This year, Kickstarter had its first million dollar campaign. Quickly thereafter, it had its first $8 million campaign. Suddenly, the scrappy startup was raising and investing funds with the powerful savvy of a venture capital firm. And expectations grew.
Earlier this month, NPR published a story entitled "When A Kickstarter Campaign Fails, Does Anyone Get the Money Back?" Near the top it contains a telling nugget about how the game has changed now that such big money is flowing into the company, and entrepreneurs have taken over a domain once dominated by artists hoping to scrounge up a few bucks for an eccentric project:
"A handful of entrepreneurs have raised millions of dollars more than they'd expected, by selling the concept of products they have yet to make. But financial backers have no clear way of getting a refund if the young businesses fail to deliver."
Kickstarter responded with a blog post of its own titled "Kickstarter Is Not a Store, in which the company announced changes intended to remind everyone that supporting a Kickstarter venture is very much not the same thing as shopping online.
So who is right? Neither. Sadly, this looks to be the inevitable evolution for a startup that's become a full-fledged company.
The (National) Public (Radio) Was Naive
Kickstarter has never defined itself as a store. It never promised anyone the opportunity to do anything but invest in an idea?and take on the inherent risk that the idea will flop. Still, NPR asked if a failed project could generate a refund, pointing out the fact that Kickstarter didn't even have a method to make this reverse transaction possible.
Investment comes with a whole lot of risk. That's why investing is something that investors do. And that's why, beyond a 401k or a maybe a timeshare, most of the public doesn't get involved in investments. But Kickstarter did something new by scaling investment to the common consumer's level. The company mitigated investment risk by dividing it up between many small donors, allowing big ideas from small startups to thrive. Kickstarter offered us all the chance to take a risk. The reward wouldn't be a big IPO payoff, but a new iPhone case or smarter espresso maker. For a $50 investment that could garner a $100 product, that certainly seems fair.
But that reward still carries its risks. With its special gifts to donors of large amounts, and the promise that a product will happen if it reaches its Kickstarter goal, investing on a site feels a lot different than investing in the stock. Fundamentally, though, it isn't. Does the New York Stock Exchange offer refunds for bad investments? Neither does Kickstarter. Do venture capitalists get their cash back when a cocky CEO blows it all on chocolate fountains and Herman Miller chairs? Neither do Kickstarter investors.
The Unfortunate Response
Kickstarter tried to respond to the NPR uproar by reinforcing its core values, and defining exactly what it is (and isn't). But to me, there's already been negative fallout from the company's reaction to bad press.
Among the new policies that Kickstarter introduced is a prohibition on product simulations and renders?designers can only show what they have at the time of listing. Presumably, the idea behind this new rule is to prevent Kickstarter listers from baiting donors with pie-in-the-sky demonstrations that they could never realize.
The problem is that showing only what you have today is a lousy way to get investors for any idea. How would Silicon Valley have viewed Facebook or Twitter if it didn't imagine scale, bigger images or mobile apps? Providing context to a vision is key in a sell.
And more than that, it's the key to getting people excited about an idea. I read Kickstarter because it's a positive atmosphere?it's the American dream on a website. But now, as part of these latest changes, Kickstarter has promised to include a "risks and challenges" section on each pitch, in which the lister is supposed to be realistic about the hurdles they'll face in actually developing the product or project. As with the ban on simulations, it's easy to see the logic?forcing potential Kickstarters to be realistic with their donors-to-be. But it greatly alters the tone of this fantastically idealistic service.
It also brings up the question, since Kickstarter is prescreening these offers anyway, couldn't risk be an acknowledged, filtered part of the service?
Who Actually Needs Kickstarter?
The real cost of these changes isn't disclaimers or uglier Kickstarter pages. It's that, ultimately, if Kickstarter caves to the expectation to further mitigate risk, the products that dominate the site won't be those by garage tinkerers and dreamers, but those by big names who probably could have realized their dreams without Kickstarter's help.
A perfect example might be the video game Double Fine Adventure, Kickstarter's first million dollar campaign. A large part of this campaign's success was a plea from gaming-god Tim Schafer, a beloved icon of the 30-year-old male demographic that grew up with his point-and-click adventures and now rules the Internet. Could Schaefer have made his game without Kickstarter? It's likely?he's known for getting the unfundable funded. (But undoubtedly Kickstarter did allow Schaefer to sidestep the headaches of publishers.
Kickstarter's most successful campaign to date, the Ouya Android-based game console that raised over $8 million, was backed by designer Yves Behar, a borderline household name (in the kind of households who would embrace that project.) Behar's association gave the project an instantaneous halo effect, the kind of "you can trust us" reinforcement that you'd get from attaching an established name onto any fledgling enterprise. But Behar, like Schafer, is no stranger to wrangling investors when he needs them. If Behar made this console his life's mission, this console would have been made without Kickstarter.
Lastly, let's revisit that new ban on concept imagery. It might seem like such a trivial matter at first glance, but its implication is that inventors will be pushed to share more and more completed products as opposed to far-out cool ideas. Research and development is the huge cost behind many groundbreaking products. If an inventor has already done it, what do they need the kickstart for, then?
Breeding the Familiar
Maybe the best analog of all is Louie CK. He released his latest comedy special, not through the help of HBO or Comedy Central, but through his own website, available for a $5 DRM-free download. It was heralded as both brilliant and obvious?a disruptive approach for creatives everywhere. And it is... except for the fact that if Louie CK weren't already one of the top acts in the world, he couldn't have pulled off this stunt.
Kickstarter has been praised for its openness, for championing the underdog. But in an era when campaigns grow larger and scrutiny gets tighter, it's the sure-bets that Kickstarter and its users will back, not the true upstarts on their first tour.
And all of a sudden, Kickstarter really will become a store, full of products from people you already know.
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