The KickStarter Paradox

Among the great business innovations of the Internet era are KickStarter and the many similar crowdfunding sites like IndieGoGo. You know how these work: someone wants to introduce a new gizmo or make a film but can only do so if you and I pay in advancewith our only rewards being a possible discount on the gizmo or DVD. Oh, and a t-shirt. Never before was there a way to get people - sometimes thousands of people - to pay for stuff not only before it was built but often before the inventors even knew how to build it. From the Pebble smart watch to Veronica Mars, crowdfunding success stories are legion and crowdfunding failures quickly forgotten. I've been thinking a lot about crowdfunding because my boys are talking about doing a campaign this summer and I have even considered doing one myself. But it's hardly a no-brainer, because a failed campaign can ruin your day and damage your career.

From the outside looking-in a typical KickStarter or IndieGoGo campaign is based on the creator (in this case someone like me, not God) having a good idea but no money. If the campaign is successful this creator not only gets money to do his or her project, they get validation that there's actually a market - that it's a business worth doing. About 80 percent of crowdfunding campaigns come about this way.

The other type of crowdfunding campaign isn't so overtly about money. My three sons, for example, have an idea for a summer business. It's a great idea they came up with all on their own and you'll hear more about it here after school ends on June 5th. But the amount of capital required to do their business isn't actually that great. In fact it's well within the investment capability of their old Dad after he's had a few drinks. Yet still they are considering a crowdfunding campaign, in this case as a sales channel. People come to KickStarter and IndieGoGo looking for projects to spend money on, which in the view of my sons identifies those folks as customers. So the boys plan to launch a campaign with modest funding goals they are sure to reach, but mainly they want to be noticed by their ideal customers, who happen to be crowdfunding junkies. Smart kids.

I'm sure this trend of seeing KickStarter as an alternative to Amazon, eBay, or Etsy is common. Some campaigns scream that. When it looks like the video cost more to produce than the campaign is seeking, that's a key. Or when the campaign is from an outfit that's already successful and ought to have at least that much money in the bank. Pebble made its mark in crowdfunding, but did they really need to use it for their follow-on smart watches? No, but it was probably a cheaper channel - one that was proven and effectively self-financing, too.

But a lot of crowdfunding campaigns fail. Sometimes the idea or the product are just, well, stupid. Often the people behind the campaign are looking for way too much money. Remember if it's a KickStarter campaign and you miss your goal you get nothing, so it's better to aim low and over-achieve. The key differentiator with IndieGoGo is you get whatever money is raised even if the target is missed. Having studied a lot of failed campaigns, though, I think most fail because the people asking for the money don't do a very good or thorough job of explaining themselves. Just having a good idea is not enough.

I'm the kind of guy who might be successful with a crowdfunding campaign, I've been told. My name is fairly well-known. I have a track record and an established audience of readers. And while some of those readers hate me, most don't. Using this blog I could promote the crowdfunding campaign and reinforce it. Using my so-called communication skills I could make the video and campaign web page fun to read and compelling. "For you, Bob, it would be easy money."

Not so fast.

Here's my dilemma, for which I need your advice. As you may remember I've been working on a TV series called Startup America about tech startups and their founders - what really works and what doesn't. It's not Shark Tank, it's better, because the show's not just about the deal but also about the execution and the outcome. And in our case the companies (you helped pick them, remember) are all real. The series will be carried next season on PBS, the producing station is WNET in New York, and our main underwriter is Salesforce.com (thank you, Marc Benioff). Where the dilemma arises is PBS, being risk-averse, has only ordered a certain number of episodes (not a full 10-show season). If I give them more episodes for the same money they'll air them so that's what I'd like to do. But I've already spent my budget as planned on the initial episodes, so I've been considering a crowdfunding campaign to pay for making a couple more, which ought to be fairly cheap to do since they are mostly shot already. Should I do it?

My gut says no. It's probably better to try to find another underwriter to go along with Salesforce.

Here's my thinking. KickStarter campaigns are usually go or no-go but mine wouldn't be and that's confusing. The series will air no matter how much money is raised, we'll just present fewer episodes. So I fear there will be a lack of urgency and nobody will care. Should I risk the goodwill I've built up over the years by asking for money?

You tell me.

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