As a Venture Capitalist... here's how crowd funded games should be...

TwistedSister77

Ok, "venture capitalist" term may get people worked up here.  Venture capital can be just moms and pops... to Gordon Geeko.

I believe, and every indy game can do it... that they raise money via shares of stock with the game community (from which they need money from). Typically a small % of ownership... depending (it really is case by case basis)... for arguments sake 5-20% of shares initially.

Instead of blanket donations, give the gamers a return on investment via partial ownership (I won't go into the many rounds of investments needed to launch a venture, but it's very complex).

For example, instead of a "pledge reward" (or maybe in addition), gamers can get a % of stock.  

With stock, you have a lot of rights (financials, stockholder roadmaps, q&a at quarterly meetings..  all of which can be under NDA... not promoting publicly traded)... and you also have a chance to make a lot of money if the studio/game becomes massive. Risk vs Reward.

Demand part of the ownership, not some headstart, game assets, or NFT.  

Just my opinion on why crowdfunding is upside down.

ConstantineMerus

There are already equity crowd funding platforms and the thing is they are less successful than the pledge-based ones. And from the psychological point of view it makes perfect sense. When you are giving away $100 you really aren't looking to make money, you are just supporting an idea you deem cool, and no start-up worth its salt would sellout equity cheap. Funny thing is when you are investing you unconsciously deman to know more to able to trust, but when you are donating you would do it easier.

Now what you said is sound, and it exists maybe with some differences, but it won't ever replace the pledge-based platforms. 

TwistedSister77

ConstantineMerus said:

There are already equity crowd funding platforms and the thing is they are less successful than the pledge-based ones. And from the psychological point of view it makes perfect sense. When you are giving away $100 you really aren't looking to make money, you are just supporting an idea you deem cool, and no start-up worth its salt would sellout equity cheap. Funny thing is when you are investing you unconsciously deman to know more to able to trust, but when you are donating you would do it easier.

Now what you said is sound, and it exists maybe with some differences, but it won't ever replace the pledge-based platforms. 

I fully agree, some of the sharks I was with in the 1990s would see todays crowdfunding as the ultimate freebie capital.

It's a mentality today... 

ringdany

the pledge based platforms need to be and will be halted.

far too many of them are nests of criminal proceeds, full of lies and deceptions, which are crimes in themselves. many jurisdictions have laws against misleading and deceptive conduct. And guess what 99% of pledge based platforms have? Multitudes of liars and conmen defaruding innocent people.

You can't have this happen in a modern society. it breeds distrust and militates against social cohesion. Just imagine if your local neighbourhood was full of drug dealers hawking illegal narcotics and hookers on every corner. Is that what you want? That's pledge based marketplaces.

Instead, we already have very rigorous capital raising regimes which make people accountable for what they say and the money they raise. You lie or deceive in a prospectus? You are going to jail. That's what we need. Enough of these lying bastard carpetbaggers.

TheDalaiBomba

Digitizing cults was never going to end well, we just couldn't see that crowdfunding did that along with opening up avenues for indy developers.  Crowdfunding quickly became Apotheosis Now.

Like with Valve/Steam, we were too busy looking at the tree we liked so much to see the forest.  If crowdfunding games never ever happened, we'd all still have a ton of great games to play.  It's not as much of a boon to the average gamer as we would like to believe.

nurso

TwistedSister77 said:

I believe, and every indy game can do it... that they raise money via shares of stock with the game community (from which they need money from). Typically a small % of ownership... depending (it really is case by case basis)... for arguments sake 5-20% of shares initially.

Isn't that how the developers of Crowfall, ArtCraft, handled it? As far as I remember, in addition to the actual CF Kickstarter, there was also the option to buy shares in the company.

Theocritus

No venture capitalist would ever touch a MMO....The risk is just too high.....THere are plenty of other ways for them to make money.

Mendel

About all they really need to do is to enforce existing laws.  For instance, the Federal Trade Commission in the US has the Unfair or Deceptive Acts laws.  (https://www.federalreserve.gov/boarddocs/supmanual/cch/ftca.pdf)  These are long standing laws first passed in the 1800s to protect consumers.

For those who don't want to read the document, it clearly states that:

[quote]

An act or practice is deceptive where

• a representation, omission, or practice misleads or is likely to mislead the consumer;

• a consumer’s interpretation of the representation, omission, or practice is considered reasonable under the circumstances; and

• the misleading representation, omission, or practice is material.

[/quote]

Promised features that do not materialize and delivery dates that are missed both seem to fit under this definition in that they appeal for money before the product is available.  None of the crowdfunded efforts that I've seen are listed as charitable organizations (and few, if any, qualify).

Putting the crowdfunding on an equity basis would theoretically increase the customers protection, as stock ownership would fall directly under the Security and Exchange Commission's existing jurisdiction.

Bottom line, making games is good, having customers play the role of unprotected investors isn't.

Arglebargle

Not to dump on the OP, but a good friend who helped develop and owned part of a small game studio that went through three rounds of venture capitol.   His commentary on it?
'Nothing they (the VCs) wanted was ever good for the game.' 

Ungood

I don't mind the idea of people pooling their money to support and be a part of a dream, which is what Crowed Funding it.

Great idea at its base, really.. a truly wonderful idea.

The biggest problem with it, is that is all risk for the person who put in their money, like betting on the horse, you take all the risk when you put that money done, and if the horse fails, you are just screwed.

As I see it, there needs to be a risk placed upon the person asking for the money, not on the person giving it.

If the person asking for the money fails, they can't simply go "oh well, sorry I spent all your money, looks like I was stupid after all, and so where you"

There should be a system set down that the recipient will either succeed and provide the product, when they say they will, or they have to pay back every cent they received.

This puts the question of competency on the recipient, do they really feel they can pull this off, as opposed to all the risk being put on the person giving them the money.

The only real way for Crowdfunding to work, is if there are systems in place to hold them to their promises, IE: If they said it was going to be made by say, 2015, then at 2015, they either provide that product or a full refund.

Simple as that.

This would eliminate every fraud there, and give the people that can pull it off a platform to work from.

TwistedSister77

Arglebargle said:

Not to dump on the OP, but a good friend who helped develop and owned part of a small game studio that went through three rounds of venture capitol.   His commentary on it?
'Nothing they (the VCs) wanted was ever good for the game.' 

Yep, it's brutal to work with many brainless VC firms.  However, like life... there are some good actors and nitwit actors.  

Having a % shares to investor fans, would not really have the problem of have a few big investors breathing down your neck over every daily decision.

Sovrath

TwistedSister77 said:

Arglebargle said:

Not to dump on the OP, but a good friend who helped develop and owned part of a small game studio that went through three rounds of venture capitol.   His commentary on it?
'Nothing they (the VCs) wanted was ever good for the game.' 

Yep, it's brutal to work with many brainless VC firms.  However, like life... there are some good actors and nitwit actors.  

Having a % shares to investor fans, would not really have the problem of have a few big investors breathing down your neck over every daily decision.

What happens if the game company folds without a product? Do the investors understand this or is there some sort of inquiry?

[Deleted User]

The user and all related content has been deleted.

TwistedSister77

Sovrath said:

TwistedSister77 said:

Arglebargle said:

Not to dump on the OP, but a good friend who helped develop and owned part of a small game studio that went through three rounds of venture capitol.   His commentary on it?
'Nothing they (the VCs) wanted was ever good for the game.' 

Yep, it's brutal to work with many brainless VC firms.  However, like life... there are some good actors and nitwit actors.  

Having a % shares to investor fans, would not really have the problem of have a few big investors breathing down your neck over every daily decision.

What happens if the game company folds without a product? Do the investors understand this or is there some sort of inquiry?

You have more rights to class action sue, if there was fraud or misleading statements.  But like any risky startup venture... there is no guarantee the product makes it to market

If there are any assets (or asset/IP sales) if bankruptcy happens, shareholders get a proportionate cut (after any debtholders).

If I want to support an unproven game studio... give me some stock for my $$.  If you blow up like Blizzard, I should be rewarded... not seen as a fan charitable contribution to newly  made million/billionares.