Kickstarter – A Leg Up on The Crowdfunding Crowd

Looking to raise money for that passion project kicking around in the back of your head? Forget the car wash–Kickstarter is now the prime online destination for raising money for creative projects.

The flagship brand of a multi-site crowdfunding movement, Kickstarter’s unique model appears to not just be growing the financial investment in projects year-on-year, but personal investment too–it’s more than a PayPal for donations, it’s a full-bodied community management platform. But as Kickstarter now grows exponentially, fundraising starts to become serious business, which raises the question–could the platform built to support the little guy become the victim of its own success?

Unless you’ve been living under a rock (or better yet, living under a rock album embargo), you’ve probably already come into contact with Kickstarter. Extending its tentacles into your social networks, inbox and word of mouth, this three-year-old New York startup has become the go-to destination for raising funding for projects ranging from shelved artistic brainstorms, innovative crafts, uber-hip technologies and social causes du jour. Not only is Kickstarter the cool kids’ destination for project fundraising, it also appears to be pretty darned effective, too—the company boasts a 46 per cent success rate in funding for the past year at a total of nearly $100m pledged for projects. All of a sudden, it seems like all the effort of the tried-and-not-so-true techniques of kissy-kissy fundraising galas and elbow-greased car washes may be all for naught compared to the seamless Kickstarter process—throw a project description together, come up with a few tiered rewards for participating funders and poof, you’re laughing all the way to the bank.

But is it really that simple? Has Kickstarter magically cracked the fundraising code once and for all? If so, what is it about this platform and this means of communication that somehow gets people to give in ways that they might not have before—in person, at an event or even through another website?

The increasingly crowded world of crowdfunding

To understand Kickstarter is to understand the context of the larger crowdfunding movement, as the site takes its place in a long line of conceptually similar sites dating back to the pop of the tech bubble. Of course, the idea of crowdfunding itself has existed from time immemorial—passing the hat being a notable example—but with the scale of the Internet, its wings were bound to spread much further. Historically, web crowdfunding was rooted in funding music and film projects, ArtistShare supporting the former as of 2000, FilmVenture the latter since 2002. The popular San-Francisco-based crowdfunding site Indiegogo followed suit and stuck out as a particularly successful fundraising hub (to this day it claims to be the world’s leading crowdfunding site having funded 30 000 projects in 194 countries). Indiegogo showed up in 2008 prior to Kickstarter’s launch, and though like Filmventure it started off film-oriented, it swelled in popularity by opening up its crowdfunding to multiple verticals, multiple countries and multiple time frames (i.e. no time frame in specific, allowing for constant and not time or money-limited fundraising campaigns).

From its inception in Brooklyn in 2009, Kickstarter has been dedicated to the funding of creative projects. like its predecessor sites, it has largely focused on film and music, and to this day still primarily does—in 2011 these two categories were by far the most popular for pledges on the platform with $32.5m pledged for the former, $19.8m for the latter. And whereas Indiegogo took off with its expansion into various verticals, Kickstarter maintained a very strict and curated focus on bringing about specific creative projects in a time-limited, all-or-nothing fundraising format. This helped it to build a portfolio of well-funded and often media friendly projects, bringing it a level of attention that would seem to eclipse Indiegogo and others for industry top-of-mind awareness. Kickstarter and Indiegogo thus became somewhat like the Coke and Pepsi of the arts-based crowdfunding space, moving along a pack of players before and after their time such as Crowdtilt, Sponsume and PledgeMusic, each with their own variation (e.g. project types, time limits and commissions). This mini-industry has continued to grow to date, gaining a ubiquity enjoyed by other digital mini-industries like the daily deal industry—with which it shares quite a few similarities.

The kickstarting of a mini-industry

Groupon was not the first group deal site and actually came to the fore years later, and yet it is credited as a groundbreaking pioneer. Likewise, the tendency is to view Kickstarter as creative crowdfunding’s starting point, but why? Has the fact that the greater financing for Kickstarter’s projects allowed it to get more media attention, or vice versa? A quick look at the greatest success stories on both platforms shows how Kickstarter has eclipsed the six-figure mark of financing on multiple occasions—Indiegogo does not yet appear to have done this once.

Some, like Kickstarter community manager Cooper Traxell, attribute the perception of greater success to the creative guidelines required of all Kickstarter projects.

“The initial selection process makes all the difference,” said Traxnell. “It makes sure that projects can be funded with an obvious outcome, and stresses an obvious reward for all funders.” But Traxell also acknowledged the unique dynamics of the Kickstarter fundraising platform as the other half of this equation. “In addition, the ‘all-or-nothing’ approach gives funders a sense of security that the projects they support will be completed, and if the goal is not reached, they do not lose anything.”

To draw on the daily deals analogy, it seems that at least part of the Kickstarter success is drawing on triggering a specific type of human behavior. Yes, daily deals are effectively just our age-old mom-clippable coupons, however they’ve been redressed in a time-sensitive, tipping point format that stimulates powerful, often impulsive, shopping behaviors. Likewise, Kickstarter and others using this similar fixed format appear to be tapping into that time-sensitive impulse and getting quantifiable results from it.

It’s true that telethons have been doing something vaguely similar for years, but not with the kind of pinpointed viral reach of social media and with the speed and exponential efficiency of one-click sharing and one-click credit card debiting. Nonetheless, the telethon comparison is apt—it is a show at the end of the day, a communications experience that’s meant to entertain—and here’s where Kickstarter taps into something of the old in providing what is effectively a type of broadcast. It is a broadcast of a fundraising campaign tied to a product on the surface, but digging deeper, a broadcast of a brand.

Adventures in brand storytelling—be yourself and you shall (probably) never fail

It really does seem like the ability to tell the right story about not just one’s product but oneself and (like a well-crafted PR plan) managing the timing of the communication leads to the greatest level of success on the platform; this success can be measured in terms of investment, which doesn’t necessarily just have to be money.

Take the little engine that could story of theSLANT, a broadsheet periodical that came about from the spontaneous musings of writers Mac Folkes and Rich King. They’d heard about Kickstarter and as neophytes to fundraising gave it a shot on spec.

“To be honest, when we did our Kickstarter we had no idea what the thing was going to turn into,” said Folkes. “Even as we were doing it we were thinking ‘How are we going to talk about something when we don’t even know what it is yet?’”

And yet despite their surface laxadaiscalness, they were able to exceed their goal of $5 000 by nearly 100 per cent. It seems as though this was possible because ultimately their un-fleshed out product was nowhere near as important as they were.

“That’s what we were selling on Kickstarter, we were selling a set of values,” said Folkes. “This is what we believe in, this is what we like, and hopefully you’ll like it too.“

Notwithstanding their claimed lack of preparation, there was clearly a marketing strategy at play that could help explain their success—they focused on such things as sending ‘soft-sell letters’ on January 1st, a known time of new beginnings, and following up with a letter 15 days later, followed by a hard sell five days later. The devil being in these sorts of details, even creative ideas which are extremely well fleshed out and well-suited to the Kickstarter community and esprit may not achieve their fundraising goals.

Ryan Greer, a New York-based designer of leather goods and accessories trying to build what on paper would seem like the Mecca of KS projects—a shared retail space/teaching environment transparently demonstrating craftsman processes tied to making the finished goods in the store—would find that his project would barely make it past 10 per cent of his $30k goal. His lesson? The need for hands-on campaign management, something to which not all artists are fully dedicated.

“It was my first Kickstarter project, and my first fundraising project in general,” Greer said. “What I mainly learned from it is that I’m not very good at PR. I spend a lot of time making things, but promoting them is a whole different story. It’s a very different set of skills.”

Interestingly, in both cases the money seems like more of a side concern compared to the benefit that seemed to be derived in both projects—the creation of an engaged community around them.

“I think in terms of building visibility and getting a lot more customers and people who are interested in all of my projects, it really helped a lot,” said Greer. “Last year was the most press I’ve ever gotten, which was just after the Kickstarter.” Folkes adds, “I tell people, that what Kickstarter did for us, more than the money, was that it solidified knowing and feeling that people were in your corner and that people believed in you.”

An embarrassment of riches—when too much money is too much

While Greer’s underfunded project could actually be labeled a success, Kickstarter has seen its most publicized failures in the form of funded and indeed grossly overfunded projects where many funders grew dissatisfied with the product and the conditions of receipt. One notorious project for jellyfish tanks funded 54 times over ended up being a defective product that killed the jellyfish it housed. Then there is the i+Case, a sleek aluminum iPhone case that met its funding goal 85 times over despite having what appeared in the end to be an unfinished product. Their communications often backtracked to account for this, taking a defensive voice on product design, shipping and customer dissatisfaction over blocked carrier reception. In fact, they framed the project as akin to investing in a prototype—a person had to take risks and not expect perfection. These examples show how, despite Kickstarter’s filtering capabilities (namely the team’s own personal curation and the built-in, all-or-none funding mechanism ensuring that the funding is indeed there to cover project execution) there is clearly room for mishaps and mismanagement. These mishaps become more exacerbated the larger, and potentially more impersonal, each of these projects becomes.

In this sense, the crowdfunding industry at large is having a defining growth moment as the platforms become more popular and the size and the scope of crowdfunded projects grows. Case in point: since the beginning of 2012, eight Kickstarter projects have eclipsed the $500k mark (and five the $1m mark), not in music and film but in the newer fringe areas of mechanics, gaming and design. By use of a California analogy, the focus is moving from San Fernando to Silicon Valley, with project valuations at numbers most venture capital firms would not sneeze at. At the same time, these same venture capitalists are funding crowdsourcing sites geared towards crowdfunding for small and medium-sized businesses. And while the government and communities at large welcome innovative means of providing credit within the American economic climate, it didn’t take too much forethought on the part of the SEC (Securities and Exchange Commission) to see the complications arising from such shared ownership schemes (ultimately, they are working with crowdfunding site consortium CFIRA (The Crowdfund Intermediary Regulatory Advocates) to craft legislation enabling crowdfunding but limiting its financial scope). With greater growth comes greater complexity, the question of greater regulation, and a presumption of greater accountability for some player in the value chain to pick up.

Corporate Crowdfunding—a creative climax or a forgettable me-too moment?

If crowdfunding continues to grow in mainstream awareness and participation and moves from the activity of a cluster of artists and their friends to the world of small businesses and technological ventures (even Kickstarter writes on their site that they are strictly for creative projects... ‘for now’), it seems only a matter of time that these platforms end up in the hands of larger industry. On one hand, these corporations already receive funding en masse from markets and reinvested profits. On the other hand, the tools and principles behind these platforms are as well suited as any digital communications tools for large corporations to use to target their fan bases and tell their brand story. As the desire will always be to be wherever the eyeballs are, it doesn’t seem too strange to imagine a world where Abercrombie & Fitch seeks funding to try out a particularly revolutionary fashion line for superfans, or Cirque de Soleil proposes funding for an entirely innovative show owned by its audience.

A million dollars isn’t cool—you know what’s cool? Ten million dollars

Even without such a full-blown corporate entrance into the field, crowdfunding growth to hyperprojects seems inevitable and as such, an irony grows for the industry and Kickstarter in particular: should something which came to be as a means of democratizing creativity—i.e. giving the long-tail of artists the opportunity to get their smaller projects off the ground and without having the backing of a conglomerate—shift focus to a notable few? Keeping in mind Kickstarter’s own for-profit stance (it itself received $10m in VC funding in early 2011) and a mechanism which awards them for every dollar on an already funded/popular project, not for a long-tail of unfunded ones, success seems to threaten the company from its roots. While the Kickstarter staff are the gatekeepers of all projects, how long will it take before Kickstarter would be willing to accept one of the corporate projects described above, for its artistic merits, for the PR value, for the revenue?

Now is indeed a defining moment, one where Kickstarter and company can choose to continue to keep rocking out for friends and fame, or accept the risks and potential rewards of rocking a much bigger boat.

There used to be a thing called ‘barrier to entry’, which was used to measure the degree of difficulty entering a market or launching a product. It still exists, of course, but Kickstarter has brought the classic ‘friends and family’ mode of financing to previously unheard of levels of success, leveraging network effects and drawing in hundreds, sometimes thousands, more to a project. The more fans, friends, followers, the more mileage you might make with your idea. In a way, the world is becoming a very elitist place and those who can’t rely on a strong network had better have deep pockets. If you believe in the ‘fail fast, fail cheap’ mindset, Kickstarter is the place to seed your next project. Just be ready for it. — AR

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