A New Kid on the (Crowdfunding) Block

In the midst of my Gamasutra articles this afternoon, I came across a post concerning a new crowdfunding option specifically targeting video games. The new site, called Gambitious, seeks to offer a crowdfunding service tailored directly to video game developers.

Now, Kickstarter has been doing a pretty darn good job so far, at least in my opinion. It certainly was not designed from the ground up for game projects. But then, at first there really weren’t any such projects being pitched on there either. They started few and far between, certainly, and seem to have taken off only when the media took the phenomenon by storm.

But Gambitious is about more than just ‘crowdfunding for games’ and isn’t just a Kickstarter or Indie-Go-Go clone. It’s a different approach to funding as well. Kickstarter operates under the donation or angel model: You put up a project, people who want to see it succeed (and maybe get some cool stuff) put up money in the form of pledges. The project gathers enough pledges to meet its goal and the money is collected and dispersed to the project creator(s). That’s it. There’s more, of course – typically the community that was built around the project ends up with a forum somewhere on the project’s home website so the creators can push through updates on progress and so far. And, of course, if there were prizes associated with the donation levels than at some point the creator should send those out to their backers. Oh, and you hope they actually finish the project that you helped back.

But that’s pretty much all there is. Gambitious changes that slightly, by offering not only that traditional pledge-based model, but also an equity model.

Ah, now here is where things get weird.

It’s not available in the United States, yet – currently only Europe. But we’ll talk about it all the same because the model may soon make itself available to U.S. indies as well. So the equity thing changes the nature of the crowdfunding model substantially. Right now, the project is, in all its entirety, the property of the creators (and possibly anyone they may have business or intellectual property dealings with that lead to licensing, etc.). These people don’t typically involve the backers, of course. So when you give that money up that t-shirt you get at your prize level may be all you ever see.

The equity model doesn’t just say, “Please – pay me to accomplish X”, it says, “Please – purchase a share of X’s equity. This means that if ‘X‘ is accomplished, and earns a profit (remember – Gambitious targets game projects which, by their nature, are typically made for market) then the backers who funded your project in the form of equity are entitled to a percentage of that profit. That’s ownership.

Now that changes the playing field remarkably. For one, these aren’t just backers – these are investors. Investors take risk with their money in the hopes of a good return. Backers fund a project because they want to see it succeed and, in the case of most video game projects, they see it as another form of pre-order, with their pledge earning them a copy of the game if the project succeeds. There was still risk because nothing says it will succeed. (And nothing says it will actually end up being the game they want or hope it will, either. But that’s a little off-topic.)

So here we have a new model, crowd-investing. Equity ownership may not translate directly to intellectual ownership, but I fear its dangerously close to crossing a line that the Kickstarter projects don’t. The pros of this new model are that investors are more likely to consider your project if it and its business plan seems solid. And because they may stand to gain more than just a copy of the game and their names in the credits, they may put up larger sums of money. And, of course, there will still be the benefit of taking traditional donations along side the equity, so you could conceivably limit the amount of ownership you are selling. Maintaining majority ownership and the control it asserts is certainly important.

I’ve already given what I consider the largest con, certainly. There may be others, but they are probably tied to the same cons that traditional crowdfunding has.

Hmmm. Traditional crowdfunding. A short time ago, crowdfunding was anything but traditional.