Recently Facebook purchased the virtual reality (VR) company Oculus. Oculus is one of the big success stories of Kickstarter. They managed to raise a couple of million dollars in order to get their VR headset off the ground with over 9,000 people contributing to their campaign. If you donated around $300 then you received the first version of their development kit; basically an advanced, working prototype. The reviews for the first version of the prototype were extremely positive with many reviewers implying that this might be the dawn of a new medium (No one counts the VR setups from the 90s). The purchase of the company by Facebook came as a shock to most people and an overwhelming majority of the immediate online feedback was negative. So today we will look at two things. One, as a Kickstarter backer what rights do you have regarding the resulting product? Two, is the purchase of Oculus by Facebook a good thing?
What rights do you have as a Kickstarter backer to control the direction of the company after the campaign is complete? None. What are the responsibilities of the people running the campaign to their backers? Only what was promised as an incentive. If you pledged $300 to get a development kit and you got that development kit, your deal is done. If you pledged $25 you got a t-shirt, your deal is also done. Kickstarter is not a source of venture capital (VC). Backers are not buying shares in a company. It is more like an elaborately disguised pre-order combined with donations. It is actually a pretty sweet deal for the people running the campaigns. With traditional VC Oculus would have to sell a percentage of the company to get the start-up cash. So while many people feel betrayed because the little VR company that everyone supported got purchased by the big bad Facebook, there is nothing supporters can do about it. People asking for their money back are wasting their time.
This event will likely change the way people select the campaigns they support in the future. It will also change the way people market their campaigns. The outcome will either be that campaigns start to give out small amounts of shares as incentives or people will start including things like “We guarantee we will remain an independent company for X years” in their summaries. Although, when Mark Zuckerberg walks through the door with a couple of billion dollars it has to be hard to stick to your convictions.
Is this purchase a good thing? Facebook is not interested in the hardware that Oculus makes. It is interested in VR as a medium. Facebook values user data above all else. They want to build a huge customer base so they can segment the market and sell targeted ads based on user behavior. This is why they paid $2 billion for a company that has what they think is a very promising new technology with tens of thousands of users but $19 billion for WhatsApp, a simple messaging program with 450 million users.
Both Oculus and Facebook have said that the VR company will continue to operate independently in the near future and if that is true then this purchase is a good thing. The main fear I had personally was a VR world covered in ads that also tracks everything you do online. However, with the backing of Facebook Oculus should be able to ramp up and expand this technology much faster and that is good for everyone. Games are the first place that this tech will be used and playing games in a full VR environment is going to be great. Beyond that we can expect VR hangouts (Hey! Come to my virtual apartment and look at my virtual pictures on the virtual wall above my virtual couch), tours of famous places, training and educational material (Hey! You are the size of a blood cell, let’s take a trip through the circulatory system), and many other uses. All of this is good.
Not by any stretch of the imagination do I think that Facebook is going to let everyone use their technology without gathering their data and serving them ads but if this gigantic influx of capital into Oculus pushes the technology as a whole forward and causes other big companies to follow up with their own alternatives, then I am all for it.