The Kickstarter Conundrum: Who’s Taking the Risk? You.

There’s been an uptick in chatter about Kickstarter the past few weeks — most of the chatter has been on the negative side. People are getting upset the projects they backed still haven’t shipped — projects like The Pebble watch. There has been a lot of good things to come out of Kickstarter, to name a few that I backed:

I was surprisingly complaint free on these projects, but it seems now that Kickstarter may be too big for their own good. Specifically, it seems, that there is such a thing as over-funding a project. While that is a massively over simplification of what is really happening, it’s worth taking a deeper look at it. I see two main issues with Kickstarter projects right now, and unfortunately I am also seeing little, to no, help from Kickstarter themselves.

The two main issues:

  • Projects biting off more than they can chew.
  • Promising more things (features, goodies, etc) in the same amount of time if higher funding levels are reached.

I think what is actually happening is that Kickstarter is suffering from being too successful. Originally the platform was one that artists used to deliver new music and films — to create things that they know how to create already. Now, with the massive success of gadgets on the site, many more people are wanting to create their dream gadgets — the difference is that most of these projects are started by people that have little to no experience actually creating the gadgets they seek to create — the polar opposite of the arts that were previously popular on the site.

So it’s one thing when two guys get together and prototype a clever plastic tripod mount for an iPhone 1 and a completely different thing when a group gets together and dreams up an interactive watch. The Glif was made from low-cost prototypes early on, they just needed money to fund large scale manufacturing. The Pebble isn’t real, the idea is, so not only is manufacturing needed, but so too is R&D.

And R&D (spoiler alert) takes a lot of time.

Yet in the project creators minds, the two projects almost seem one and the same. The Glif is a physical good made by two people that had no prior experience, which is basically the same was making any other physical good that happens to be a watch — right? Not quite.

And that’s what all Kickstarter gadget backers are quickly learning: you cannot simply fund something into existence.

So while some fault lies with over-ambitious Kickstarter project creators, I think we also have to fault the system. Kickstarter doesn’t stop a project from receiving funding at any point — you can raise as much as you humanly possible — and I don’t think that should change necessarily, but it should be better controlled.

Here are some simple fixes I would like see put in place:

  1. Allow project creators the option to cap funding.
  2. Require actual estimates of cost and production times from project creators. That would be in the form of an proposal from a manufacturer that states the time required for manufacturing at certain break points and the estimate per unit cost for every X unit run. This would only be required by gadgety type projects.
  3. Automatically delay shipping estimates based on those proposals and the amount of units pre-sold. This gives backers a better understanding at the time of backing.
  4. Change the “backing” terminology. Stop being vague and working in a gray area. If a project says that you backing at X level will get you the item being back — that’s no longer a donation it’s a pre-order. So create two types of backers: donators and pre-orders. Donations are just that, you give them money and get nothing (maybe a sticker, whoopy). Pre-orders are exactly that: pre-ordering a good — this then becomes refundable. That would likely curtail the amount of projects being created, because of the risk associated, but that’s the way it should be. You need project creators to be confident they can deliver.
  5. A reality check. Kickstarter should hire some people that know a thing or two about manufacturing and have them take a look at popular projects to vet them for realistic goals. If the goals aren’t realistic, talk to the creators and give them a reality check, or suspend the project.

I have more thoughts, but those are where I would start. The risk is actually to Kickstarter on a whole, as Matt Griffin tells me on App.net:

@benbrooks the fact that I’m still waiting for my pebble is exactly why I won’t fund any more projects right now. I can only place one bet at a time and feel ok about it.

Which brings me to my last point:

Why is it that all of the risk with Kickstarter projects falls on the backers and not on the project creators?

Yes, there is financial risk for project creators if they go over budget, but they could also spend all the money trying to ship, never ship, and I have no recourse because I was just “donating” money with the hope of getting a product.

That doesn’t seem right and until it’s fixed I’m done backing things on Kickstarter.

  1. Not to minimize how amazing the Glif is.
Originally posted for members on: September 7, 2012
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