Do you mean "underserved"?

I agree that the two can coexist (and probably have to). Kickstarter might work for areas with untapped potential when the game is published by a recognized personality with public goodwill on their side. But to be honest, to actually do something novel and unproven, or with a budget that is larger than goodwill can provide, someone needs to take a bigger risk. And to make that happen the I think the risk-takers will need equity. So while I am happy to see this Kickstarter project grow so big, I don't think traditional publishing should or will go away, lest we end up with only the games that someone can pitch to public backers in a Kickstarter video.

With the recent crowdfunding bill obama just signed, I hope to see a kickstarter-like site that offers equity instead of "rewards". There are lots of businesses that don't work well as kickstarters, but could work with an equity model.

Even so, I have my doubts that mob mentality and viral marketing will prove to be reliable diviners of good investments. That said, they may be every bit as good as say, a gated community of silicon valley entrepreneurs and angel investors. After all, in a sort of perverse coincidence, these people purport to predict mob mentality and viral potential. Maybe crowd-funding is just trading the experience and insider knowledge of the investor community to cut out the middleman.

In any case, I fully expect both sources of funding to produce plenty of gems, so I would fight to make sure both can survive and be strong.

The main thing crowd-funding has over big investors is that rather than having to predict what the mob will be interested in, the mob can be part of the investment process.

Sure, they might not be as good at judging potential to execute as a seasoned team of investors, but they'll be a lot better at gauging interest levels.

I also wouldn't underestimate the potential of having a lot of tiny investors becoming product evangelists; if you've got a thousand people putting $50 apiece into a project, that's not only a thousand first users, it's also a thousand real people that will happily post links to Facebook, mention the product in a blog, recommend it to their friends, etc. Especially because they presumably were interested in it in the first place.

"I have my doubts that mob mentality and viral marketing will prove to be reliable diviners of good investments."

You are not a mob when you are in your house browsing Kickstarter, you are a person and if you can think for yourself, you will.

We had crowd funding for centuries, it is called "the stock market". As you said, now we can cut the middleman (and their abuses).

Those middleman had been abusing the system too much, e.g Renting your own shares without your permission to speculators (short selling)

Did he sign it? I didn't know it had made it all the way through congress. Last I heard it got merged into the JOBS act.

You are correct. JOBS act just passed the house. My mistake.

But there is built-in risk aggregation in the crowdsourcing model. If you raise $100,000 from a single angel investor or VC, that investor is risking the full $100k; ten-thousand backers each contributing $10 don't have nearly the same risk exposure.

On top of that, the expected reward is likely different: a traditional investor is looking for a financial return, and analyses the project in terms of its ability to deliver that return. But the motivations of Kickstarter contributors come from their qualitative desire to see the project itself completed and to enjoy the product it generates. There's also the possibility of prestige and networking opportunities that can come along with being a top-tier contributor.

The crowdsourcing model appears to exist in a grey area between traditional investment, pre-ordering as a consumer, and charitable giving, and it's probably too early to know for sure what its limitations are. It's actually possible that funding new and risky projects will in some cases be easier via crowdsourcing.