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.
My kid is running a Kickstarter campaign this very second. He is about half way to the goal. He wants to make a movie. Most of the investors are friends of his who believe in him.
As others have said - it is a donation system. He has rewards for different levels of contribution. You get your name on the credits for so much. You get an appearance in the film for so much, you get a DVD for so much, you get to come to the cast party (at my house -how did THAT happen?) for so much of a donation.
This is a project he’s wanted to do since he was a freshman in high-school. He is now a college sophomore and much more sophisticated and realistic about the project.
It has a budget - and all of the intellectual contributors are doing it without a salary.
This is one type of typical kickstarter campaign. There are others that are trying to get businesses going. Good example are 3D printer designs, etc.
Anyway - yes it is a possible avenue for fraud, and it really isn’t a replacement for Wall Street, Venture Capital, etc because the return is usually the equivalent of buying a product or some such with the reality that it may not occur. It is a total crapshoot as to whether projects succeed or not.
Many of the projects have a lot in common with open source in that the technical contributors are doing it out of a passion for the subject. There are others who are trying to start a company, and the main payback to the donations might be a copy of the project. Depends on the project.