Opinion

Felix Salmon

Kickstarter matures

By Felix Salmon
September 21, 2012

In the wake of my post on Tuesday about the Kickstarter campaign for Lifx lightbulbs, there were two very welcome developments yesterday.

First, Lifx announced that, having passed the $1 million mark, they were going to cap the amount of money they are raising via Kickstarter. They’re over $1,200,000 as I write; they’ll cap out at just about $1,300,000.

“We want to put all our energy into developing the product, rather than building a large company (at this stage)”, they write. “We’ve raised more than enough to execute on what we’ve proposed to do so now we are going to get down to the business of creating a full production run of LIFX smartbulbs fit for homes across the world.”

On top of that, if you look at the Lifx product page, you’ll see that the $5,000 option for ordering 25 packs of 4 bulbs has disappeared: that’s partly because such wholesale offers weren’t allowed even when the Lifx project was announced.

Still, the Lifx team got in just under the wire, because Kickstarter yesterday announced new rules which would disqualify their campaign in its current form. In a post headlined “Kickstarter Is Not a Store”, they lay them out: all Kickstarter projects are now required to have a “risks and challenges” section, allowing backers to judge whether “the creator is being open and honest about the risks and challenges they face.”

On top of that, if you’re trying to fund a project designed to make things and ship them out — if you’re in the Hardware or Project Design sections — then product simulations are forbidden, as are product renderings like the picture of a perfect lightbulb which currently graces the Lifx page. “Products should be presented as they are,” write the Kickstarter crew. “Over-promising leads to higher expectations for backers. The best rule of thumb: under-promise and over-deliver.”

Finally, you can’t offer multiple quantities of a product at all. The famous Pebble watch, for instance, persuaded more than 10,000 people to order two or more watches; between them those backers contributed some $3.3 million, and are expecting to receive more than 30,000 watches. (Initial estimated delivery: this month. Actual delivery: your guess is as good as mine; the company’s not talking.)

Given that Pebble wound up taking in more than $10 million in all, they would have been fine without those multiple-quantity presales. And the Kickstarter people are right: selling many of a thing — up to and including Pebble’s $10,000 “MEGA DISTRIBUTOR PACK” — sends a clear message that you actual have many of these things to sell. Once you’re up and distributing, then you can sell as many of your widgets as you like. But before your widget exists, by all means offer a future widget in return for people helping out with development costs. But don’t turn your Kickstarter page into an e-commerce shopping site.

“It’s hard to know how many people feel like they’re shopping at a store when they’re backing projects on Kickstarter,” the new rules say, “but we want to make sure that it’s no one.”

Yesterday’s new rules are an important step in that direction. Kickstarter is a wonderful way of crowdfunding projects; if the public were to start thinking of it as SkyMall for vaporware, that would be just as horrible for creators as it would be for Kickstarter themselves.

What’s more, now that projects like Lifx are going to be forced to be upfront about their risks and challenges — including the probability that backers will not receive any products at all — those backers are likely to be much less upset if and when things do go wrong. As ever, transparency is a good thing. And these new rules will make it much harder to hide serious weaknesses behind video-editing cleverness.

Comments
6 comments so far | RSS Comments RSS

So Kickstarter is not a store, yet they don’t want start-ups to show products that haven’t been developed yet. So what does that mean? If the product isn’t real, then how do they raise money for it? And if it’s real, and ready to ship, then what do they need Kickstarter for, since they can’t sell on it?

I thought the whole point of Kickstarter is to help companies raise money for ventures that can’t be funded through VCs and angels. If you can’t show a simulation or rendering, then what do you do? Display a bunch of words about your idea, without letting anybody know what the product will look like?

The kick-started companies should obviously disclose when they are showing drawings, and let prospective funders know what stage the product is at. But it sounds like with the new rules, they don’t want to kick-start product companies. That’s too bad, because VCs are not all knowing about what will succeed, and Kickstarter provided an alternative for some low-budget ventures.

Posted by KenG_CA | Report as abusive
 

Kickstarter’s users are sophisticated enough to know the risks they’re taking.

God knows why Felix is so intent on bashing the kind of new young entrepreneurs America needs so badly.

Posted by EmilianoZ | Report as abusive
 

Ken- Your post seems to imply kickstarter is out there for the public good. They are not, they are trying to make money like everyone else. And the longer they delay the first big catastrophe and all the negative press that will be around it, the longer they can keep taking their cut.

The point is to make money, the point isn’t to “help companies raise money for ventures that can’t be funded through VCs and angels”.

As for your love of this obviously misguided and foolish kickstarter, I am not sure what to say. The end users certainly won’t get what they are expecting, and if they get anything at all it will likely be something they could have already bought without the risk.

Emiliano- American needs entrepreneurs about as much as it needs more nuclear missiles. More resources wasted on fraud/duplicate/failed businesses is not necessarily a good thing.

TO the extent kickstarter helps connect people with products and services they want and value it is a good thing, to the extent it serves as another medium for wise guys to extract money from the foolish masses it is not. Only time ill tell which it is, and your rhetoric won’t change the facts at all. I doubt many of them are sophisticated enough, a lot of them are kids and college students.

Posted by QCIC | Report as abusive
 

Kickstarter is not the only crowd funding website. If they ban the sell of multiple items, other websites who welcome it will just take Kickstarter’s business.

For instance, rockethub:
http://www.rockethub.com/projects/10224- 52-shades-of-greed

Kickstarter will be forced to take it back.

Posted by EmilianoZ | Report as abusive
 

QCIC, I wrote a long response to you earlier, and I don’t know if it got lost, or Reuters is just broken again and slow, so I’ll try to repeat what I said.

I don’t assume Kickstarter is out there for the public good. I don’t believe any company is managed for the public good, they are all managed for the benefit of the management. They don’t care if customers, employees, or even shareholders are happy, and although they have to satisfy a subset of those sometimes, that’s not their goal.

And I don’t believe the founders of Kickstarter created it just to make money. They, like so many other people who start companies, have other goals in mind. It’s only when speculators get a piece of the company that the goals change from solving a problem to making money. I don’t believe Kickstarter has crossed that threshold yet.

I don’t have any love for kickstarter or Lifx (I’m not sure which one you were calling misguided and foolish, or why you called them that, but I don’t believe either deserve those adjectives). I don’t know how you can forecast that the “end users won’t get what they are expecting”; what is the source of this prescience? do you know the principals? Are you an expert on the technology they are trying to bring to market (it’s not state of the art)? What makes you so sure?

Your comment to Emiliano is condescending and insulting to millions of people. Who are you to decide that people have no business starting their own company? Are you suggesting that if they can’t obtain a fulfilling job, they should just take whatever our deteriorating economy gives them? Or if someone can’t get a job at all, they should just lie down and die, instead of trying to build something by themselves? And that all of our needs will be met by the existing big businesses out there, most of which don’t care about meeting the needs of their employees or customers, but rather, as you suggest, only care about making money?

Your “point is to make money” attitude summarizes what is wrong with businesses today. And it’s that reason that individual risk takers, and the infrastructure to finance them, are needed.There are far too many companies that are content to milk their existing products, as obsolete as the technology may be, and a nation largely populated by those companies will only slide into irrelevance.

Posted by KenG_CA | Report as abusive
 

I’m actually mixed here. On one hand, I think it’s too easy for someone to make a slick sales pitch that they can’t deliver on. On the other, there is a high bar set now that demands an actual physical item before funding can be sought.

Personally, I would rather see an unattractive, but functional, prototype that proves that there’s some possibility of manifesting the project than a rendering and a bunch of copy telling me about this amazing idea the entrepreneur has had.

If you can’t build anything at all without kickstarter funds, then perhaps your idea isn’t as fully formed as you’d like folks to believe. When a maker, LIFX in this case, states that now that they have funding they’re going to find the best experts out there to help them finish the design on their product, I have to wonder…just how much designing did they really do before they launched this thing?

Posted by tempo36 | Report as abusive
 

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