Kicking Kickstarter

Screen Shot 2013-04-02 at 11.06.28 AMNow that Kickstarter has hit the awareness of the independent film community with the successful $2 million raise for Veronica Mars, it is time to pause and think through the legal consequences of using Kickstarter for both sides — contributors and recipients.

But first, we need to make clear what Kickstarter is — and what it is not — due to the confusing term “crowd funding” that is used to describe it. There are two types of crowd funding; one kind, of Kickstarter ilk, is basically a donation model, referred to here as donation crowd funding to distinguish it from investment crowd funding, described below. Under donation crowd funding, wannabe entrepreneurs with bright ideas (for Kickstarter, it is limited to “creative ideas,” which basically means the arts) submit the ideas on the website and solicit funding from the public, usually in exchange for some small goodie, like a free copy of whatever the product to be produced is, but the contributors do not receive any equity or ownership in the project. Since donation crowd funding seems more fun than mercenary, it is not regulated — yet. The other kind of crowd funding is for actual investors that receive equity or a debt interest in the venture — let’s call this investment crowd funding — and it is subject to extensive regulation. This article focuses only on donation crowd funding.

Read more at The Huffington Post



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