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Investors usually have terms which defines the contract you both agree to. Investments usually result in an ownership transfer though which doesn't have the sa

Investors usually have terms which defines the contract you both agree to. Investments usually result in an ownership transfer though which doesn't have the same kind of hard stops necessarily.

jacquesm 3y ago
That ownership is worth exactly nil if the company fails or fails to deliver. In fact being an investor in an early stage start-up has substantially worse expectations on a per-project basis than Kickstarters. Kickstarters are 6 times more likely to succeed compared to angel investments. And when you lose your angel investment it will be a large multiple (1000x) of what you would put behind a typical Kickstarter. That increase in risk and increase in capital involved is what powers the legal requirements, and that's where there is no document with a signature on it or any legal stuff to review before you can back a Kickstarter with $50 or $100 of your hard earned money: the risk is negligible compared to an angel investment. And investments do not necessarily result in an ownership transfer, at the seed and angel level convertible loans effectively postpone that transfer, possibly in perpetuity unless the business manages to raise a later round. Because everybody involved recognizes that if that doesn't happen there is no point in engaging in the song-and-dance of ownership transfer at a non-realistic valuation. Your typical start-up team is far more capable in terms of business savvy than your typical Bickstarter initiator (artists, tinkerers, hobbyists, wannabe entrepreneurs) and they tend to be much less sure of their ability to bring the project to term. They will most likely underestimate their costs and runtime, overestimate their ability and availability of parts. This should factor heavily into the decision of whether or not you want to back a Kickstarter at all, no matter what the desirable features of the gadget are.

Investors usually have terms which defines the contract you both agree to. Investments usually result in an ownership transfer though which doesn't have the same kind of hard stops necessarily.

jacquesm 3y ago

That ownership is worth exactly nil if the company fails or fails to deliver. In fact being an investor in an early stage start-up has substantially worse expectations on a per-project basis than Kickstarters. Kickstarters are 6 times more likely to succeed compared to angel investments. And when you lose your angel investment it will be a large multiple (1000x) of what you would put behind a typical Kickstarter. That increase in risk and increase in capital involved is what powers the legal requirements, and that's where there is no document with a signature on it or any legal stuff to review before you can back a Kickstarter with $50 or $100 of your hard earned money: the risk is negligible compared to an angel investment. And investments do not necessarily result in an ownership transfer, at the seed and angel level convertible loans effectively postpone that transfer, possibly in perpetuity unless the business manages to raise a later round. Because everybody involved recognizes that if that doesn't happen there is no point in engaging in the song-and-dance of ownership transfer at a non-realistic valuation. Your typical start-up team is far more capable in terms of business savvy than your typical Bickstarter initiator (artists, tinkerers, hobbyists, wannabe entrepreneurs) and they tend to be much less sure of their ability to bring the project to term. They will most likely underestimate their costs and runtime, overestimate their ability and availability of parts. This should factor heavily into the decision of whether or not you want to back a Kickstarter at all, no matter what the desirable features of the gadget are.