I've run 6 Kickstarters with my wife to launch and expand our family business. The first project failed to make goal because we didn't understand that Kickstarter doesn't deliver an audience. We learned and the next four similar projects succeeded spectacularly - and now we have a viable business - with zero debt and nobody owning a share of our business but us. We have lots of very happy customers, lots of expensive equipment - and around a thousand very happy supporters. We also had one attempt to diversify into a different market which failed to make goal.
Kickstarter is a very powerful thing for people like us. We were able to start with $100 and a crappy PC - and now we earn enough for one of us to give up the day job - and we'll likely grow until both of us are working it full-time.
So it's worthy of trying hard to keep it alive. It creates jobs and gets innovative products to market without the need to deal with bankers and all the horror that goes with that. It allows customers and product designers to work together. When it works, everybody wins.
But it's clear that these million dollar failures (with accusations of fraud, etc) have to stop - because they make the news and kill the entire beautiful concept of crowd-funding.
My feeling is that backers should avoid pushing too far above the "project goal" for a persons' first project. If they ask for $15,000...maybe let it ride to $25,000 - but then pledge no more. But on a second or subsequent project, when the business has succeeded at what they proposed - more or less within the estimated time - then let them earn a fortune the second time around.
Meeting goal SHOULD be enough to get a new business started...and after pushing through that first production run, we all learn a LOT. On the second time out, we know the ropes - and can be trusted with more money.
IMHO, Kickstarter should create a two-tier system - in tier #1, projects have to justify every penny they'll spend in mind-numbing detail - and they should be limited by KS themselves to 200% of that goal or $50,000 - whichever is greater.
When a project owner has successfully delivered on a tier #1 project, they should be released from probation and allowed to grow their business with either a new project - or a re-run of the previous one, but without the $$$ caps. Backers of the tier #1 project should be encouraged to leave feedback on the subsequent project without having to pledge against it.
I'd also prohibit "backer-only" updates...they allow bad projects to hide terrible news from the outside world - and muzzle their backers from commenting adversely.