The ugly side of Kickstarter

I suppose if you're 20 years old with no responsibilities and you sit in a room coding 16 hours a day you could stretch $20k pretty far. If someone has the ability and desire to work for a formal $30k salary then I don't begrudge them declaring what they can do on the cheap.

On the other hand, I roll my eyes when someone who spent 500 hours building an app says it's profitable because they have enough paying users to pay the server costs.

First of all, you correctly identified the biggest cost to making games: paying programmers. The solution to that is to be the programmer yourself (or have a programmer friend be your equal partner).

Past that tho, making 2d indie games is (or can be, if you're smart about it) very cheap - Cardinal Quest's entire art budget was around $3000 (music, graphics, etc). Since it also took about half a year of my time to make that's an almost negligibly small amount of money.

The game ended up making a bit over $30k from the desktop and flash versions (direct sales for the former, branding deals and ad revenue from the latter) and the android (done but not yet released) and ios (almost done) versions will hopefully make at least that much again.

It's less than a normal programmer's salary (I didn't get to keep all of it as there were some costs such as the aforementioned music & graphics) but it's enough to pay my living expenses and thus fund my next game.

[1] http://cardinalquest.com

Wait, isn't the whole premise of Y Combinator exactly that? Giving $20k to hackepreneurs to build a company? The mentality isn't born in a vacuum.

Sharper minds than mine have already demonstrated the emerging pattern on Kickstarter: that a majority of the "backers" don't really see themselves as investors, or even charitable givers. They see themselves as consumers pre-ordering hot products. They're handing over X dollars in exchange for Y goods (and maybe a tiny bit of Z street cred). It's a very transactional relationship. And the problem with such a transactional relationship is that the backers/buyers are expecting to get Y as quickly and cheaply as possible, nevermind how the sausage gets made. (Ironically, Kickstarter is all about the sausage-making process, but its users are uninterested in process; they want finished goods).

The article raises a lot of good points about the problems that the Kickstarter paradigm presents for indie developers, hobbyists, and enthusiasts. But it only scratches the surface of the backer-as-consumer issue, which, to me, is a much dicier one. In the long run, I think this dynamic will be net-beneficial to indie content and product development. In the short run, would-be developers and creators will need to think critically about precisely which stage of their fund-raising vs. sales vs. marketing activities take place on Kickstarter, and about who the Kickstarter audience represents in the lifecycle of their product launch. (Are Kickstarter backers your hardcore fans, with a higher willingness to pay to get the goods before everyone else does? Are they early product evangelists? Are they beta testers? Are they something else? And, most important, do they see themselves as any or all of these things?)

I suspect that the long-run winners at the Kickstarter game will be the ones who develop the most sophisticated and savvy method for differentiating both among Kickstarter user sets, and between Kickstarter users and mainstream consumers -- and, accordingly, the best ways to differentiate the product offering to these sets of users.

(IANAL)

I also expect to see lawsuits in the near future, possibly with government investigation into Kickstarter resulting in changes to required project terms. Very few projects have clear legalese defining what your money will be used for and any (or no) guarantees. I bet the percentage of people running projects that consult with an attorney beforehand is in the single digits. This will inevitably lead to legal issues.

When you fund a project you're generally pre-purchasing. Pre-purchases are a legal obligation to the company. If they don't deliver they have to return your money. Very few people running projects realize this. Clearly stating no guarantees in the project description may get around this but then again, possibly not.

If you're going to run a Kickstarter project speak with an attorney and make sure you have a solid business plan with all expenses calculated, including Kickstarter's cut and tax obligations.

They are pretty explicitly not an investment, though, and the site is quite clear about that. I don't think an equity model would serve them well in most of the markets they're working in, either; it would attract a different audience that they aren't targeting. Kickstarter is modeled off some successful crowdfunding efforts in the arts from the early 2000s, like Trent Reznor's and Radiohead's, and aims to connect fans, not investors, with people undertaking projects.

Would it really be an improvement if, instead of getting a limited-edition box set and maybe access to preview chats/etc., fans got an equity stake in Reznor's label in return for crowdfunding his next album? Do the thousands of fans who kicked in for his last crowdfunding drive even know what equity is and what to do with it? That seems like adding a huge amount of complication for something few fans actually want.

There are also projects on Kickstarter that will never be profitable, not because of failure but by design. People use Kickstarter for art experiments and to fund parties and special events that don't generate a product that will be sold after the initial funding. You'd be better off going on AngelList if your goal is to fund projects for high amounts of money and get a return on your investment.

That said, I don't think there anything explicitly stopping someone on Kickstarter from giving small amounts of equity to backers, and it might be something that people do for very high tier ($5K-$10K) reward levels.

If you are looking for an equity return investment worth picking your nose for then kickstarter projects simply are the right place to be looking.

What you put into KS projects is not an investment, you are essentially just helping the project out. If you are looking for financial return on the money you put down then you either need to properly invest in companies (though that is of course rather expensive and risky) or for smaller amounts you need to find a savings account with a reasonable rate of inflation. The medium amounts there are several "crowd funding" options that provide loans to individuals or small businesses - you'll likely get a higher return from this than a savings account but there is of course a risk that you could make a loss instead.

I've put money in the put for a couple of things on KS, not because I want some financial return on "investment" but because I want to see the thing happen or be made for one reason or another (a valid reason being just because I think it is a neat idea and even if I don't personally want it I think the world would be a little more "cool" on average if said product/service/show/what-ever got off the ground).

I've done a GDC demo in Unity in one month with a team of about 7. It was a good concept demo, but not polished enough to release as a product.

I also shipped a Unity game in about 2 months, doing all the programming and art, with predictable results. The game-play needs polish, and let's not even talk about the visuals.

Games really do benefit from iteration. In some sense, this is the danger of trying to schedule a game project. It's a great way to build some life-less me too game. Often the most successful new games have had schedule disasters that forced almost complete re-writes.

You learn the business stuff as you go along, ideally before you run out of money.

It's a MAJOR difference to present a prototype of something like an iPod Nano watch-holder and say "well, we just need 50K to get tooled up and start stamping these out", as opposed to saying "well, we need 50K to get our ideas together and hammer out something that hopefully will be fun, on-time, and cheap".

Remember that old engineering joke about good/cheap/on-time, you can pick only two? That's gonna hit every single one of these game projects. It's hard enough making a game fun, but now you have to do it while making your budget and making your schedule? That's a recipe for disaster.

Using this logic, one should just play the lottery because hey its only a buck and the EV, while a sucker's bet, is still better than any Kickstarter project.

I used http://readable.tastefulwords.com/ for this article myself.

It's even quite benign for FUD — they're not saying "this is a load of crock," only "this is not magic".