Inflection point: Kickstarter has 3 $1M+ project in 2 weeks | Hacker News Reader

Inflection point: Kickstarter has 3 $1M+ project in 2 weeks

venturebeat.com

50 pointsbproper32 comments

Crowdfunding is a solution to high quality software development, open source development, science funding, and sopa/pipa. It's really quite amazing and people haven't caught on yet. It's also a solution to the startup problem of building what people want.

Eric Ries talks about "pre-testing" - put up a landing page and seeing if you get signups. However, this sounds scammy. A better way is to simply launch a kickstarter/indiegogo campaign. You release the software as open source, which is better for the world as well. But you also get paid as well. You want to launch as startup that does project management as a saas. Instead put a kickstarter campaign up for 1 million dollars, or however much you were expecting to earn from the lifetime of your startup. If enough people want it, it will get funded. The next step you build and release as open source. Afterwards you can host it, or a bunch of other people who are expert at sysadmin host it and get customers paying for saas. You move on to the next project you want to build. The point is, you can have many crowdfunding campaigns going. Think of 20 apps, list them for 60 days. The ones that get funded, you build.

It also solves sopa/pipa. Someone has ideas for movies, launches campaigns in parallel. The ones that get funded, he creates releases for free on youtube.

Same for science. Scientists would no longer need to be attached to a university or do the politics that is involved in getting funding in science. They go directly to the public.

In the above scenarios everyone wins. Customers and creators. The only people who lose are people who were good at politicking their way up the coroorate ladder. Although, they don't really lose. They can switch to being marketers who launch campaigns, however they'll now need to have competence in marketing and brainstorming ideas.

Firms only exist to solve the communication problem. Now that we have the internet, there really is no need for organizations to exist. As more database-based information systems are created for crowdsourcing (kickstarter, fiverr, mechanical turk) , the more efficient this process becomes - which is good news for startups because this is what they are creating.

With enough creativity Kickstarter can almost be seen as a marketing channel in addition to an early stage funding platform. Sounds to me like an ideal way to cajole friends and family into funding one's project/venture without having to formally raise a 'friends and family round', and without having to approach angel investors.

For no upfront marketing dollars you get free exposure, and the opportunity to reach prospects who - gasp - might even FUND your development efforts.

What a great way to reach, excite, delight and validate a market!

I run a magazine (http://interestingtimesmagazine.net) as a hobby. It could really use some funds. I've never really considered that we could raise money this way, but now I am getting more and more interested in taking that route.

Any tips would be most welcome :)

A good goal for us would be to get $2000/month (after taxes) which would go toward paying our graphic designer so that she doesn't have to work a full-time job. Is this completely unrealistic?

Yes, it's completely unrealistic to expect a designer to work for $2k/mo in the US :)

This is Sweden.

Also, she's worked for $0 for 2 and a half years now :)

Amazon payment (which Kickstarter uses) only works in the US

Kickstarter campaigns are usually a one time shot-they have a deadline (example 30 days) to meet a specific money goal (example $30,000). If you're looking for a recurring revenue model, like a certain number of dollars per month, each month, then Kickstarter probably isn't the right method.

You would launch a campaign asking that you would write this many articles with these titles and publish them in your magazine. You can launch parallel campaigns, with lists of articles, for example 10 different campaigns with different themes. Also show your previous work. Also say that you'll give the articles away as creative commons. If the public actually wants what you're giving, you'll get funded and have readers as well. If they don't, you'll know that what you're doing isn't worthwhile to customers and you can think of seeking funding for something else.

I could recommend retooling your mag for single landscape screens, but, a) I don't know your print:download ratio, and b) you asked about Kickstarter!

My knowledge does not come from using it, but instead trying to convince friends and associates to use it, after researching and being enthralled by the potential! First codes the news that, you can't use Kickstarter! Forever, you can use IndieGoGo, if you don't mind the higher total fees (7%, plus afee for not being American (money changing.))

Take inventory. What do you have that has value? Can you leverage that for backing? You're on issue #7 and don't charge, so offering free digital issues to low level backers didn't give you anything. But paper copies do. So any spare stock you have, well, consider this your "fire sale" to raise cash. If you print on demand... Ouch.

Make sure backers know this isn't business as usual, this is an event! I'd make the push to "back Interesting Times volume 2!" And start with new renumbering, and a quarterly schedule. This may be the time to start charging $2 a digital issue, and push to get into digital storefronts like Amazon, iTunes, and even Steam. Don't think this bad. I mean, if you can offer ~100 pages of content that's a great deal. And if not charge, which I understand, consider ads. (Actually, I personally other ads. But at that rate, I see no reason not to retool things as a website... And offering ads at reduced price could be great high tier backing options.) If you're okay with charging, consider subscriptions at reduced rates. Offer DRM free issues congruently with other pay options. But I'm getting into backing rewards now... As I said before, take stock. My point here really is, you want money to continue to chine in, right? Even after the fund raising?

Have people vouch for you. Any connections you've made, use. Ask people if they'd consider giving you blurbs. "Required reading for world domination. Or at least dominating your social circle." - Semi-Popular Person, Company/Culture X. This may play to the mainstream to give you credibility, but of course it also appeals to fans of that person's fans.

Find someone to help make you a worthwhile video. You have to know someone who can film and edit high quality video. If you don't, you can shoot it yourself on a cell phone, and use open source video editing equipment, all for nothing, but you have to make it "work." Get across not only yourself, but the idea that you're offering. Not "a magazine," but that after reading your magazine, your readers will be better equipped to succeed I the world around them. That, somehow, is your video.

And that video is probably the most important thing.

I guess one thing I was dancing around in this was said by someone else. If you don't find a way to turn this into a money making venture, you'll find yourself right back in this spot in a year. And if you do, you may not even need something like Kickstarter/IndieGoGo.

/edit: I also typed all of that on my phone. Wow at those typos. And how longwinded I got. By the I finished, I couldn't bring myself to editing on that tiny screen. Sorry about that. Feel free to ask or email if anything was too confusing.

Of course, that said, you can find all the same material I've read with a little Googling, I'm sure.

Wow, quality advice. Maybe I should contact you, eh? :)

What I find most impressive about Kickstarter is that they are becoming more of a marketplace with every passing day. In the beginning, it was mostly a tool to help project owners collect donations from close friends and family - and their immediate friends. That is changing by the day and witnessing the transformation is very exciting.

You're definitely spot on, as evidenced by the fact that you can get lost merely browsing Kickstarter now. It's a repository of interesting people doing interesting things with signal/noise ratio far higher than the rest of the web.

I believe the signal to noise ratio is good because the projects on the website are allowed only by permission. The Kickstarter team reviews projects and doesn't admit every proposal.

There are over 300 sites similar to kickstarter now. Competition will drive down the 5% fee kickstarter gets, and sites will start competing by providing api's for managing multiple campaigns, as well as differentiating on providing marketing support.

This is a great opporunity for startups - both getting funded on crowdfunded sites and launching crowdfunded sites, because unlike the usual ad-supported business model or saas offering, serious money changes hands and every sector of the economy can be flowing through this.

In 2 sided markets network effects can keep margins high since going to one of the 300 kick starter competitors may mean not getting your project funded.

I doubt their fee will go down ever.

There isn't a network effect in kickstarter. Whether you get funded is basically up to your social media campaign. Unlike ebay, you cannot be anonymously selling your wares with your seller score being your reputation. In crowdfunding you have to go all out - you already need a solid track record that is publicly visible. Funders are basically doing a due diligence check on you. You need a profile on many different sites and email newsletters etc. Crowdfunding sites are basically an reverse bounty system - a kind of api for gathering and dispensing money. The only differentiation between indiegogo and kickstarter at this point is the percentage they keep.

As regards ebay, their network effect hasn't worked out - amazon has taken their business. In the future Amazon or Google might come in take out all the crowdfunding sites by offering a reverse bounty api. At that point, the crowdfunding sites should move in to the function of providing marketing services for creators seeking funding.

I don't agree with you for many reasons:

1) Creating an account and entering banking numbers etc. is a real friction which is not easy to overcome.

2) People can go on Kickstarter and see a number of projects which they can fund without any prior knowledge of the person they are funding.

3) eBay is a $45B business which almost all of the value comes from network effects. Sure, Amazon is doing great (80B+) and is taking some of their business, but eBay is still a cash machine.

4) Looking at Indigogo it says that if you raise the money the fee is 4%. If you don't raise your goal the fee is 9%. While the 4% is better than 5%, my guess is that the total expected fee is actually above 5%.

6) Crowdfunding is not as simplistic as it appears on the surface. While not having the funding as an investment gets around many of the issues associated with the Securities and Exchange Commission, making a mistake could land an owner in jail or with substantial fines. Even if the owner did not mean to make something sound like an investment, if they do, it is a huge penalty. A simply API to create many more reverse crowd funded sites would not work out well on the average.

Question: Why aren't kickstarter backers required to be accredited investors? I ran into that problem trying to join SecondMarket. How is the kickstarter model different?

I don't know of any kickstarter that has offered equity.

I think the reason you do not need to be an accredited investor is that: they are not investments.

Doesn't the success of Kickstarter mean we need to rethink investment laws? I imagine this sort of businesses, where they help start-ups get funding, would explode if people could get equity in the companies. The equity per investor could stay small, so random people don't have much of a say in how the start-up is run.

Kickstarter hasn't really faced many scammers yet, but as it becomes more successful more people will propose projects that they dont intend on fulfilling (and pocketing the money).

This is what I'm interested in understanding.

Right now kick starter and many other sites are handling scammers because, there aren't that many.

What happens when they do try to abuse the sites though?

There's already a bill to change the law to accommodate.

http://venturebeat.com/2011/11/08/faq-what-the-new-u-s-crowd...

Kickstarter et al. have been project-focused and artist-centric primarily in order to get around the "motivations to invest" problem, so passing this could open the gates to a new wave of startups.

How about rethinking investment entirely. Why not just fund projects as open source that will be released to the world. This includes physical objects, designs, and software.

If you were creating a startup, and it would have cost you 1 million dollars of software development cost, 1 million dollars of hosting costs for 10 years, and you expected to earn 1 million dollars profit over 10 years, why not do this instead - ask for 1.5 million dollars on kickstarter - 1 million cost and 500,000 dollar profit. Say that you will be releasing as open source - this is the value you provide to funders. Then sysadmins come in and compete on hosting the software and divide up the other 500,000 dollar profit among themselves. You can move on to other software development projects instead of supporting your startup for 10 years.

At what point does Kickstarter become a NGO stand-in for the more traditional Gov't grants that are continually being short-changed in budget battles and austerity measures?

It will also be interesting to see how a move to "crowd-sourced" changes what pursuits are successful. Presumably, the upside to something like Kickstarter (as opposed to tax-funded Gov't grants) is that the individual financiers have a greater say in what they value enough to fund. The downside, I worry, is that some of the best things to come from science and technology in the last century would probably never have gotten funded...

Also, it bears mention, while $1M+ is a lot for an indy game developer or starving artist, a basic biomedical research lab needs at least that much per year and the standard amount for an R01 grant from the NIH is ~$4M for a 2-3 yr project.

Consider that people were saying Louis CK was a chump to spend so much on the website he had made to sell his video. That was $32k. These mega-Kickstarter projects are giving Kickstarter at least $50k (5%).

Some of the big differences are that A) You only pay Kickstarter that 5% ($50k+ for a mega-success) if you're funded so you're reducing your risk (Tim Schafer honestly seemed to be aware of the possibility that he wouldn't be able raise the requested amount) and B) Kickstarter offers some degree of discovery and promotion (not so much that you can throw a project on there and walk away expecting people to just find it, of course, but a project like Pixel Sand[1] likely only got funded because it was on Kickstarter [also it benefited from serendipitous timing]).

Louis CK had reasons to expect his project would be successful and widely promoted and so increasing his up-front expenditures instead of going with a Kickstarter makes sense in his case (setting aside whether he could have gotten the same custom-built website for less cash).

[1] http://www.androidrundown.com/blog/kickstarter-spotlight-pix...

I don't understand why they would want to keep business's off of kickstarter. It seems there is a real opportunity to provide this service for small business's.

The reason kickstarter projects are interesting and worth the several-months wait for the rewards is that it's enabling unique projects which you wouldn't get any other way. If it got overrun by businesses using it as a pre-order catalog, it could lose a lot of appeal and end up competing with traditional web catalogs like Amazon.

I bet that there are lots of companies that have interesting project ideas but not enough resources to bring them to market. Do you really think it would become a pre order catalog? I think letting business's get information about what people wanted ahead of time would increase the quality of projects/products being created.

Let me get this straight: can you fund a startup with Kickstarter or not?

I used to think yes but the in the interview someone from their team (?) says no.

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