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Growth boosts Kickstarter's horsepower

posted Apr 11, 2013, 12:14 PM by Sallar Khorram   [ updated Apr 11, 2013, 12:30 PM ]
NEW YORK — It's not hard to guess that this rickety three-story walkup on the Lower East Side would house a hip Internet start-up. But the red-hot company that's raised more than half a billion dollars from the public to fund passion projects?

Crowdfunding phenomenon Kickstarter is on the third floor, with a handful of staffers who don headphones and stare at large iMacs, tweaking the website that brings in an average of 200 new projects daily. A former waiter, Perry Chen, his one-time frequent customer and freelance rock critic Yancey Strickler and designer Charles Adler launched Kickstarter in 2009 as a place where anybody could pitch in to help get passion projects funded.
The company helped coin a new word — crowdfunding — as it helped everything from community gardens, books and local plays come to life. It has since grown to include movies (a Kickstarter-funded documentary, Inocente won the Oscar this year) music (singer Amanda Palmer's Kickstarter-funded album made its debut at No. 10 on Billboard) and a red hot tech product (the Pebble smartphone watch launched in February).
Now, as Kickstarter approaches 40,000 successfully launched projects, and other crowdfunding sites compete (hello, PledgeMusic, Indiegogo and GoFundMe) the Kickstarters are outgrowing their space. They're preparing to move in June to bigger digs in Brooklyn, where they'll keep a keen eye on growing the business.

"Our jobs are to come in here and make the site a little better every day," says Kickstarter CEO Chen. "We have no interest in ever selling this business or IPO'ing. We're as independent as you get."

Along with physical growing pains comes the price of success. As Kickstart-ed projects become more widespread, backlash — a "Kickstarter fatigue" — is starting to emerge, as folks who once didn't mind pitching in are now finding funding requests as bothersome as the frequent political and charity pleas that clog e-mail inboxes. Additionally, the requests are getting much closer scrutiny.

Recently, a Maryland mom helped her 9-year-old daughter stage a Kickstarter campaign to "support girls in tech" by raising $800 to help her create a video game. But after the request brought in more than $20,000 in pledges, it drew scrutiny — and more than 1,300 generally nasty online comments. A Kickstarter member discovered that the mom was a tech entrepreneur and could easily afford to send her daughter to the summer camp where she was going to make the game.

Still, the mom, Susan Wilson, hasn't sworn off Kickstarter. "I truly believe real innovation over the next decade will come from regular people leveraging advances in technology to empower themselves to come together and create 
BIG CHANGES in the world," she wrote on her daughter's Kickstarter page. "I still believe in the power of the crowd," she adds, telling USA TODAY: "The crowd is smart enough to figure things out."


It was that same crowd that inspired aspiring musician Chen in 2001, when he was living in New Orleans. He tried — and failed — to raise money to put on a concert and thought: "Wouldn't it be great if we could raise the money online?"

By 2007, he had met Strickler and designer Adler, and they decided to join forces.

In raising money for launch, the founders turned to family and friends. That was later augmented with $10 million from venture capital firms and notable Internet investors such as Twitter co-founder Jack Dorsey and Flickr co-founder Caterina Fake. Kickstarter, which takes a 5% fee off the top of every funded project, was profitable within its first 12 months.

Now, there are many crowdfunding sites. The founders aren't bothered by this — they say they're happy that many people are able to realize their dreams.

"The goal of Kickstarter is for people to be able to make things and bring projects to life," says Strickler, head of communications. "Not necessarily for it to be on Kickstarter." 
The site began with a simple project, an artist offered to draw something, which raised $35. Now it has grown to multi-million-dollar projects, such as Veronica Mars creator Rob Thomas's recent headline-grabbing revival of the TV series. Thomas wanted to make a movie of the series that got canceled in 2007. With little interest from corporate owner Warner Bros., he decided to see if he could raise money directly from fans.

"I figured I had nothing to lose," he says.

Within 10 hours, he surpassed his initial goal of $2 million, and has since topped $4.4 million. Production will begin in June.

"I was shocked how fast it happened," says Thomas.

Mars is now at No. 3 on Kickstarter's list of most-funded projects, following No. 1 Pebble Watch ($10 million) and $8.5 million for Ouya, a video game system with free trial games that is scheduled to make its debut in June. 
Thomas is thrilled that he was able to get his passion project off the ground, but says anyone looking to Kickstarter as a quick end run around the system is mistaken. "This has been exhausting," he says. "A much simpler process is to go in as a writer and pitch a movie, and hope the studio buys it the old-fashioned way."


The most successful Kickstarter campaigns have promo videos that look as polished as a TV commercial. A well-designed Kickstarter page should answer all potential questions, and offer the perks that come with backing. (In Mars' case, scripts, DVDs, screenings and more). Finally, you must plug the project on social media and be responsive to the Kickstarter community. You also have to adhere to Kickstarter's community rules, which basically lists charity and equity interest in firms as no-nos. For those looking for a more open platform, rival Indiegogo accepts every project submitted. With nearly 40,000 projects funded to date, "it's working really well for a lot of people," says Chen. "There's no limit to the kinds of ideas people have been able to share."

The issue for Kickstarter and other crowdfunding sites, as they become more popular, is how to deal with the fatigue that can come from more frequent online pleas for money — a new form of busking. "I'm sick and tired of people begging me for money in my Twitter feed and e-mail box," says Andy Salge, an Indianapolis musician who pays the bills as a house painter. Music industry blogger Bob Lefsetz says crowdfunding can work for up-and-coming musicians, but established artists have to think twice about using the platform. "We're at the turning point where it can work against you," says Lefsetz.

Amanda Palmer raised $1 million to fund her recording on Kickstarter — and recently endured a heated session at an industry gathering of how she got rich on the system. Rich Robinson of the Black Crowes used Kickstarter to raise money for a tour, but had to backtrack due to negative feedback.
Strickler shrugs off the "fatigue," pointing out that more than 1 million people have come back to Kickstarter as repeat backers. "We don't see it as an issue. It takes work to get a project funded. You have to spread the word."

Veteran jazz guitarist George Benson is using PledgeMusic, which focuses solely on music, to raise production funds for his forthcoming album, a tribute to Nat King Cole. He explained the need for using fan funds in his online pitch, saying he wanted to use a 50-piece orchestra, and in this era of declining music sales, that doesn't come cheap.

Benji Rogers, a co-founder of PledgeMusic, says the benefit to the artist and record label is pre-selling a record to the fan base. Fans get frequent updates on the project and bonuses if they back it. It also helps the record company know how many copies to make for initial release.
On Kickstarter, artistic endeavors are the most popular category — some 11,000 music projects, 9,400 movie/video and 3,800 art projects have come to life. At the recent Sundance film festival, some 10% of all the movies there were born via Kickstarter.

"In many ways, what we see going on is bigger than the platform," says Kickstarter co-founder Adler. "These projects are now part of the culture. We're just as excited as they are." But Adler and his co-founders acknowledge that working at Kickstarter doesn't come cheap. Strickler helped back Pebble, as well as 749 other projects. "There are people here who have backed more," he says. His co-founders each say they've backed around 300. "You spend enough time on the site, you click around and get excited," adds Strickler.

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