I haven’t paid much attention to the whole crowdsourcing phenomena. I’m aware that it exists and basically what it is (ask lots of people for a little money, instead of a few people for a lot of money) but after reading an article about a product that was crowdsourced via Kickstarter I realized that I don’t think I have a complete grasp of what’s going on.
I always assumed that if you invested in a Kickstarter project that was a success, you would see some return on your investment. That’s sort of the whole point of investing. But I now realize that not only is that not the case, Kickstarter actually specifically discourages investing for profit . Kickstarter isn’t a site where you can invest in good ideas, it’s where people with good ideas can beg for money.
So why do people give money for Kickstarter projects? Out of the goodness of their heart? Charity? Do they get a free T-shirt?
Are there any crowdsourcing sites out there that have figured out “Hey, if we make it so people can actually profit from their investments, they’ll probably give more money to projects?”
Kickstarter is NOT investing. You do not get a percentage of profits, etc. In fact, these kinds of “rewards” are prohibited on Kickstarter.
Typically, depending on the amount of money you give, you do get some sort of rewards. For lots of Kickstarted things, the reward you get is the actual product itself. If you give enough, sometimes you get an “upgraded” or personalized version of the product being offered. If you give less, sometimes you get a t-shirt, a decal, or just a mention somewhere as being a supporter.
So, people typically “kickstart” a project because they want the final product and by giving a certain amount of money, that’s what they’ll get (in theory).
One use of the site is really akin to a storefront where people place pre-orders. You see this quite often where a physical project is being funded – printing copies of a poster, book, or game. The person asking for money can specify goodies that they will send investors at different support levels. Usually at $1 it is a big thank you, but at $29.99 or whatever they have choosen as the selling price for their product, you get as a reward, the product if it gets funded. Fund at higher than that level and get additional add ons, a delux edition, a signed edition or what have you.
Other than that I seem to remember reading that kickstarter was created to fund art, so gallery tours, performances, etc where there would be no real return for investors.
I’m some cases it works like a simple purchase except out of the normal sequence. In most cases, a producer makes the product first and then sells it to customers. With kickstarter, customers are buying the product before it’s produced, which in some cases allows a producer to make a product he couldn’t have made without that money.
In other cases, you’re just giving money because you want something to exist. You’re not getting anything more out of the project than a non-payer gets.
Yup. I threw some money at the OOTS project in part because I’d been reading the webcomic for free for years and thought it was only fair, and also because it was an excuse to pick up some fun odds and ends (and digital rewards that will appear in my inbox one day if Rich actually heals properly).
You could also think of it as being akin to a public radio/television pledge drive: you give them money and at different levels you get some rewards back but not any money. Except that Kickstarter doesn’t generally do tote bags.
Ok, this makes more sense to me. The producer is essentially getting startup costs and some preliminary sales. Even if he “sells” the product to the kickstarters at cost, he’s still getting a few thousand units out there for people to show to their friends, get word of mouth advertising going, hopefully get a few consumer reviews, etc. The alternative was to produce a product first, then hope that you could find people to buy the 5,000 widgets that you just got delivered from China and are sitting in your garage.
Actually, using it to support the arts makes sense to me, as that’s an area that has been funded by patronage of some kind for pretty much all of history, and is all about giving money to people for products with little intrinsic value.
But while I can imagine supporting an artist you admire, I had a hard time wrapping my head around supporting some dude who says, “Hey, I’m trying to get this awesome iPhone case I designed produced. If I only had $15,000, I could start production and make shit-tons of money for myself!” Now I see that what I was thinking of as “investors” are really “customers” in many instances.
Really, it’s not much different than a typical PBS fund drive. You can donate $10 and get nothing. Donate $50 and you get a DVD. For $200 you get the coffee table book.
One project I saw recently would give you a weekend to hang out with the designer at the $10,000 level of support.
(And I don’t want to derail the thread too much, but there’s some very interesting developments on the investor angle in the US. The 2011 American Jobs Act had a specific provision to loosen restrictions for crowd-sourcing. Implementation of that provision is stalled with the SEC, though. So we’re in a sort of limbo where the law says it’s legal but the regulatory agencies still won’t let you.)
Ditto. I liked the idea that I could help Rich along with things, and getting the exclusive goodies was just a bonus. I’ve also kicked some coin to one of my favorite groups so they could get the latest CD done. It’s a great idea for any number of projects.
Of course, you could support a larger arts organization that has charitable status in your country, thereby receiving a tax receipt. In my region of Canada, the Stratford Festival, National Ballet, Toronto Symphony and the Canadian Opera Company could all use your donations, too.
The problem with larger organizations is that they either support too many things for your individual contribution to mean much, or support things which you don’t want supported. Crowd-sourcing gets around these problems rather handily.
I’m not sure about Canada, but in the US, you’d lose your ability to take a charitable contribution deduction if you specify a particular recipient. So you can support the arts in general with $100, but you can’t require them to give the $100 to Bruce for his new project (not if you still want to write it off on your taxes). There are some abuses and gray areas in common practice, but still… most kickstarter contributors aren’t going to want to go the charitable route.
Well if you really want to own one of the awesome iPhone cases, you pay up front. Simple as that. You don’t begrudge the person for making money off it. You get what you want (iPhone case) and they get what they want (a business making and selling iPhone cases). That’s how it’d work with an artist too.
Have you ever heard or read about someone describing some sort of idea for a product and thought “Man, if someone actually made that, I’d definitely buy one,” except it’s kind of a niche idea so no actual company ever would take the risk that people just talk about wanting one and wouldn’t ever buy it?
That’s the kind of stuff Kickstarters should be good at. It’s kind of a pre-sale store, but really more a way for a company to get proof that enough people actually want to buy whatever strange little product they’re proposing to make it worthwhile to make.
So if I help fund, what I generally get is a product I want, often at a somewhat discounted price and sometimes with some other freebees. I also possibly help direct new, similar products simply by helping to show that there is a potential market–video game wise, for example, there really haven’t been many space combat flight sims recently, now a couple of them are on Kickstarter, if they’re successful, then maybe some other companies will make some.
Of course, the risk is that I’ll put in the money, they’ll make their goal, but then something will happen and the product will never get made, in which case I’m out my investment–but the amounts are small enough that it’s been worth the risk for the couple of things I’ve put in for.
This had me confused… I had thought a Kickstarter payment was in anticipation of being repaid. If I’m helping a guy build a new radio, he’ll credit my KS payment with a coupon worth that much off, later, when he releases the radio and I buy one. Only later did I learn it’s really just a gift. I do know of at least one case where a guy has collected about four times as much KS money as he can ever reasonably expect in sales. I had thought this put him in debt, and only recently learned, nope.
In all of the Kickstarter programs in which I’ve participated, that’s not quite accurate.
You pledge $X, which, in many cases, is a pre-paid purchase of the product which the “creator” would like to make. It’s not a “coupon”, it’s an actual order, and the “creator” lists an anticipated date of delivery on his Kickstarter page (and he delivers it directly to you, rather than giving you a voucher for then buying it at retail).
So, I pledge $50 to a guy who wants to make a new role-playing game; the “level” of my pledge on his Kickstarter page tells me that I’ll get a copy of the game for that level of support. If the Kickstarter offering is successful (meets its funding hurdle), he goes ahead and makes the game, and then directly ships a copy of it to me when it’s ready. Other than having to supply him with my shipping information, I don’t have to do anything else after making my initial pledge.
Here’s some examples of crowdfunded projects I’ve supported to give you an idea of various possible rewards:
[ul]
[li]Public art project: Got a postcard of the artist’s work.[/li][li]Art book: Got a PDF copy of the book suitable for printing.[/li][li]Toys: Will get a full set of the toys for a price far below retail.[/li][li]Board game: Will get a physical copy of the game, which regardless of price may never be available in stores in my area.[/li][li]Video game: Will get a downloadable copy of the game below retail price with bonus in-game items.[/li][/ul]
I went for Obsidian’s Project: Eternity Kickstarter ($3,986,929 pledged of the $1,100,000 goal; it went well); the various awards included a badge on the forums (several, depending on how much), a physical copy of the game, a printed manual, an original novella set in the game world, concept art/player’s handbook/monster manual, an in-game pet, strategy guide, T-shirts, your name in the credits, a cloth map of the game world, early beta access, a copy of Wasteland 2, your name on a memorial stone in-game, a personally named & designed NPC in the game, and more.
Note that the highest tier pledge was “$10,000 or more”, and 5 people actually spent that much. This isn’t about spending money and getting more money back; it’s about spending money to ensure that a niche product will be created that otherwise just wouldn’t exist.
If it wasnt for the SD, i wouldn’t have a clue about so many things on the web. But without word of mouth, did anyone find this on their own? Googling “extra cash in my pocket, looking for a place to dump it”?
I think the website should have its own pot. Does it?
Kickstarter is essentially an alternative form of charity. But this year Congress passed a law permitting crowdfunding as an investment with lighter SEC enforcement. Kickstarter doesn’t do that. And you should be very careful, IMHO, before you do: some called this proposal crowdmuppeting. I’d recommend reading Felix Salmon on the subject.
And the great majority of kickstarter rewards are delivered late. If the business model is bad, they may not be delivered at all. Caveat backer.
This is Kickstarter’s core function really. And if the public thinks that iPhone case is artistically awesome, why not? Or maybe they just want to help an entrepreneur out.
. Kickstarter isn’t a site where you can invest in good ideas, it’s where people with good ideas can beg for money.