Oculus’ Facebook acquisition spawns new breed of investment crowd-funding firms

After Facebook’s $2 billion purchase of virtual reality development firm Oculus VR, backers of the once crowd-funded Kickstarter project are

After Facebook’s $2 billion purchase of virtual reality development firm Oculus VR, backers of the once crowd-funded Kickstarter project are asking if they should too receive a return on their investment after the acquisition.

Oculus’ VR helmet began its way as nothing much more than a video game add-on concept that quickly saw heavy fanfare resulting in funding of over $2.4 million from fans of the device itself. Donators of $300 and above received in exchange for their funding a now obsolete prototype of the yet to be released virtual reality wearable. Given Facebook’s $2 billion acquisition of the firm, a number of those who helped fund the endeavor feel they should also receive compensation for their investment.

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“I would have rather bought a few shares of Oculus rather than my now-worthless $300 obsolete VR headset,” wrote Oculus Kickstarter backer Carlos Schulte.

Kickstarter’s model does not allow for firms to offer company shares or equity in exchange for funding projects. It is because of this and Facebook’s new acquisition, new crowd-funding platforms are emerging with the premise of offering shares and equity in exchange for small investments.

 “Kickstarter won’t switch to an equity-based model. We believe the real disruption comes from people supporting things because they like them, rather than finding things that produce a good return on investment,” CEO Yancey Strickler told Popular Science in an interview last year.

New companies like Wefunder, SeedInvest, and Crowdfunder are just a few who are planning on offering equity in exchange for small amount investments.

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The move comes after the Jumpstart Our Business Startups (JOBS) Act, stating companies will be allowed to issue stock to the public in exchange for small investments, similar to how Kickstarter projects are allowed to provide merchandise, or even the product itself, depending on the amount invested. The firms are currently waiting for the Securities and Exchange Commission (SEC) to issue its final rules later this year before unveiling their respective platforms.

While the premise of Kickstarter is not to fund a project in exchange for a return on the investment, Oculus’ recent acquisition has laid the groundwork for such platforms to exist.

“Just because people say, ‘Well I want equity in this company’ doesn’t mean it’s available. I don’t think the Kickstarter backers were backing it because they wanted a financial win … they wanted to try it, wanted to experience it, wanted to see it. They got exactly what they bargained for,” stated Mo Koyfman, a partner at Spark Capital, which led Oculus’s first round of investment.

 

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