Backers on the Back Burner

Backers on the Back Burner

You’ve almost certainly heard the news by now. Oculus VR, the company behind the ever popular and impressive Oculus Rift, was acquired by Facebook for $2 billion. (More precisely, for $400 million and $1.6 million in stock options, but who’s counting.) That is, if you can’t recall, twice as much as they dished out for Instagram two years ago.

The reaction has been, unsurprisingly, rather scathing. There have obviously been some good ol’ jollies to be had along the way, but it’s been overwhelmingly and purely negative from much of the Internet. Markus Persson—better known as Notch and creator of Minecraft—even announced that he’s canceling a deal with Oculus to bring Minecraft to the Rift.

An interesting question to ask, of course, is why, but the more important one is to ask is it justified. The reason is pretty simple: people are feeling cheated. Even if you weren’t a backer or even a fan of the virtual reality device, it’s easy to understand why you would take this news negatively if you were in a supporting role of the Rift’s meteoric rise.

Oculus Rift

For those that don’t remember, the Rift started out as a Kickstarter project. They asked for a measly $250,000 to bring to life a developer kit for this farfetched dream, but they instead got $2.44 million. That includes $10,000 from Notch’s own personal savings (not that he can’t afford it being 99% phat stackz now, but it’s an important part of the story).

Then, once they were imbued with legitimacy, hype, and fans, Oculus secured another $92 million in venture capital over the course of two rounds of funding during 2013. This enabled them to build an HD version, travel to give talks, and build better developer relations. Important steps to becoming a real, honest-to-goodness hardware company.

And that’s what many of the Rift’s backers thought they were doing: jumping in on the ground floor of a company they thought would do big things. Most of that statement is true, actually. They were there are the beginning, yes. Oculus is doing and probably will do even bigger things as well. But the jumping in part? Not so much.

Oculus Rift

The sourness from much of the Internet over the acquisition by Facebook seems to stem from the idea that they, by giving money to the original Kickstarter, gives me ownership over some part of Oculus’ enormous (and, let’s be honest here, ridiculous) success. Others thought they were explicitly giving money to keep the company as independent as the day it was born. Maybe some truly don’t understand the difference between crowdfunding and investing.

Regardless, the net result is the same: they feel cheated. They aren’t seeing a single dime of that $2 billion of Zuckerbloons, and for folks like Notch, they “did not chip in ten grand to seed a first investment round to build value for a Facebook acquisition.” And yet that’s exactly what happened.

Because it’s a fundraiser. Kickstarter is a fundraising platform, much like the ones that involve selling candy to your neighbors and quickly and poorly washing cars in your high school’s parking lot. When you make that exchange of either overpriced candy or terrible custodial services or even just freely giving away cash as a donation, you never expect to see anything beyond your immediate and discrete return.

Oculus Rift

You don’t expect to conduct a song at the orchestra’s concert during the tour you donated to. You don’t expect to be at the top of the pyramid at the cheerleading tournament you got the school’s team to. You don’t expect anything in return because you understand the transaction is nothing but a donation.

That is precisely what Kickstarter is. It’s even stated on Kickstarter’s About page: “Backers are supporting projects to help them come to life, not to profit financially. Instead, project creators offer rewards to thank backers for their support.” That’s it. Every project on the site is a busker with a hat in front of their tap dancing cat and every once in a while, people throw money in there.

There’s obviously much more to the psychology of the response here (including distrust of Facebook and general disdain for change), but the crux of it is that. It’s that people feel used and abused because they gave to something—helped put in a brick on the foundation of something so grand and important—and only got a pat on the back.

Oculus Rift

We really don’t know much to understand where this is headed (Instagram has been, more or less, left to its own devices, but Facebook does have a pretty good track record of tinkering with its own products and then shelving them when they don’t fit into their expansive vision), but this and failed project and scams and grifters are good healthy lessons in the crowdfunding world. We are not investors. We’re just people with some loose cash and an overdose of naivety.

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