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When Crowdfunding Goes Corporate: Kickstarter Backers Vent Over Facebook’s Oculus Buy

5 minute read

When Carlos Schulte contributed $300 on Kickstarter to an ambitious project called the Oculus Rift, he never expected this day to come. It’s doubtful anyone did—Oculus VR, the company behind the virtual reality headset, was only asking for $250,000 in its crowdfunding campaign during the summer of 2012. Back then, it was a scrappy startup with a small but passionate base of supporters. Now, it’s a multi-billion-dollar company about to be owned by Facebook.

The surprising acquisition announcement Tuesday left many of Oculus’s original backers stunned, and a bit disappointed.

“I felt a little used, I guess,” says Schulte, a 46-year-old gaming enthusiast in California who has backed many projects on Kickstarter. “Maybe I was naive. I thought it was more just like someone doing it for a hobby and just wanted to do something fun for the community. I didn’t know it was going to turn into a $2 billion deal.”

Supporters of Oculus are voicing their frustration at the company’s decision to sell itself to a tech giant on blogs, Twitter, Vine and even Kickstarter itself. They’ve risen like a group of livid shareholders who disapprove of a firm buyout — but Kickstarter donors have no say in a company’s financial decisions. The passionate online response against the Facebook purchase illustrates how the do-it-yourself ethos of crowdfunding sites can clash with the corporate world.

The Oculus deal is a huge win for crowdfunding because it proves the model’s validity. Oculus VR founder Palmer Luckey and his team had a lofty idea to bring true virtual reality gaming to the masses. They asked the Kickstarter community for help and were rewarded with $2.4 million in donations from more than 9,500 individuals. They parlayed that funding into a business that drew more than $90 million in venture capital funding in less than two years and a $2 billion valuation from the world’s largest social network.

What more could anyone want from a Kickstarter project? Gordon Burtch, a professor at the University of Minnesota who studies crowdfunding trends, says the rise of Oculus may attract more tech entrepreneurs to Kickstarter. “[They] could see this success story as an ideal outcome for their own companies,” he says.

While a big buyout is viewed as a win for a venture capitalist or a tech CEO, the Oculus deal left a bitter aftertaste in the mouths of Kickstarter backers who are seeking things besides return on investment when they open their wallets. Avram Eisener, a 33-year-old web developer, gave just $10 to the project but said he felt a small sense of “betrayal.” He admired that Oculus had sprung from the mind of Luckey, a 21-year-old who tinkered with virtual reality gadgets in his parents’ garage, rather than a tech giant.

“It wasn’t from a big company. It was just someone who felt passionate about it,” Eisner says. “To me, that made it just all the better. It was like I want this person to do the best that they can with their idea.”

Luckey has taken to Reddit to defend the purchase, arguing that Oculus will have more resources, more autonomy and the ability to offer a cheaper product than it could independently. “We have even more freedom than we had under our investment partners because Facebook is making a long term play on the success of VR, not short-term returns,” he wrote.

Kickstarter backers don’t doubt that Facebook’s support will help bring virtual reality to a mainstream market faster than Oculus would’ve managed on their own. But some worry that the final version won’t look like the product they envisioned when they gave money to Luckey and his team. Oculus has been pitched as a gaming device, but Facebook has much grander ambitions for virtual reality as a communications platform that may one day serve users advertisements.

“You don’t go on Facebook to have a wonderful videogame experience,” says Joel Edelstein, a designer who has spent $650 on Oculus devices. “If Oculus Rift just becomes the next venue for sort of like Farmville, that’s going to be really bad.”

Kickstarter and Oculus VR declined to comment for this story. Facebook did not return an email seeking comment.

Backers will have to wait—likely for years—to fully determine Facebook’s impact on Oculus. But the deal may color the way they view crowdfunded projects.

“In the future, donors will be a lot more circumspect and skeptical about putting in money, especially in projects where they could have even an inkling of an idea that this might be bought out by a tech giant like Google, Facebook, or Apple,” says Anindya Ghose, a professor at New York University who studies the crowdfunding sector. “They do not believe in backing projects for financial, commercial reasons. For them it’s a lot about a cause or altruism.”

Eisner, who has backed 45 Kickstarter projects, said this might be the “nail in the coffin” for him funding projects by people he doesn’t know. But Edelstein and Schulte plan to continue backing Kickstarter ideas. “I like Kickstarter as a model,” Edelstein says. “Oculus Rift is still one of the best projects that’s been on there.”

Still, he and other backers will wonder how the virtual reality sector as a whole might have developed differently if its hottest startup hadn’t gone corporate.

“The worry that I and some other people have is really just that the Oculus Rift was originally just based on trying to make the best virtual reality experience possible,” Edelstein says. “I don’t know if that’s their core goal anymore.”

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