The risks of crowd funding
Crowd Funding, via websites like Kickstarter, is a great way for creative projects to find funding. By appealing directly to fans everyone from comic book creators to games developers can get funding for new ideas without the need for the involvement of a publisher or manufacturer. Typically, a project creator gets around 80% of the total funds raised to invest directly into their project AND to reward those who put money into the project.
When it works it's a fantastic way of realising products that would struggle to make it to market otherwise - just take a look at the huge successes of Oculus Rift and Elite: Dangerous to see what can be achieved. The former is now owned by Facebook in a huge $2 BILLION sale and the latter is approaching release giving fans a chance to play a game they've been waiting decades for.
However, the successes are surrounded by many more projects that fail to attract funding and increasingly by those that DID get funding but were either abandoned or failed at a later date in the development process. Many people refer to crowd funding as a form of investment - it isn't investment in any conventional sense in the word. You're not getting a share in the business and other than the fixed rewards and final product you're not realising any financial benefit. And it is becoming clear that those rewards and final products aren't guaranteed either.
A recent very high profile failure is Yogsventures - a game developed in association with massively popular Youtube channel Yogscast and development newcomer Winterkewl Games. Having raised over half a million dollars to develop the game the problems with the project started almost as soon as the funding round was complete - first an artist left the project taking with them $35,000 and then Yogscast took control of $150,000 which was earmarked to pay for rewards and to hire another project developer. The fate of that $150,000 is still unknown. Unfortunately Winterkewl struggled to build a product which was up to scratch and Yogscast pulled the plug on the partnership last month resulting in a high-profile mud-slinging match.
By pledging money, you're NOT guaranteed anything. It's a donation that may or may not result in a product you like making it to market. There is no formal requirement for refunds on project failure - chances are if a project gets funded then your money is absorbed into the costs of realising the final product. If something goes wrong there is little chance of a refund and no legal recourse to recovering your donation.
Right now, backers of another PC game - The Stomping Land - are increasingly concerned about the state of that project. It's been two months with no update, the developer has claimed to a few people that he's still working on the game and doesn't have time to update backers. The result is a lot of worried people who are now worried they've lost their money. This particular game is also available to 'buy' via Steam Early Access and can be downloaded in an unfinished form right now. Much in the same way Minecraft was in 'beta' for an extended period, it means that gamers can test the game now and influence development - however, it does mean that there are huge numbers of games that people pay not insignificant money for that may never end up being finished. It's a risk backers take, and one we don't particularly support.
Then again there are plenty of people WILLING to spend their money in return for very little - just take a look at this ridiculous $55,000 attracting Potato Salad. We like the idea behind crowd funding, but it's something you need to do knowing EXACTLY what you're getting in to. Much like a visit to a casino - be prepared to lose your money if the projects you back don't make it to market.