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OCULUS VR: Leaving Early Backers Out to Dry?

Friday, Mar. 28, 2014
Source: llh3
Source: llh3

In the wake of Facebook’s $2 billion buyout of virtual reality startup Oculus VR, a number of Oculus’ 9,522 early backers are up in arms. In an ongoing trend, Oculus took to crowd funding site Kickstarter to raise seed money for their company, and it was an outright success raising over $2.4 million. While the backers “invest” knowing they receive no ownership in the company (instead receiving early access to products or memorabilia), many of the backers feel that the Oculus pulled a “bait and switch” by taking the Facebook deal: “I might as well have handed my money right to Facebook and I feel a little sick.” Adding insult to injury, as recent as last month, Oculus’ founder assured backers that he had no intention of selling the company. Backers flocked to Oculus believing that the company was their best hope for an independent platform for virtual reality gaming, but now “it’s Facebook’s platform.” Did Oculus wrong their Kickstarter cofunders? Do companies owe anything to their early internet “backers?”

  Patrick: I sympathize with the disgruntled backers, but Oculus is in the clear here. For one, Oculus raised an additional $16 million from traditional sources. Second, consulting or “even keeping in the loop” 9,522 backers is the equivalent of opening up the company’s boardroom to the general public. The only thing Oculus owes its early backers is the items offered in exchange for the contribution: t-shirts, posters, and development kits. Beyond that, Oculus ought to treat the early backers as loyal enthusiasts. No more, no less.

Cofunders of the Maker of Oculus Rift Denounce a Facebook Buyout (NY Times)

Oculus Rift (Kickstarter)

A Framework for Thinking Ethically (Markkula Center)

 

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Comments Comments

Chrissy said on Apr 25, 2014
I agree with Patrick. I can imagine that Oculus was given a deal it couldn't refuse by Facebook. The deal not only gives the company money but additional resources and opportunities. Any investment includes risk, and ones on Kickstarter are no different. It's a tough break for the investors but that's the risk they took. - Like - 1 person likes this.
Joe said on Apr 26, 2014
Chrissy and Patrick are right that Oculus has every right to sell themselves to Facebook and the injection of capital will help the company grow. From a more holistic perspective it seems like a poor decision to mislead your core supporters who raised one of the largest Kickstarters ever. Add in they haven't released a product and that their product will be a large leap for most consumers to purchase and their partnership with these early adopters is essential to their success. In this case treating your supporters and backers fairly and ethically, even when you aren't obligated to do so, makes business sense. Only time will tell if their association with Facebook hurts their initial product launch. - Like - 2 people like this.
Patrick said on Apr 26, 2014
Good point, Joe. I imagine that the acquisition will allow Oculus to reach a wider audience, but you're right that these products often require a sturdy early adopter community to get the ball rolling. - Like
Samarth Gupta said on Apr 26, 2014
I agree with the comments above. Though it is right that the early investors funded the initial growth of the company, Oculus does not own them any more than what was initially promised. I say this because facts tell us that Oculus raised a much larger amount in external funding later on and those investors were the ones that probably invested in it from a financial investment point of view and hence deserve the gains. The early investors knew what they were contributing for initially and in today's world of rapid acquisitions, for investors to expect that company if funded through Kickstarter will continue to operate independently forever it too idealistic. Investors should actually be more hopeful now because Facebook can provide those resources to Oculus and help in rapid development of product than maybe what Oculus could have achieved independently. - Like - 1 person likes this.
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