It was the Catholic Pontiff, Pope Francis who stated a few years ago that the Internet is a gift from God. He marveled at the extent to which unprecedented technological advances has made it possible to reach billions of people across different regions and cultures of the world in record time. He sees it as a “network of humans, not wires”. In a diverse world, not everyone may share this idea of a divine origin of the Internet with the Pope but it is indubitable how consequential the internet is.
The inherent advantages occasioned by access to the internet has been phenomenal and far reaching. Suddenly, the voice of the man on the street has been magnified a billion fold. Perhaps a good example is Mark Zuckerberg and Facebook. He is one of the world’s richest men and made his scores of billions of dollars after he founded Facebook. In fact, it is very difficult to overstate the influence of the internet in the day-to-day life of today.
This network of humans has enabled people around the globe to organise themselves in groups for various causes. It has resulted in political, social and cultural changes as well as upheavals too. A previously unknown individual at an obscure part of the earth with possibly no hope for the future this minute can become famous in the next minute with prospects to be very rich, thanks to social media.
It is this opportunity presented by the internet that was harnessed by a group of friends when they came together to establish the crowd funding website, kickstarter.com. This platform was founded in 2009 by Perry Chen, Yancey Stricler and Charles Adler. According to the founders, the mission is to bring creative projects to life. Simply put, when you have an idea of a great project and there is no money to execute it, you present it on the website and ask people of the world for contributions in order to achieve your dream.
Yet, Kickstarter was not the first crowd funding website. One year earlier, Indiegogo was founded by Danae Ringelmann, Slava Rubin, and Eric Schell but its business model was not as open to individual creators. It liberalized the platform after Kick-starter launched in 2009. Today, the Indiegogo platform is more liberalized than Kickstarter but the latter has become the largest crowd funding platform on earth today and a magnet for tech geeks.
Kickstarter successfully circumvented the traditional way of solicitation of funds from few deep pocketed investors and put the power in the hands of millions of ordinary people. This is not just a one-way traffic or even a two-way traffic but a multi dimensional traffic through which the end product benefits the creator, the investors and the consumers.
Unlike, traditional financing whereby the investors share part of the profits of a project, the investors in Kickstarter projects are rewarded with a finished product or products, according to the level of their contribution. The peck is that backers in the final run get these products cheaper than it would cost when it goes into the market. Kickstarter takes 5 percent of whatever amount is raised.
Currently Kickstarter has about 15 categories into which creators can categorize their projects. It is the technology category that excites most backers. Unlike Indiegogo which accepts campaign for charitable causes and later sold this unit to a company that metamorphosed into Gofundme.com, Kickstarter is strictly restricted to products.
A typical Kickstarter campaign starts with a presentation of a tangible product to the Kickstarter team. The creator further presents a campaign funding goal and how much is required to achieve it at minimum. These include video presentations and technical specifications. Estimated date is also chosen for the final product after a clear and achievable timeline is outlined. If the presentation passes the muster, it is listed on Kickstarter. Otherwise the backers are not charged. At this point, all a creator can do is to wait for investors. There is currently a limit of 60 days for funding campaigns after which the campaign is closed.
Investments in Kickstarter projects can be as little as $5 or even lower depending on the value of the finished product. There is no maximum amount to invest on most projects. After the project becomes a reality, investors, simply known as “backers” are rewarded with a copy or copies of the project, according to their contributions. Or they can simply be sent a thank you note, if it is the reward level a backer contributed in.
However, there are many pitfalls on Kickstarter. That a project seems plausible does not mean it will come to fruition. A creator can set up a goal and end up not meeting it for various reasons. For one, if the target amount of the campaign is not met, Kickstarter does not disburse the funds to the creator. Even when a target is met, there is no guarantee that a project will become successful. For this reason, Kickstarter reminds backers that they are contributing to back an idea and not buy a product. Kickstarter cannot be held liable when something goes wrong in the future.
Kickstarter has been a boon to technology start-ups around the world. Some of the most consequential tech devices around today were funded through Kickstarter. There have been so many products created by individuals who would otherwise not be able to finance their ideas and do not have the connections to take them to deep pocketed investors or traditional venture capitalists.
Tech creators have been able to raise millions of dollars on the platform from thousand of backers all over the world. Some of the products from the proceeds of Kickstarter campaigns have gone on to achieve more commercial success than products of multinational conglomerates. Some start-ups have even been acquired after proving their viability.
An example is the Virtual Reality device, Oculus Rift. The success of Oculus Rift on Kickstarter inspired many technology creators to bring their projects to Kickstarter to get backers. Ocular Rift was so successful that subsequent iterations were made. The start-up was eventually acquired by Facebook for billions of dollars. Yet, the story of Ocular Rift started by ordinary individuals all over the world making little contributions to bring the Virtual Reality device to reality. Backers of the project were rewarded with the first products for a fraction of what the device sold in the market. Oculus Rift set a funding goal of $250,000 and ended up raising more than $2.4 million before it was eventually sold to Facebook for 2 billion dollars.
Other very successful technology projects on Kickstarter include Pebble Time smartwatch which surpassed its $ 500 000 goal and went on to raise over $ 20 million from more than 78 000 backers, setting a record on the platform. The first model of the smart watch had also surpassed its goal and raise over $ 10 million from more than 60 000 backers after setting a funding goal of just $ 100 000.
It is not always that rosy. Unlike, Oculus Rift and Pebble Time, there have been tech failures on Kickstarter as well. Most of these happened when creators could not reach the target fund goal. Others happened because creators did not anticipate technical difficulties and production problems that it encountered along the way. Logistics issues are also enough to make a project fall through. A lot of creators realize in the middle of the production of a product that they have been underfunded. Since a creator cannot possibly come back for more money according to policy, the project becomes stuck. When this happens, backers cry “scam”.
Some creators that fall into this misfortune return all or some of the money to backers after apparently using part of it in the failed project. But Kickstarter backers remind them they fund the ideas, not the final product. This is the reason the copy given to backers at the end of production is called a reward.
Skarp Laser Razor raised up to $4 million on Kickstarter but could not produce a workable prototype. The campaign was suspended by the platform after it could not meet its deadline for a workable prototype. Backers were refunded since funds were yet to be disbursed. Backers sometimes lose some of their money when well meaning creators discover that they are unable to go forward with a project after using up some of the money.
It can get ugly too. One of the ugliest experiences for backers on the platform include projects like iBackPack which was promoted as a smart bulletproof smart backpack that connects to phones and come with inbuilt power pack. It was also touted as containing a wifi hotspot with Android and iOS compatible apps. Hundreds of backers supported this project and it surpassed its funding goal, only for the creator to claim he ran into problems with production and disappeared into thin air with backer’s money. Since, Kickstarter is indemnified, backers reported the creator to the authorities and he is currently on the run. The authorities do not guarantee a refund of the money even when the creator is caught as it is possible it has already been spent.
There have been other such scams but the platforms try as much as possible to nip them in the bud. They advise backers to use their judgement before backing any project and if anything becomes suspicious, backers are encouraged to report to the Kickstarter team before funds are released.
Although there are risks involved with either soliciting for funds or backing a project on platforms like Kickstarter, Indiegogo and Gofundme, the benefits they present far surpass the risks. According to a Russian proverb popularized by the a former President of the United States, Ronald Reagan, “trust but verify”.
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