The Problem With Kickstarter
Kickstarter helped pioneer crowdfunding for creative projects. It has been enormously successful. The Kickstarter model is to set a fundraising goal. If the project meets its goal, the money is transferred to the creators to fund the development of the project. Kickstarter collects a 5 percent fee, the creator gets funding, and the backers get the satisfaction of sponsoring a new idea.
For creative projects this model works well. As long as the creator is genuine, you can expect that they’ll deliver something. An aspiring director is probably going to make a film. Sure, it might be bad. But that’s the only risk you take.
Hardware projects are different. Hardware is hard. Things blow up. You get sued for patent infringement. Going from prototype to mass production is an enormous challenge. You need the help of experienced industrial designers, engineers, and manufacturing experts to make everything work. Inventory costs and cashflow management become an issue. For the types of companies that go on Kickstarter, they often don’t have the expertise required to successfully deliver on their promises. Delays are inevitable.
But some people had no idea what they were getting themselves into. The formula for success was to create a slick video, get coverage on high profile blogs/publications, and leverage social media. The problem was that backers were being fed false promises. They’re expecting to receive a fully functional consumer product. The reality is much different. The Kickstarter model of collect money first, deliver product later doesn’t work for these types of projects. The failure of over 75 percent of Hardware and Product Design projects makes this clear.
This presented Kickstarter with a problem. It doesn’t keep track of projects after the funding is delivered. It doesn’t monitor progress, offer assistance, or enforce refunds. Yet all of the top 6 funded projects are Hardware/Design. It’s a lucrative category.
Kickstarter recognized this—and changed its guidelines to make it clear that consumers shouldn’t expect fully finished products. Like many others, we respected the new guidelines. We spent a lot of time and effort making sure we conformed to the rules. We only showed actual ByteLight enabled hardware from our lighting partner. We didn’t offer bulk quantities. And we felt our project goal was in the spirit of Kickstarter—opening our technology to early adopters, developers, and makers.
But given all of the recent controversies surrounding Kickstarter, I can’t say we were shocked when we were rejected.
We asked for some more specific feedback, but received a similarly vague response. Our correspondence was identical to that of some other rejected projects. We felt like we were dealing with the government, not a pioneering Internet startup.
I applaud Kickstarter for making a choice and sticking to its identity—a funding platform for creative projects. But it hasn’t gone far enough. We aren’t the first technology company to waste our time making a campaign. Kickstarter has taken a half-measure when it comes to hardware projects. It should take a full measure—and remove hardware as a category.
The fund-first-deliver-later model doesn’t work as well for technology as it does for creative projects. But a different model might work. The model pioneered by Lockitron. Batch orders. Collect payment information, but only charge customers when the product is ready to ship. This forces project creators to use efficient, rapid production methods. Customers can rest assured that they won’t be charged until the product is being shipped.
Of course, the hard part about this model is that there isn’t an established community of donors, like on Kickstarter. But I don’t think this is a huge concern. Most project discovery happens via social networks and press. As long as tech blogs continue to cover innovative projects and people want to talk about innovation, there will be an audience.
We think that’s a good thing.
The Self-Starter Movement
The problem that Kickstarter solves for hardware startups is demand prediction. Inventory is expensive.
We already sell enterprise solutions. But we weren’t sure if there was an audience for ByteLight in smaller quantities. We’ve got innovative technology with new capabilities. Inbound requests on our website are one thing. But putting down payment information is something else entirely. By collecting payment information upfront, we can work out the logistics of producing a batch of ByteLights without the burden of large inventory costs. Maybe there’s an audience for hacker kits? Maybe there’s an audience for a consumer version? Crowdfunding is a low-cost way for us to answer those questions. We can’t wait to see what happens.
We’re incredibly thankful to Lockitron for kicking off the self-starter movement by open-sourcing selfstart.us. We’ve forked their project to add some new features. These include support for different tiers of projects and the option to limit each tier.
We hope the self-starter movement continues to move forward. Given the success of app.net, Lockitron, and Lumawake, we’re confident it will. Early stage hardware companies deserve to control their own destiny. And regardless of what crowdfunding platform you use, the community always votes.