Quoted from Oldgoat:
There have traditionally been two funding models for startups. The first, and most prevalent is the self-funded/networked model. This is where you put in your own cash and supplement that with $ from friends and family. They pitch in because 1) They think you are smart, ambitious, etc. and will be successful or 2) They have visions of the business becoming the next Facebook, Starbucks, etc. and believe their $5k will turn into $5mm. This is the easy way because you, your family and friends are investing in you and the idea. They don't care about a business plan. "It's a great idea" "Bob is such a hard worker and so smart" "I'm gonna be rich!"
The second funding model is via investors (bank, VC firms, etc.). They really don't care if you are nice, smart, ambitious, etc. (Ok they care about that a little bit). What they are focused on is the business plan. Have you done your homework, are all the risks identified, market research analysis completed, staffing model reasonable, logistical components in place, financial models make sense, etc.
What is interesting is this new model, i.e., the Kickstarter model being used by these small pinball companies. This model is really nothing more than the first one. One is simply expanding the 'family and friends' willing to invest in the business. You don't see the business plan so you have no idea if it is well thought out, complete and viable. The one difference is, in this case, you are investing in people you don't even know. You actually have less info about the people and the business plan than you have when your brother-in-law says 'Hey I've got a great idea for a business'
Obviously, your money, your risk. But I would only play this game with money I am willing to lose. And while I would be disappointed, I would not be shocked if it ended up badly.
We self funded our business four plus years ago. The thousands we invested was supplied by me and one other partner. The third while not investing any cash was actually the smart one on how to run the Buisness 100% legit and by the book. To the point where it's almost a pain in the ass...but that's what it takes. If the Buisness is run by the seat of your pants it won't succeed. Money management seems to be lacking in every crowd funded project. Guess its diff when it's your own money on the line.