It's not the same game at all, though. When you invest in a startup, you help them make a product which they then try to find customers for. When you back a kickstarter, you're basically pre-ordering the product. A successful kickstarter already has their first run of customers. Startups generally fail when they can't scare up enough business, while kickstarters only fail if they can't actually produce the product they promised.
This is an insightful comparison, but its significant to know that it is not actually a preorder.
When you preorder you are entitled to demand the product or your money back, but with kickstarter if it fails after a good faith effort you probably have no recourse. With most preorders (not all, but most) the product is near completion when you put in the order, but with kickstarter that product is often little more than plans at the point of pledging. It is similar to a preorder, but the differences matter.
Agreed. It's a different concept from both startups and preorders, but of the two it's more similar to a preorder. The ultimate point I'm trying to make is that, at the completion of a successful kickstarter, the creators have a guaranteed minimum customer base for the product, which puts them way ahead of the average startup. Success rates should therefore be much higher.
I am not a lawyer, but my understanding is the courts would see a distinction.
Kickstarter goes out of its way to try to make sure people understand that it is not a preorder service, and many projects include a "risks" section specifically talking about how it could fail.
There would be a clear case for fraud if the people asking for contributions just took the cash and walked. But in the event of a good faith effort that failed, I think the court would find that the contract was probably upheld. The possibility of failure was always there and what was promised was the effort.
