone who donated $100 or whatever sounds really troubling.

Perhaps others will find success with fundedbyme.com, but I feel like kickstarter is much better for me given how limited our accounting team (me) is. As a project supporter, I prefer it too because I know exactly what I'm getting for my money, and I don't have the hope or expectation that I'll get paid in the long run, which most likely won't work out. Most game projects are unsuccessful as I learned on Retro/Grade...

[ranger_lennier]

Well, publicly traded companies sometimes have to put questions to a vote among all shareholders. I think the crowdfunded venture capital model would work better for a mid-sized team with someone dedicated to accounting rather than a very small team. I'm not opposed to the Kickstarter model, but I can see how Oculus backers would at least be a little wistful wondering what would have happened if they'd gotten equity in the company.

[matt]

I can imagine that people are wistful, but they got what they paid for. They got their rewards and helped make VR a reality.

I think when people look for investment, they often aren't looking for JUST money. They are looking for business advice from successful venture capitalists on the board as well as opening up strategic business opportunities.

With crowd investment, you only get the money and none of the other benefits. For it to be realistic, I think you'd have to limit people who carry weight in accounting decisions to people who have a lot of skin in the game. I don't think you can ever get a group of people to agree about money. Compromise means no one is happy.

With 24 Caret, there were two founders (well originally 3, but one quit), and sometimes it was really tough to resolve disagreements. With Infinitap, I get to make all the decisions, and quite frankly, it's a lot easier. I ask advice when I need it, but I'm the only one who really understands what the game is supposed to be, so it would be tough to justify all my decisions even to people on the team without lots of explanation about what exactly I'm trying to accomplish. Instead, I can just focus on actually accomplishing my goals. hahah