Equity just doesn't make sense at the level that most people are backing KS projects. What kind of equity are you expecting if you back a $100K project for $15? Maybe, if the project is wildly successful post Kickstarter, you'll see a couple hundred dollars?
There are also projects on Kickstarter that will never be profitable, not because of failure but by design. People use Kickstarter for art experiments and to fund parties and special events that don't generate a product that will be sold after the initial funding. You'd be better off going on AngelList if your goal is to fund projects for high amounts of money and get a return on your investment.
That said, I don't think there anything explicitly stopping someone on Kickstarter from giving small amounts of equity to backers, and it might be something that people do for very high tier ($5K-$10K) reward levels.
> What kind of equity are you expecting if you back a $100K project for $15?
A very little amount yes. But if I can invest $100 (or $1,000) into a Kickstarter project maybe I "lose" it all, maybe make my investment back + enough money to buy a pizza. Maybe I double my investment, which then I can pour into other kickstarter investments.
Where AngelList falls down is don't you have to be a qualified angel? So someone with only hundreds to invest, or a thousand dollars, is locked out because AngelList is looking for investors with tens of thousands of dollars? (Although, again, the JOBS act might change that dynamic...)
Do you know how much of a nightmare it would be for a small startup to deal with thousands of effectively anonymous investors, each of whom has only invested a few tens or hundreds of dollars? You have to deal with voting rights, transfer of equity, shareholder lawsuits, etc, of people who you have no previous contact with and no way to vet. What's to stop a competitor from "investing" in your company to gain access to your financials? It just doesn't seem like the risks and costs are worth the reward.
The SEC defines an "accredited investor" as someone
with over a million dollars in liquid assets or an
income of over $200,000 a year. The regulatory burden
is much lower if a company's shareholders are all
accredited investors. Once you take money from the
general public you're more restricted in what
you can do. [1]
There are also projects on Kickstarter that will never be profitable, not because of failure but by design. People use Kickstarter for art experiments and to fund parties and special events that don't generate a product that will be sold after the initial funding. You'd be better off going on AngelList if your goal is to fund projects for high amounts of money and get a return on your investment.
That said, I don't think there anything explicitly stopping someone on Kickstarter from giving small amounts of equity to backers, and it might be something that people do for very high tier ($5K-$10K) reward levels.