Kickstarter

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= people pledge money for projects to happen. If the money is raised, the project happens, and the people who pledge get what they've been promised.

URL = http://Kickstarter.com


Description

"Kickstarter lets donors fund art shows, movies, short films, dance, graphic novels and theatre productions. It helped Diaspora, an open-source social-networking project, raise $200,000 during the recent controversy over Facebook’s privacy policies. IndieGogo supports filmmakers, writers and game designers. Some sites specialise: Sellaband helps bands raise money to fund professional recording of albums, and Spot.us raises money for journalistic projects.

Yancey Strickler, Kickstarter’s chief community officer, says the firm accepts about half the projects submitted to it. “We turn down projects that are charity, that are just straight business expenses, or ‘my dog has cancer’,” he says. Of those that are accepted, about half meet their funding goals: around 1,600 projects had been funded by July 2010.

Crowdfunding firms typically take a 5% commission and charge a 3-4% payment-processing fee." (http://www.economist.com/node/16909869?story_id=16909869&CFID=149765222&CFTOKEN=41065834)


Examples

Successful Campaigns

'Some of the most successful campaigns on KickStarter show exactly why it provides a win-win situation for making money online:

TikTok+LunaTik watch kits: Turn aniPod nano into a multitouch watch.They requested $15,000 and raised$941,718 which was 6283% more than anticipated.

Blue Like Jazz (the movie): FilmmakerSteve Taylor requested $125,000 andmade $345,992 which was 276% morethan requested.Diaspora: Filmmakers raised $200,641 which was 2006% more than their initialrequest for $10,000.

Glif: An iPhone 4 Tripod Mount & Stand: Creators Tom Gerhardt and DanProvost raised $134,417 which was1378% more than their goal of $9750.

Lockpicks by Open Locksport: Creator Schuyler Towne raised $87,407 and asked for $6,000, making 1456% more than requested." (http://www.crowdsourcing.org/document/kickstarter-the-science-of-crowdfunding-infographic/2325)

History

Rob Walker:

" I had imagined Kickstarter as a neutral mechanism for liberating creativity, as bias-free as the Internet itself. With no profit-driven executives or credential-obsessed curators, the site could allow creators to raise cash for any idea, however unlikely, eccentric or even foolish. But that is not the case. The founders suspect that if they had taken a purely values-neutral approach, they would have failed. It may be hard to believe, navigating the unruly mob of idiosyncratic ideas cataloged on Kickstarter, but the reason it works is that somebody is in charge.

Perry Chen, who is 35 and Kickstarter’s chief executive, started thinking about the idea in 2002. He wanted to hold a concert in New Orleans, where he was living at the time, but he lost his nerve thinking of all the money he might lose. Chen imagined a Web tool that would have allowed him to raise the money he needed at no personal risk. Three years later, when he was living in New York City, where he grew up, and paying the bills as a waiter, he explained his idea to Yancey Strickler, a Virginia transplant with a manner as laconic and soothing as Chen’s is fidgety.

“I’m not so sure about this,” Strickler, 32, recalls thinking. He might have been dubious because neither of them had much experience fund-raising, running an arts organization, starting a technology company or writing code. Chen was a founder of a gallery in Williamsburg; Strickler’s only qualification was his work as an online music critic. But experience wasn’t the problem. It was the democracy factor that nagged at Strickler — it sounded suspiciously like a popularity contest. “If you let people vote for what they want — that’s ‘American Idol,’ ” he said to Chen. “That doesn’t produce great art.” But Chen had a retort: “What about someone like a sculptor in some small town in the middle of nowhere? They have no way to get into a gallery. No one around them appreciates what they’re doing — but the Internet could.” The Internet could support any idea stranded on the margins of traditionally financed culture-making.

Appealing. So they agreed on a strategy, added a third founder, Charles Adler, and spent the next few years getting nowhere with it. Strickler admits he had basically given up. But Chen wouldn’t let the thought go. Finally the right set of contacts led to people with the right technical skills. Kickstarter started in earnest on April 28, 2009.

By that time, other online services — some successful, some not — had familiarized people with the idea of connecting individual donors to small-scale money-seekers. DonorsChoose let teachers raise money for classroom projects. A site called SellaBand applied the idea in the music sphere; IndieGoGo started up as a vehicle for filmmakers (and has since expanded). But from the start, Kickstarter had a particular philosophy.

First, users must define a specific “project” — a word the founders did not choose lightly. A project suggests something finite; it is not supporting a career or underwriting a start-up. Second (and contrary to my attitude when my friends and I started our little campaign), Kickstarter isn’t for handouts. It encourages — indeed, it mandates — an exchange of value. Creators must offer “rewards” to their backers: written notes of thanks, custom T-shirts, handmade objects. Finally, to add some marketplace discipline to the proc­ess, project makers must pick a target dollar amount and a deadline. If they fall short of the goal, they get nothing. These guidelines aim to subtly shape the proposals, and ultimately the creations themselves. “Once you add constraints, that’s what happens,” Chen explains. “We want that to happen. ‘Kickstarter project’ has some specificity to it, just like a tweet.”

Two years later the founders still avidly discuss the question of what is or isn’t a Kickstarter project. Early on, to be a project creator, you had to have an invitation: the founders turned to friends and harangued them to do cool stuff. They wanted Kickstarter to be full of ideas that they actually liked.

This later evolved into an approval system. Anybody could pitch a project, but Kickstarter had to give it a green light. (The stock example of a proposal they reject: “Buy Jenny a prom dress.”) In late 2009, the company raised funds from people like Jack Dorsey, a Twitter founder, and Caterina Fake, a Flickr founder, as well as two venture-capital firms, and now has 25 employees and not enough space for them in an office on Rivington Street. On a recent week, Kickstarter received 1,890 proposals, each evaluated by a “community team” of about a half-dozen people. About 40 percent are rejected (although most of those flagrantly ignore the site’s guidelines — which bar charitable fund-raising, offering financial incentives and of course anything involving Jenny’s prom dress — or are incomprehensible).

With so many ideas pouring in, Kickstarter could adopt a passive stance and simply let “the Internet” take over. But instead, approved projects often get a little advice: make a video, adjust your rewards, lower your funding goal and so on. Kickstarter is as much about unlocking creators’ marketing potential as their creative potential. The company takes a cut — 5 percent — of the money raised on successful projects. (The transactions are processed through an Amazon.com service, which takes a slightly smaller cut.) The founders say it is profitable.

As both a business and a facilitator of culture, Kickstarter has an interest in projects succeeding, not only in the sense that the money comes through but also that the projects are well received. This entails more than simply waiting for people like me and my friends to show up. One of Strickler’s chief responsibilities is hobnobbing with film-school faculty, museum curators and music-festival organizers. This year the site introduced a feature called curated pages, which gives (thoughtfully chosen) entities like Sundance Institute, the Rhode Island School of Design, the New Museum and Pitchfork space to highlight Kickstarter projects proposed by people associated with their organizations, or anything else on Kickstarter that they happen to think deserves promotion. Kickstarter doesn’t ask for money from these organizations; it simply wants the best brands in culture-making to effectively endorse it as a resource. Most recently, the company hired the artist Molly Surno to function as something like a talent scout, courting and working with artists who might have compelling ideas that could be framed in a Kickstarter-y way." (http://www.nytimes.com/2011/08/07/magazine/the-trivialities-and-transcendence-of-kickstarter.html)


Status

2011

1.

"Kickstarter has been around online for just over two years, and various artists, filmmakers, musicians, writers and designers have used the site to raise more than $75 million for 10,626 “creative projects,” to use Kickstarter’s preferred term. That money has come from 813,205 “backers” — individuals making mostly modest contributions (the most common is $25) to support specific efforts." (http://www.nytimes.com/2011/08/07/magazine/the-trivialities-and-transcendence-of-kickstarter.html)


2. Business results 2011:

"Just how big a year was 2011 for Kickstarter? Very nearly a $100 million dollar year. That was the total amount of funding pledged on the crowd-sourced site during the year ($99,344,382, specifically), which is up considerably from the $27.6 million pledged in 2010. That was generated by just over 27,000 projects, 11,836 of which reached their funding goals (a success rate of 46%, up from 43% in 2010). What's more, while tech-related projects may generate the most attention 'round these parts, film and music projects were actually the two biggest cash draws on the site (netting $32 million and $19 million, respectively)." (http://www.engadget.com/2012/01/11/kickstarter-details-the-year-that-was-27k-projects-almost-100/)


3. Technology Review:

"Overall, Kickstarter users pledged nearly $99.3 million for projects last year—an amount roughly equivalent to 10 percent of all seed investment in the United States, which PricewaterhouseCoopers estimates at $920 million." (http://www.technologyreview.com/article/40244/)


More via http://www.kickstarter.com/year/2011

Discussion

Critique of Kickstarter as a Scam

Mr. Teacup:

1.

"This new collaborative, cooperative ethic promises to bring social change, and posits itself as a threat to the capitalist status quo. This is based on a naive analysis of the world where greedy, selfish, power-hungry people build institutions that embody their corrupt values. Once we get the right people in charge, things will be different. Only they aren’t. Charging 60 times the actual cost of providing a service by skimming a percentage off financial transactions is the very definition of parasitic capitalism. We’re OK with this, because Kickstarter are Good people. So the logic of conscious capitalism and social enterprises is this: as long as you reject the values of bankers & brokers, you can have their business model." (http://www.mrteacup.org/post/an-ambitious-plan-for-putting-kickstarter-out-of-business.html)


2.

"The reason it ought to be put out of business is that it is overcharging its customers for the value it offers, i.e. it is a scam. A tough message to hear, but there doesn’t seem to be any other possible conclusion. Some people have argued that it is possible to be scammed on Kickstarter, a possibility that Kickstarter itself admits to in its help pages, but few people seem to argue that the service itself is scamming project creators.

To make that case, first we should look at what Kickstarter offers to projects. Here are the list of benefits that are offered:

- A very small website

That’s it - Kickstarter provides you, the creator, with space for 4 public web pages plus an admin interface that is intended to be used for 4-6 weeks. The pricing scheme is unique: if your project reaches its funding goals, Kickstarter takes 5% of what you receive. If not, it’s free.

How much does Kickstarter make off of this arrangement? According to Wikipedia, Kickstarter has raised $125 million for 15,000 successful projects, and with a 5% cut, Kickstarter takes $6.25 million. We can easily calculate revenue per project, including the unsuccessful ones. The success rate is 44%, so the overall number of projects was around 34,000, which is $184 per project website.

A barebones web hosting company like NearlyFreeSpeech.net charges around $30 a year for far more space, including a domain name. Let’s call that $0.60 a week. Assuming an average of 5 weeks per project, Kickstarter earns $37 per week per website, 61× as much.

In other words, Kickstarter is a web hosting company that charges over 6,000% more than a comparable service." (http://www.mrteacup.org/post/an-ambitious-plan-for-putting-kickstarter-out-of-business.html)

More Information

  1. what it takes to succeed: http://www.nytimes.com/2011/08/07/magazine/the-trivialities-and-transcendence-of-kickstarter.html