When a Kickstarter Goes Bust

Like any kind of investment, funding a Kickstarter comes with the possibility of losing money.



Within the crowdfunding model, there are essentially two ways to go; Kickstarter or Indiegogo. If you’re happy to receive partial funding, Indiegogo is the best choice. We’ve seen in the past what can happen when a campaign creator didn’t deliver, perhaps because they never intended to. But what happens when the money was raised and spent in good faith, but the project peters out?

Neal Stephenson, a sci-fi and fantasy author, headed a campaign to make a realistic sword-fighting video game in 2012. The project received full funding, and there were numerous updates to the Kickstarter page as the team made progress. Unfortunately, the project died, with the nebulous promise to reimburse backers with a later project.

The short version of what went wrong, according to the updates page, is “Subutai Corporation delivered the CLANG prototype and the other donor rewards as promised. The prototype was technically innovative, but it wasn’t very fun to play.” Because of this and the inability to secure further funding, the team disbanded.

Response from backers has been mixed. Some users have requested refunds, others accept the failure of the project as the nature of backing something on Kickstarter. That’s the official position of Kickstarter management, and they’ve updated the terms of service to reflect this fact.

Reads the new ToS:

Backers must understand that when they back a project, they’re helping to create something new — not ordering something that already exists. There may be changes or delays, and there’s a chance something could happen that prevents the creator from being able to finish the project as promised.

Section four outlines the obligation creators have to backers: they must do their very best to deliver, and if that’s not possible they need to give a detailed explanation. Creators should provide as much information as possible about how funds were used.

Kickstarter also points out that the relationship between backer and creator is a contract between those parties; Kickstarter itself is not liable. In this way (and no other way), Kickstarter is like an investment — there is always the possibility that you will lose money. And let’s not forget that 75 percent of Kickstarter projects don’t deliver on time if at all, so Clang is just another one of the unlucky ones.