Why I’m not backing you on Kickstarter
danshapiro.com
danshapiro.com
The site has gone to great lengths in recent months to stamp out the former -- even going so far as to announce "We're not a store," and to impose a lot of restrictions on project listings.
IMO, these moves have only exacerbated the problem at hand. Now you've got a presumptive majority of users who still treat Kickstarter like a preordering site, but who get even fewer details about what they think they're preodering. Case in point: lots of blog posts like this one, which claim they grok the idea that they're not preordering finished goods, but nevertheless complain that they're not preordering finished goods. There's a very clear disconnect between intellectual admission ("I realize I may not actually get this item") and emotional expectation ("Where the f--- is my item???"). This is a recipe for cognitive dissonance, and it leaves a lot of very vocal users frustrated. Some of those users may be right, and others may be off base -- but they are Kickstarter's problem, regardless.
Quite frankly, I don't think there's a fantastic solution to this problem. But project categorization/tiering seems like at least a halfway decent step. Kickstarter should ask its listers to choose which stage of the idea they're in: early concept, prototype, pre-sale, etc. (I'm sure they can come up with better names for these categories). And that stage would be made very clear to the users/backers from the get go.
I don't think Kickstarter can continue to grow, or even last, without preordering. That just seems to be the dominant use case most people have for the site. It's here to stay. If Kickstarter shies away from it, some other crowdfunding company will claim the space and leave Kickstarter in the dust. Rather than trying to stamp it out, Kickstarter should embrace it -- but at the same time, take steps to differentiate it from true kickstarting.
http://www.kickstarter.com/help/guidelines
Part of the first Guideline says:
"A project will eventually be completed, and something will be produced by it. A project is not open-ended. Starting a business, for example, does not qualify as a project."
If I were starting a project it seems clear that the expectation is that I deliver something.
I'm not clear if that agrees with your view or not I guess I'm not clear what the expectation of crowdsourcing is. Maybe it's just a buzzword.
And this is exactly my point. :) I don't think most people are clear -- or at least can't agree -- about their expectations for crowdsourcing, including the users of Kickstarter. The only thing that seems to be clear is that a lot of funders assume that crowdsourcing means crowd-buying. Whereas a lot of project launchers tend to think crowdsourcing means X, Y, Z, what have you. There's a disconnect between these expectations.
1) A project is more clearly defined as something that the creators intend an eventual completion. Or, perhaps better, a project is something that has a hard ship date. A project is not necessarily successful: that is, it may fail to make that ship date. If it fails, it may fail in such a way that it never completes. That is the worst case scenario: your money went into a black hole.
2) There's a difference between crowdsourcing and crowdfunding. Crowdsourcing is a riff off "outsourcing"; it's using "the crowd" to accomplish tasks. Crowdfunding is a specific instance of this, in which the task is "give me money".
I think Kickstarter is fully focused on creative projects that do actually create things. Each project has to have a clear end point and well-defined creation. It definitely isn't made to clear out old inventory -- so in that sense, it isn't a store, but for those of us that need resources and scale to manufacture a product, it is hugely important, and a lot of their focus.
I do think there are a lot of ideas like categorization and tiering that could help people better understand Kickstarter, and I think they'll continue to refine the concept, of course.
I think that tiering may help, though I don't have the variety of experience to suggest a set of tiers, and I suspect KS devs don't either. I would suggest to Kickstarter that, now that they have a few years' worth of data, mine it and figure out those tiers. Also, start actively going through failed projects and figuring out why they failed, and release that information to the public: you have inertia now; telling people that projects fail after funding is not going to stop them from contributing to ideas they're enthusiastic about.
My broader issue is that Kickstarter, in general, seems to have a dilemma on its hands. On the "buy" side, it has a lot of users who are essentially treating Kickstarter campaigns like product preorders. On the "sell" side, it has a highly variable mix of project owners. Some are doing presales. Some are seeking funding for proof-of-concept. Some are seeking seed money. Some (seem to) have finished products, and are evidently using Kickstarter as a marketing tool. Etc.
The challenge is that you have a fairly homogenous use case on the buy side, and a heterogeneous use case on the input side. Adding to this challenge is the fact that the use case most "buyers" seem to be gravitating toward is directly at odds with the use case Kickstarter wants to encourage on the input/"sell" side.
Now, my recommendation stems from my assessment of the problem. I may be wrong. But to me, when I see a lot of variance on the sell side of a market, and considerably less variance on the buy side, I tend to think the solution involves bucketing, or categorizing, the different product types on the sell side. The goal is to create some sort of homogenous subsets of what is currently a very messy, variable master set.
The "From Holden" campaign seems to be more about market testing and broadening their reach. With the amount of work they'd already done, they had a product they were ready to start selling and could have set up an on-line store from day one. The low target ($5000) basically guaranteed they could run off 500 or 1000 units and move them out the door immediately.
Since most of us could throw that amount on our credit cards with ease, the only rational reason to run the kick-starter campaign was to make sure the product was wanted before committing to production.
I'm not saying this is all bad ... in fact it's way better than the campaigns with cool ideas but backed by founders with no idea how to deliver. I guess what I'm really saying is that there are more than two reasons for kick-starting.
If you want to be hypercritical of companies using Kickstarter for the first time, you should try to provide real feedback. Mindless comments such as the following are as unhelpful as tips get:
"Pro tip: if I, who know your business as well as I know the feeding habits of the Springbok Antelope, can come up with more risks than you can, you’re not doing it right"
Here, let's try to write some generic, but probably more helpful feedback:
When first filling out the Risks and Challenges section your first inclination will probably be to prove how there are no risks and no challenges. Instead of taking this path, be open about what you feel the risks are and your plan for minimizing them. Talk about the challenges you currently are facing and how you've solved other challenges in the past. If I'm going to sail out to sea with you on this voyage you'll be more likely to convince me you know how to handle a storm than to tell me there won't be any storms at all.
If you are thinking about doing a kickstarter campaign and you come across this blog it's not going to help you tackle any of the issues that he outlines. At best, it's just the author posturing with, "If your campaign doesn't meet my guidelines then I'll use social signaling to embarrass your company."
I would rather see high quality writing about how to be successful in raising money and delivering on Kickstarter.
What you suggest is another, different, and also valuable blog post. His choice:
Pro tip: if I, who know your business as well as I know the
feeding habits of the Springbok Antelope, can come up with
more risks than you can, you’re not doing it right.
Truthfully, the whole post is really just two points: think hard about your business, then be honest with what you know. But sometimes writing about antelopes is fun too.
That type of hyperbole doesn't sell as well as this one does.
Maybe my habit of spending 10 minutes a week reading YouTube comments has made my skin thicker than before, but I wouldn't call Dan's tone "disdainful". Exasperated, yes. Impatient, yes. Frank and direct, yes. Disdainful, not that I can see.
Here's the problem with your generic, helpful feedback: my eyes keep slipping past it. I'm pretty sure I'm not the only one who ends up having to expend more effort trying to read bland and insipid content, so tailored to avoid offending anyone's sensibilities that it shows.
For me, it struck a decent balance between straight prose and casual, frank humor.
If we wanted everyone's blog to read like the owner's manual for an automobile, I guess you'd have a point... but do we really?
Not every "project" can and should be successful in raising money. The general gist of the example was not "You didn't write about this well enough, so I gave up on you and want to shout about it". Instead, it was "You don't seem to have any idea what you're doing, and here's how I can tell."
If you don't know what the risks, details, or plans are, you can't and don't write about those things. We can tell you don't know about them, and can choose not to support the "project". In this way, your Kickstarter page perfectly represents the project. Why would anyone want to change that?
If a project estimates correctly, they should be able to 'kickstart' once the funding goal has been met. After that they can set up their own sales and marketing channels to sell to follow-on customers after the original Kickstarter backers get their rewards. To me this matches the original intent of Kickstarter.
Obviously capping funding amounts cuts into Kickstarter's short-term gains. In the long run however I think it would minimize the risk of a high-profile project (or several) failing to deliver and sinking their whole model.
If anything, an enforced cap will increase the exclusivity of an offer, and reduce the number of people who hold off until the last day to back a project - they're the people who are really preordering a product name, not backing an idea.
Yeah, stretch goals are stupid.
Rewards tier X. Costs $ to provide and ship to customer. Minimum pledge amount is Y. Amount of 'extra' you make is PROFIT; Y-X.
Stretch goals seem to imply that if you hit the funding target $$$ now everything over that is Pure Bonus PROFIT and goes towards making an Extra Awesome version of whatever the project was.
...but it doesn't work like that does it?
Backers aren't stupid; they will by and large pick the most optimal pledge level (you see it all the time on successful projects). That's the pledge level that minimizes the PROFIT level to the project runners.
So really, when you make a million on top of your goal, what you're probably making is 1,000,000 * low profit factor, and the stretch goals you see for some projects are just ridiculous (eg. we'll ship extra stuff to all pledge levels! <--- totally smashes your PROFIT total for these pledge levels).
Poorly thought out is exactly how I would describe it.
Kickstarter should make people submit a budget excel spreadsheet that details exactly how much they expect each reward tier to cost, and how both a exactly-on-budget successful funding, and the 10x surplus funding will broken down into spending on delivering the project.
That doesn't have to be made public, but how can kickstarter stand there and go "we're good guys" when they're running projects for people who clearly haven't done this, and as such neither kickstarter nor they themselves have any idea if they'll actually be able to pull of the project when if its funded.
A lot of stretch goals I have seen are things like upgraded components, extra colors, and the like which are wuite possible as your order sizes push your per-unit costs down. This is doubly so for software based offerings since marginal costs are zero for each additional pledge so you can take what would be pure profit to fund additional features.
...many projects don't seem to have any idea how scale works though.
All I'm advocating is that creating a project requires you to submit a budget detailing how you'll spend the funds.
Spreadsheets are easy to parse; it'd be trivial for them to automate checking the sheet for stupid values (cost of manufacture: 0, cost of shipping: 0, profit: 100%) or people who have no idea (100% of funding -> making the game (that's not a budget doofus)) or people trying to exploit the system (excessive total units shipped) and give them some idea of what projects need closer scrutiny before being approved.
The real problem (alluded to by both the article author and other comments) is that project creators don't ask themselves hard questions about how their project will scale. Unfortunately, this is more of a problem in the Technology and Design categories, which tend to have a higher hit rate than others. Many project creators envision doing the work themselves, or using hard to source parts. The Open Locksport guy even planned his reward tiers so that he was operating at a loss for each pledge. That's just poor planning.
[0] http://tachycline.com/index.php/kickstarter-funding-rates/
http://www.danshapiro.com/blog/2012/11/this-is-why-im-not-ba...
What if the fabric from your supplier is inconsistent in quality, do you have another supplier? What if your estimates are off, and labor+fabric costs more than $8, will your margins allow you to deliver? What if every other large manufacturer has discovered that the cheaper labor available overseas more than offsets the increased shipping costs? What if your manufacturer has a work stoppage, do you have another manufacturer you can turn to of high quality? What if their factory burns down? What if their quality is inconsistent? What if they don't deliver finished goods on time? What if your fabric gets damaged en route, do you have insurance?
I know next to nothing about clothing manufacturing, and I just listed more risks than you did. The risks section is not intended to be an exercise in braggadocio.
Not to mention, the Kickstarter's "risks" section is precisely meant for what you just wrote above.
I don't back a Kickstarter campaign because I want one of the things they're selling. If I want that, I'll just wait. I do it because I want to back the venture.
You write: "To build a revolutionary product, we knew we had to build a next-generation apparel manufacturer from the ground up, tailored entirely to the way men want to shop." And then your risks section is mostly about the risks of selling one batch of shirts. There is such a vast amount of hype and haziness on the Kickstarter page that I have no confidence that you guys know what you're doing.
It's a five-person company that needed to raise $5,000 just to buy fabric? You guys seriously couldn't come up with that kind of dough directly? Or from friends? Or put it on your credit cards? It just makes no sense to me.
I figure the reason it makes no sense is that you're not actually using Kickstarter to kick-start the company. Instead, I guess you're using Kickstarter as the pop marketing channel du jour, a way to take pre-orders and get some hype. So naturally it wouldn't make sense.
The reason why the question about risks is asked is because one way you can tell a person with experience from a person without is that the person with experience can speak about risks in more detail than "shit happens." They can enumerate specific risks, make general predictions about which risks are more likely to hit them than others, and estimate the costs that would be incurred should such a hit happen. This indicates that the person has been around the block a few times and knows how to differentiate between large, real, business-killing risks and more theoretical ones.
The opposite approach is to make bold statements like "no matter what happens, I'm going to make and deliver high quality shirts" with an obligatory disclaimer like "small hiccups will happen" tacked on afterwards. This communicates that you're aware that risks exist, but not what exactly they are, or which ones are the most dangerous to your business. Which sends the message that you haven't been around the block a few times. To be frank, it sounds like amateur hour.
It doesn't surprise me that a potential backer would prefer the first type of response over the second. I would too.
What I get from the article is that this guys had an idea and 24 hours later they created the Kickstarter. This is partly wrong, what is totally wrong is people supporting them(please note this is just my opinion) because you can find everywhere cheap shirts, even good ones. There a huge market about it what would make you think that some random guy can do better? Just because they say so? If this would make any money companies would have already adopted this.
When approaching Kickstarter I think one(with an idea or a prototype) should make it clear what he wants to achieve without the "I will make the best at the lowest price" attitude. Remember the users that backing the project it's a donation with a possible gift and not a preorder. Also you should have thought about it more than 1 day. The day you realize that you can't maintain your promises your reputation might end up destroyed.
I think that it's important that we use Kickstarter the correct way because we risk ruining it, when too many people will realize that they will not get what they paid for people will not use it any more, resulting a bad reputation for kickstarter and therefore other projects that might be worth checking.
I'm not backing you on kickstarter because you're asking me to give you money in the hope of a reward later, instead of it being either a real purchase or a real investment.
Kickstarter croudsources the risk, and the upside is 'you get this thing we want to make', where you could instead just wait for that thing to be made and buy it.
I would rather have given Pebble $200 or $2000 for a (admittedly tiny) piece of the company. That's compelling.
The risk is way, way too high for the reward. But the price points are generally so low that it isn't a big deal. It's like playing the Super Lotto, but instead of an infinitesimal chance of winning $10m on a given date, you have a slightly less infinitesimal chance of getting the product you wanted at some nebulous point in the future.
All the downside of risk with none of the upside, where do I sign up?!
Its like watching a rebel guy you didn't like and thought will never to well, go to work for the guy you hate and then both do amazingly well.
Besides this whole model of skipping a VC/investor to go directly to customers and then make super profits is a disruptive trend for investors.
Having customers pre-order a product and pay directly for it isn't exactly disruptive.
This is like the sales pitches pre-real estate collapse. "The markets have steadily risen at 5-10% so its safe to take a 4.5-8% variable interest mortgage!"
Then things go wrong.
I lose my bet if KS can dodge a hit to their reputation, by ensuring that their system doesn't get gamed or become a target for cons.
Edit: Incidentally the reason VCs and others don't invest in some ideas is because of ticket size of the initial investment and final ability to knock it out of the park. (the 9 in 10 fail, but the 10th is Google rule)
So VCs are never going to be worried about losing out on KS projects except very rarely.
On the other hand, I know that I can create a sales pitch for a vapor ware product which sounds good enough to at least get some funding, and use that to create more believable KS pitches.
Speculation of course - I assume that this is something KS has worked on.
Is it sustainable for tangible goods businesses? Generally, campaigns don't sell full pre-orders, they sell deeply discounted preorders. Unless there is some major, major margin built in there.... I mean, I'm looking at Pebble's kickstarter, and all but the first level give you 1 or more watches. Considering that the first run is the most expensive (by a wiiiiide margin, getting the tools made, setting up QA, etc), I wonder what Pebble's books are going to look like once all the preorders are filled?
It probably depends on the VC/investor -- the hands-off investor it not bummed because these guys are learning manufacturing. That's expensive. The Pebble guys had a working prototype and expected to ship production Pebbles in September of this year; they're not even in production runs yet. Not getting down on them, just pointing out the not-so-obvious: manufacturing is really hard to get right.
I know, you could find this out too. But if they mention things, they should mention it properly since it's not clear at all.
I quite like this idea by the way, I just can't back them since I refuse to get a Credit Card :)
I'm suggesting right here and now that someone create a Kickstarter project for a 3D printer. With such a unique and interesting offering, how could such a project not succeed?
Don't forget to give me credit for the idea when you eventually see it appear on Kickstarter.
[for the humor impaired, the above is sarcasm]