I’ve talked a bit about Kickstarter in the past, and I also have sunk a bit of money into stuff there. In Kickstarter lingo, I’ve “backed” 9 projects. Recently, they’ve initiated a bit of a campaign — see here and here — to address what apparently is a rash of unfulfilled (or at least delayed) projects, but I think they missed the mark, by a pretty wide margin. The overall message (and in fact, the title of one of their posts on the matter) is that Kickstarter is not a store, but I beg to differ. Kickstarter is definitely a store, just not the kind people are used to, and therein lies the problem.

Let’s start out with what Kickstarter isn’t. Kickstarter is not an investment platform. No one who backs projects gets any sort of stock or other compensation if the companies behind those projects are successful. Kickstarter is also not charity. It’s actually explicitly disallowed in their rules; you have to give people something if they back your project. So I don’t get an ownership stake in the companies for my money, and I do get some thing (or service, I suppose) — that sounds an awful lot like a store… So what’s different?

Well, nothing is in stock, for starters, because it hasn’t been made yet. And the pictures of the goods, well, they might not be 100% accurate, because they might still be in development. And, in fact, if you read the fine print carefully, Kickstarter isn’t guaranteeing that whatever you back will ever ship. (They did recently add language to clarify that creators must refund money if they can’t produce the goods.) Sounds like a pretty lousy store, right?

Let’s look for a minute at things from the point of view of someone creating a product. Historically, there has been a big price gap between producing things in small numbers and mass production. And to bridge that gap, to ramp up production, companies had to come up with a pretty hefty amount of money to cover a variety of upfront costs. They didn’t get to recoup their investment until they sold a decent percentage of the goods. Kickstarter is basically a way to turn this process around, for creators to take pre-orders and collect money upfront. Projects only move forward if they can get enough people signed on to cover the costs (if not enough people buy in, everyone gets their money back). This is what people are talking about when they call Kickstarter revolutionary.

I think it’ll be interesting to see how much the culture and kind of projects posted on Kickstarter change as a result of these new rules. My gut feeling is that they make it much harder for creators (and ultimately Kickstarter) to make money, and trying to disguise what their site really is will be detrimental in the long run.

posted October 9, 2012 – 8:37 pm
Old News
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