Venture capital firms Spark Capital and Matrix Partners made a 2,000 percent return on their early investments in Oculus VR, the virtual reality company acquired yesterday by Facebook (FB). It’s a potent reminder of how profitable a timely bet on a startup can be. Nine thousand, five hundred, and twenty-two people who backed the venture even earlier than that, though, on the crowdfunding site Kickstarter, are getting a multiple of exactly zero for their prescience.
The difference highlights the raw deal that Kickstarter users get from an investment standpoint. The money they chip in to promising ideas isn’t equity, so in addition to taking the risk of getting nothing if a project turns out to be vaporware, they also get none of the upside if the project takes off. Spark and Matrix each put $19 million into Oculus in 2013, a year after the Kickstarter campaign was completed; those stakes are now worth $380 million each, Bloomberg News reports, citing people with knowledge of the deals. Kickstarter believers have nothing to show for their $2.4 million besides T-shirts, signed posters, the promise of VR prototypes, and “a sincere thank you.”
At the same multiple that Spark and Matrix got, a $25 Oculus T-shirt would be worth $500.
Many of these people are steaming mad, as my colleague Joshua Brustein notes. “I think I would have rather bought a few shares of Oculus than my now worthless $300 obsolete VR headset,” wrote one user on the Oculus Kickstarter comments page. “What’s two billion dollars amongst 9,522 friends? I’d be happy with my $300 back.”
Another carped: “I was extremely optimistic for the future of this product and the company behind it, and this is how I’m repaid for my investment? Incredibly disappointing.”
A third user, David Tse, reminded the crowd that they should have understood where their money was going:
“Kickstarter is for doing exactly what it’s called. It’s for kick starting projects and the companies that create them. We ‘donated’ (really we just preordered a product) and they used the money to create the product and deliver it to us. Now that the product we paid for is finished and in our hands we are no longer entitled to any say about what the company does. We are not investors in the company. … You have no extra entitlements or rights because you were a backer. You should not feel personally insulted by this deal.”
Thanks to looser regulations put in place by the 2012 JOBS Act, a number of crowdfunding startups are now attempting to allow investors to get small pieces of equity in new ventures, although federal rules on the law are still a work in progress.