Comment by ryanlchan | Hacker News Reader

Comment by ryanlchan | Hacker News Reader

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I'm curious to see what happens to Amazon FPS if these product based crowd-funding apps take off. We may be in for a bit of a Paypal style crackdown debacle.

I actually spoke with the Kickstarter guys back in 2009 when I was considering branching off their idea specifically for product based ideas, thinking that it could be "Amazon for stuff that doesn't exist yet".

We all agreed that the idea should happen, but Kickstarter didn't want to do it for two reasons:

1. Their goal is to help artists succeed. They're artists themselves, and the guy who started the site's been working on this for years. It means a lot to them to help the little one-man filmmakers.

2. The risk in having products that aren't delivered on time, in the same form as envisioned, or aren't even completed was just too high. They were terrified of having a backlash of backers who thought they were purchasing a product when in fact the transaction is structured as a donation.

The second one is what makes me worried. What happens if, worst case scenario, Pebble goes bankrupt without producing any items? Who takes the hit there? Is it Amazon, Pebble, Kickstarter, or the backers? It isn't clear yet because we haven't had a high-profile failure yet. But it's only a matter of time.

I'm surprised that the idea that anyone other than the backers are going to lose money keeps coming up; it's always looked pretty clear to me (even though I've gotten rewards delivered from around 30 out of 45 projects, mostly hardware, and the remaining ones are still pretty visible and active - past success doesn't feel like a guarantee on anyone's part, it's just pretty cool.) It's helped that I'm pretty well-qualified to judge these projects, though the only ones that looked unlikely to actually deliver have been really obvious (the "projector" that was supposed to be something mini-maglite sized that plugged into an iPhone headphone jack comes to mind) so it's not like it's actually taken all that much effort :-)

It also seems like the small-donation structure should make it difficult for any individual to have cause for action; I see some of KickStarter's recent changes as not wanting to even get into that fight, but that's because even winning would be expensive (and as has been suggested elsewhere in the thread, they're actually in it for the indie films.)

Or do you mean just the popularity risk, if enough projects don't deliver?

Eichin,

I’ve also backed quite a few Kickstarter design projects. The biggest risk backers face from Kickstarter design projects is personal safety, not failure to deliver. I’ve spent many years in new product development and the items delivered to me wouldn’t come close meeting even the most basic consumer safety codes. Plus I have no expectation that the project creators have any sort of product liability insurance.

That being said, I think the Selfstarter model can directly address that risk. Backers are dealing directly with project creators. The liability is clear. I expect that in the future, project creators will need to demonstrate product liability insurance coverage and that they will meet safety regulations. I hope to see that option somehow added to the Selfstarter code so that project creators can show they have insurance coverage and that they will meet safety standards.

It seems to be understood that crowdfunding only guarantees an attempt at realizing an idea. Backlash will only be warranted when crowdfunding is used for anything other than an honest attempt. I think reasonable people agree that money can't buy success, so failure is and will continue to be an accepted outcome.

There is a subtle but critically important difference between the Kickstarter offer and the Lockitron offer. With Kickstarter, the backers’ money is transferred to the project creators at the end of a successful campaign. With Lockitron, the backers money isn’t transferred until the product is ready to ship. That completely changes the risks. Lockitron can get bridge funding based on the committed orders, but the financial risk of failure is born by the lender, not the backers. That strikes me as a much better model than Kickstarter for new product inventions.

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