Crowd-Funded Companies: Making It a Slippery Slope

When Oliver Housknecht gave virtual reality headset maker Oculus VR $25 through crowdfunding website Kickstarter two years ago, he wanted to help a startup grow into a larger, independent company. Instead, Oculus became part of one.

Housknecht was shocked last week when Oculus announced it was selling itself to social media company Facebook for $2 billion. He was one of many backers who helped it raise more than $2.4 million through Kickstarter in 2012.

He wants his money back.

"Why do they need my $25 now?" says Housknecht, who does technology work at a hospital in Kansas City, Kan.

Crowdfunding websites such as Kickstarter, Indiegogo and Peerbackers provide a way for people to donate to a variety of things including community projects, vacations, independent films and even small companies. On Kickstarter alone, users have pledged to give more than $1 billion since it launched in 2009. The backlash over the Oculus deal puts a spotlight on the people who donate with no expectation of a financial return to businesses as varied as bakeries and smartphone app makers that aim to turn a profit someday. It also highlights the tension that could arise when those funders disagree with a company's decisions.

The Oculus Kickstarter page was ablaze last week with outrage about Oculus selling to Facebook. Some donors -- including people who gave $300 or more -- argue that Facebook will ruin Oculus. Others say Facebook, with a market value of about $159 billion, doesn't need their hard-earned cash.

So why then do people donate to a company that has the potential to strike it rich and to give little, or nothing, in return?

Many want to feel like they are part of creating something new and exciting, says Paul Levinson, a professor of communications and media studies at Fordham University in New York. Most of that is...

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