Kickstarter backers are not investors. They don't own any part of the business they are funding. They are essentially buying pre-orders. I would assume that genuine attempts to use the money to produce the pre-sold product should be protected from litigation, but if the Kickstarter owner goes out and parties with it instead, that is fraud. Not saying that happened in this case, but it's up to the plaintiff and defense to prove whether they used the funds appropriately or not.

> If I fund a company and it fails, then I don't have any right to sue them for lost "revenue". Right?

That really depends on how you fund the company, and what the company "fails" at.

If you fund a company by providing debt (rather than equity) financing, and they fail to pay what the promised, yes, you can sue them.

> What is the difference in the case of Kickstarter. They are a crowdfunding platform are they not?

The difference between Kickstarter and debt financing is that, with a Kickstarter, the offered exchange for money now is a specified "backer reward" later, instead of a specified amount of money later.

You may want to read the original complaint: http://www.scribd.com/doc/221464947/State-of-Washington-vs-A...

This is a bit more malicious than "things didn't work out."

> They are a crowdfunding platform are they not?

A "crowdfunding platform" doesn't mean anything to a judge. Crowdfunding doesn't mean anything legally. A donation to a charity has legal ramifications, but Kickstarter is no charity, equity an investor owns has a legal definition, but Kickstarter projects are no investments ... Kickstarter becomes a store as soon as a reward is promised.

If you back something and you are promised a reward, you are entitled to that reward or a refund, and i'm sure many more cases will go in that direction, which is a good thing.

"If I fund a company and it fails, then I don't have any right to sue them for lost "revenue". Right?"

If you're an investor, and you believe that the company was not acting in your interest, then yes, you can sue.

"What is the difference in the case of Kickstarter. They are a crowdfunding platform are they not?"

Shouldn't matter; if you don't put forth a good faith effort to actually do what you set out to do, you should have the crap sued out of you.

Treating Kickstarter as a store involves the person running the campaign also treating it as a store (which admittedly in many cases is extremely helpful/necessary to get funded).

Rewards are promises against pledges: Someone pledges, you owe them the reward. Now if you offer your product as a reward, then yes, you owe them the completed product. If you are not sure you can do that, then don't offer the project goal as a reward, but things you can do. Then it doesn't matter that much if you fail at completing your main project.

And really, analogies don't go very far if the terms and contracts you agree to explicitly spell out something different.

If you fund a company by buying debt, you can certainly sue them if they don't pay what was promised. If they're already bankrupt I wouldn't expect more than pennies on the dollar, but the option is there.

If you fund a company by buying equity, you have no recourse except possibly a share of whatever remains when the company is liquidated, after debtholders are paid. In exchange, you have an unlimited upside if the company does well.

Kickstarter commitments are much closer to debt than to equity.

I think the difference is that you're only funding the company if it reaches the point where it won't fail due to lack of funding. They're supposed to have all costs associated with deliverables factored into the amount they request to be funded.

Publicly traded companies get sued all the time for misleading investors. Happens in biotech very often.