Facebook’s $2 billion acquisition of Oculus VR should consider rewarding its Kickstarter backers with something greater than a T-shirt.
Facebook’s decision to obtain Oculus VR on the way to connect social networking with virtual reality hasn’t gone over well with the Kickstarter members who backed the startup.
Comments from Kickstarter participants had been predominantly negative, with backers saying they feel sickened, betrayed, saddened, and disappointed. Similar sentiment dominates discussions of the deal on Reddit — a lot in order that Oculus VR co-founder Palmer Luckey bothered to reply.
“i’m sorry that you’re disappointed,” Luckey wrote. “To be honest, if I were you, i’d probably have an analogous initial impression! There are lots of of the explanation why this can be a great point, a lot of which aren’t yet public. lots of people obviously feel a similar way you do.”
[Whom does Oculus take part the Facebook “family”? Read Facebook Oculus Deal: 5 Older Siblings.]
Luckey defended the explanation for selling his company, and only time will tell whether Facebook’s stewardship of its acquisition can win back the disaffected. However the deal reveals a fundamental flaw in crowdsourced funding: It’s too easily exploited.
Oculus VR initially sought $250,000 to begin the corporate and ended up raising greater than $2.4 million from greater than 9,500 backers through Kickstarter, a crowdfunding platform. If these backers had invested in Oculus VR for, say, a 50% stake within the company, they might have received $1 billion of the $2 billion price to be paid by Facebook. So each dollar of initial investment would have ended in a $416 return. For the greater than 5,600 of Oculus VR’s backers who made $300 contributions, that’s a theoretical payday of virtually $125,000.
That form of math, optimistic though it’d be, hasn’t been lost on contributors. Brian Bedford noted in a touch upon the Kickstarter page that he backed Oculus VR for $10. “I’d like my $8200 (0.00041%) of that $2 billion Facebook deal now, please. I backed a VR project for games, not an enormous social media company’s fairly obvious try to stay relevant… I’m a game developer/artist struggling to even discover a job within the face of frequent studio layoffs. Shareholder stake in something i thought in would have helped a good deal right about now, but screw the little people, right? Thanks for that.”
Of course, deals might possibly be structured in lots of ways, not all of which might be that favorable. What’s more, Oculus received venture capital funding after its Kickstarter round, making the equity percentages more complicated. Regardless, Kickstarter isn’t very an equity investment platform. It is a technique to promote the production of goods through prepayment. The backers didn’t invest; they contributed and hoped for something in return. Lots of them got T-shirts, as promised.
Kickstarter really should offer equity as an option, the manner Fundable works. No less than, it would require companies that get funded to repay their backers in full or more upon acquisition or receipt a raffle capital.
Oculus VR could be under no legal obligation to pay back its Kickstarter funders, but it surely often is the right thing to do after receiving the sort of large sum from Facebook. You notice this in other industries. When a film does spectacularly well, bonuses are often paid.
Paraphrasing the French writer Honore de Balzac, Richard O’Conner wrote in The Oil Barons: Men of Greed and Grandeur (1971), “Behind every great fortune there’s a great crime.” The fashionable version could be something like this: Behind every fortune founded on aggregated resources, there may be exploitation.
Social platforms get your content — free labor — or, relating to Kickstarter, your money. When aggregated, the full is worth greater than the sum of the parts. You get a free account to precise yourself amid ads or even a fantastic T-shirt. Some other person gets an empire. Some individuals are fine with that. But when fairness matters to you, insist on an equity stake.
Engage with Oracle president Mark Hurd, NFL CIO Michelle McKenna-Doyle, General Motors CIO Randy Mott, Box founder Aaron Levie, UPMC CIO Dan Drawbaugh, GE Power CIO Jim Fowler, and other leaders of the Digital Business movement on the InformationWeek Conference and Elite 100 Awards Ceremony, to be held along side Interop in Las Vegas, March 31 to April 1, 2014. See the total agenda here.
Thomas Claburn was writing about business and technology since 1996, for publications similar to New Architect, PC Computing, InformationWeek, Salon, Wired, and Ziff Davis Smart Business. Before that, he worked in film and tv, having earned a not particularly useful … View Full Bio
More Insights