Why Kickstarter's Ouya looks like a scam

The entirely imaginary Ouya game console has now raised some $5 million (£3.2 million) from “funders” on Kickstarter - a quite staggering sum of money. It is, in short, the latest of many Kickstarter tech projects to attract a long line of suckers. The world of Apple fandom has been cooing for months over Pebble, another set of attractive Photoshop renderings that will purportedly become a smartwatch someday. But fingers are in danger of being burnt.

Hardware development isn't something that can be done easily in a Silicon Valley garage. Hardware concepts can certainly be formulated, and Pebble and Ouya are both great concepts. But actually building a reliable, functional product requires expertise in supply chain management, mass hardware QA, and negotiations with component makers and assemblers that these companies by and large entirely lack.

Even Pebble admits this.

"The hard part will be the manufacturing process. There will be things that will come up, and we'll have to solve them," Pebble founder Eric Migicovsky told Wired. "It could be anything. This is our first large-scale manufacturing. There will be some problems, guaranteed."

That quote is the sound of your hard-earned Kickstarter money vanishing into a black hole, never to return.

I know this because I have seen this happen many times. The most famous "ground-breaking" hardware start-up is Fusion Garage, also known as the makers of the CrunchPad and the JooJoo, which designed and conceptualised a gorgeous new tablet before realising that it was impossible to manufacture at the price it promised. Every time you hear about Ouya's $99 (£64) price tag, think of how the $199 (£127) CrunchPad became the $500 (£320) JooJoo.

You may not have heard of zzzPhone, but it has a similar story to a lot of these Kickstarter hardware companies. Back in 2008, some ambitious American entrepreneurs tried to build a Chinese supply chain to create what was basically a line of custom build-to-order mobile phones. The supply chain essentially ate the founders; I remember getting a scratchy phone call from one of them with a Heart of Darkness feel to it, as I became more concerned about him making it out alive than successfully building a phone business.

Even major companies get hung up on manufacturing. The best explanation for all of the rumours of Apple's "new" iPhone design before the appearance of the iPhone 4S is that Apple just couldn't get its manufacturing partners to realize its dreams in time for a 2011 release.

If you intend to jump on board with one of these projects, let me remind you of something on Kickstarter's “about” page, where it promises dreamers: "You'll never give up ownership or pay back any funds raised on Kickstarter. Ever."

That's your funds that they won't give back.

Kickstarter's poor track record in tech

Of the 21 "most funded" projects in Kickstarter's tech-heavy "design" category, a grand total of four appear to be currently available for sale. Of the top 12 most funded in “technology,” four are available. Yes, many are available for "pre-order," which is another way to say "we'll take your money for a product that doesn't exist yet."

These projects aren't all new, either. ZionEyez took in $343,000 (£219,000) starting a full year ago and still hasn't delivered a pair of heads-up camera sunglasses. Many of these projects have little in the way of updates explaining that the products are taking longer to make than expected.

Yes, this is heart-breaking, because many of the products look gorgeous. Many have prototypes. Many have had demos. I want some of them. I want to review some of them. But. They. Don't. Exist. The ability to manufacture a single working product is one thing, but getting proper quality control out of a factory line is an entirely different matter.

A success rate of 33 per cent is good for a venture capitalist, because actual investors expect to hit it big often enough to offset other losses. But when you give money to Kickstarter for a tech product, you're not a real investor. Investors have equity. You're just a buyer who isn't getting your gadget for who-knows-how-long. The longer you don't have the product, the less value your money had – and if you never get that product, well, remember, they don't have to refund your money.

When kickstarter isn't a scam

There is a place for Kickstarter in this world, certainly. For example, it’s well suited to funding art and performance projects by established creators with a track record. That's the real purpose of Kickstarter, as far as I’m concerned, and I suspect Kickstarter, deep down, agrees. On the site's home page, it states: "Kickstarter is a funding platform for creative projects."

It's insanely hard to make money on art. Most art loses money. But the world needs art. There's a long tradition of art being publicly or privately funded, with little hope of payback, because it's simply considered highly beneficial to have cultural goods. Having cultural goods makes our world richer, gives us insights into humanity and the world around us, and is a vital thread in the tapestry of life which ensures that we’re not merely dull, mechanical clock-punching drones.

So Kickstarter funds should be funnelled into plays, comics, indie games, music and photography projects. All of these fit into the traditional category of cultural goods. And all of these are primarily creative projects, accomplished by small teams which often have a proven track record and fan base. This is the model patrons of the arts have followed for millennia.

Pre-funding a previously unknown company to build an insanely complex piece of electronics using an international supply chain is a vastly different proposition. I'm not saying that it can’t be done, but I suggest that those seeking funding prove it before you put any of your hard earned money down.