By now, we're all familiar with the Kickstarter style of crowdfunding, in which people donate money to their favorite projects, and if a financial goal is met, funding is approved and project development goes forward.
Depending on how much you donate, you may receive a T-shirt, the game whose development you put money towards, or even a credit in the final product. It's a nice gesture for your donation.
But what about getting actual money back from your investment? You know, like a real investor.
That model is known as equity crowdfunding, and it received a big score today in video games when Swiss developer Urban Game Studios' railroad business simulator Train Fever hit its 250,000 euro ($323,000) goal on equity crowdfunding site Gambitious.
It's one of the few times an equity-crowdfunded game of this financial magnitude has been successfully funded. (Slightly Mad's Project C.A.R.S. raised over 1 million euros, or $1.3 million, with a similar promise of revenue share). In the case of Train Fever, over 650 unique investors will get a healthy piece of the pie. The campaign still has 11 days left.
Equity crowdfunding platform Gambitious is a site founded by business partners from Texas-based independent game publisher Devolver Digital (publisher of games including Hotline Miami), Mastertronic and Dutch investment firm Symbid. It caters exclusively to funding video games.
With Gambitious, investors get their advances repaid, and receive a return just like a publisher or angel or venture capitalist would receive. The offer varies from project to project. In the case of Train Fever, the studio expects 822,500 euros in revenues, with Gambitious investors receiving half of that. That equates to a return on investment of 165 percent.
What about Kickstarter?
Why hasn't U.S.-based Kickstarter, in all its popularity, adopted the equity crowdfunding model? Right now, equity crowdfunding is an international legal minefield. The model was approved by president Obama in April 2012 when he signed the JOBS act, and the U.S. Securities and Exchange Commission has until 2014 to define the rules of equity crowdfunding -- it has yet to finalize these guidelines.
So for now, soliciting investments from the general public is illegal in the U.S. and Canada (right now you have to be a "qualified investor" to contribute). But when the coast is clear for everyday folks to invest, there's big potential for this to take off in the future. It could challenge -- or even supplant -- the current model.
But even after the JOBS act is implemented, don't expect Kickstarter to race towards equity crowdfunding. CEO Perry Chen said in November 2012, "We think the most disruptive aspect [of Kickstarter] is the removal of the investment component. People are supporting projects because they want to see them happen. It's so different than giving money because you want to make a profit."
Kickstarter may not be interested in the equity-based model (for now), but Devolver Digital's Mike Wilson tells us, "I think a lot of gamers and game devs will be [interested], especially after the inevitable wave of Kickstarter vaporware."
Looking at the case of Train Fever, he may be right. While equity crowdfunding in the U.S. and Canada are stuck in legal limbo, a European developer like Urban Game Studios would be wise to consider this funding option.
Gambitious will be relaunching in May this year, as the new company takes time to revise and reform its investment structure.
"For us it is of utmost importance to offer an equity based model that is tailored to the specific needs of both investors and developers, and to make sure innovative game projects as Train Fever see the light of day," a Gambitious rep tells us.
Meanwhile, the company is still entertaining submissions for future Gambitious projects. If you'd like to get in touch, the official website is here.