you should see this as a way that start ups get around BANKS and the constant crap of silicon valley investors. Kickstarter has been a big deal for several years. Due dilegence is always a key in investing.
Microloans have been around for a while. This is geared towards different customers and different investors. As with any investment risk is involved and investors should take that into consideration if contemplating pitching in $20 on a microloan.
Characterizing it as an investment is false; you have a promise of some reward for your donation, but no security in the company. You have no control over how that money is spent, or voting rights in determining course of action. You will get nothing from your donation without positive and sincere effort by those you are donating to.
How Kickstarter has survived is a careful eye by donors as to the realistic nature of the proposed project, the record of success (or failure) of previous ventures, and a self policing by Kickstarter staff to ensure that fraudulent activities are kept to a minimum.
I've donated to a few Kickstarter campaigns, knowing full well that the money was gone, and it was quite likely that any promised return or premium was a bonus if it actually came to be.
Kickstarter is not an investment system. Nor is it a loan system.
Surf the site.
Basically, people post their ideas and inventions. They solicate funding and promise something in return, besides repayment. For products, this is usually some of the products. Sometimes the lowest donation only gets you “satisfaction of knowing you helped.”
It is called crowd sourcing and I think it is a phenomenal tool for entrepreneurs to get a feel for the market before they invest time and money.
I believe I have read that kickstarter cannot be an investment because it would be illegal.....
KickStarter has been around for a while, allowing people to seek donations for their project. Most of the projects (until now) have been either artistic/cultural (films, music, etc.) or humanitarian (I need money for surgery). The law was that the individual could not provide anything of value in return.
About 18 months ago BHO signed the JOBS act (yes, right after Steve Jobs passed) allowing what has come to be known as Crowdfunding. The SEC is still working through the regulatory aspects, but Companies will be able to offer equity and raise up to $1MM (I think this is the amount) from individuals in small amounts (I think $1000 is the maximum “investment.”).
What has happened is that these companies have become places where startups can pre-sell their products in order to get the money necessary to complete their product and go into production. The biggest deal so far has been the Pebble Watch. They raised over $10M in pre-orders and are just starting to fulfill them, seven months late. Another big success has been Jane Jensen, the game developer, who pre-sold enough games to pay for the creation of the game.
Interesting idea, but due diligence is the key.
It’s a good idea to allow small startups to find funding, to get started. Unfortunately, it will be stomped out quickly by the SEC and financial lobby before it can really take a hold. Can’t have a bunch of “uppity” upstarts challenge the status quo, can we?