Usually if you want to make games you'd start with smaller projects, if they're successful you can use the returns to attempt larger projects. You can also apply for investment from external parties who will expect a financial return on their investment, which may even include some forms of crowdfunding.
The issue comes when the "investors" are actually your customers and the return is simply the product that they are funding production of. It's not bad in principal but there is a significant disparity in bargaining power and access to information. Retail customers/investors are rarely provided the information they would require to conduct due diligence and in the event of a dispute there are no defined paths for arbitration and forcing an audit would likely necessitate an uphill legal battle. Probably an impossible battle in cases like this where the developer is based in China.
With tighter regulation I don't think it would be inherently bad, but it isn't tightly regulated. What it is is a veritable shit show. Things would be significantly improved if the likes of Patreon were required to conduct due diligence when establishing a business relationship with creators and conduct auditing of projects where appropriate.
