4 ms·

If you consider Kickstarter projects as startups, then a 10% success rate is ok. Is something like am 80% success rate for kickstarter projects desirable? They

by qznc 14y ago

If you consider Kickstarter projects as startups, then a 10% success rate is ok. Is something like am 80% success rate for kickstarter projects desirable? They probably would have to implement much higher barriers for applicants then.

Ntrails 14y ago
That depends on whether kickstarter can continue to generate sufficient revenue once people get "disillusioned". Otherwise someone else will come along with a similar concept but stricter rules and a higher potential success rate etc etc
potatolicious 14y ago
But Kickstarters aren't startups. This is specifically an avenue for lower-capital, lower-risk businesses to get the money they need to deliver products. If you're an angel or VC, the low success rate is countered by the large upside - a Kickstarter has no upside besides the cool t-shirt/game/gadget you were promised. The risk needs to be commensurate with that.
- Xylakant 14y ago
  Kickstarter does have an upside: The option of actually receiving a project that was deemed commercially unviable by a VC or other investor/company. Something that no one wanted to produce since "there is no market for it". So by becoming a backer you might end up with a product that otherwise would not be available. Granted, it's a small upside, but the risk is also lower.
  - graysnorf 14y ago
    An additional upside for some projects: you may actively dislike many distributors/publishers for some industry and want to support indie production.
- jiggy2011 14y ago
  So basically, a lemon market. When I see for example a kickstarter game that has a $20 price tag for a pre-order "donation" that seems like reasonable value. If however the delivery rate is only 1/10 then that game actually costs me $200 (since I probably need to fund 10 games in order to get one I can play). Therefor if I only want to pay $20 for a game, I shouldn't pay more than $2 for a pre-order. The result of this is that genuine projects who stand a good chance of delivering have to grossly undercharge for pre-orders which starves them of the level of funding that they actually need.
  - lambda 14y ago
    When funding something, you should consider its likelihood of succeeding and its value to you. If its value is around the price you're funding it at or slightly higher, then you should only fund things which have a high chance of success; from a proven team, that has shipped plenty of products before. For instance, a band that you like that's released several albums and is raising money for a new one, a studio that is developing a new game based on an existing engine, and so on. If it's a riskier campaign, like development of a new hardware product from a new company that has never shipped anything before, or an artist's first album, or some amazing new game with an amazing new engine that has all kinds of really neat features, with a game designer you like but a rookie team, then you should only fund it if it has significantly more value to you than what you are funding. Maybe you just think it's such a good idea, that even trying and failing and learning from that is worth the money you spend. Or maybe you think that it is a game worth $200; it's such a perfect game for you, that you would be willing to shell out $200 for it, or the equivalent, fund 10 such games for $20 and get one working game out of it. Or maybe you're just a big fan of the person you are funding, and don't mind giving them $20 even if you think they might not complete the project. So yes, you should be aware of the risks when funding something; that's why it's funding, and not buying a completed product. You should decide if what you're going to get is worth the risk. Far too many people seem to see Kickstarter as a pre-order system, where the product is basically ready but they want funding to determine how large to make the first batch and fund just the final manufacture. Maybe people think that because it does act that way for some products; but you really should not expect it to work that way for all products. If Kickstarter limited themselves to the pre-order model, that would vastly limit the kinds of things it would be good for. You seem to want only pre-orders, not to fund development, so maybe that would work for you. But some people want to be able to fund riskier, more wild ideas, and accept that risk. I think that they should be able to; the only trick is that there seems to be a good deal of confusion on the part of funders as to which projects are which type; people don't seem to be very good at judging the risks involved when funding a project.
mikeash 14y ago
It's not the same game at all, though. When you invest in a startup, you help them make a product which they then try to find customers for. When you back a kickstarter, you're basically pre-ordering the product. A successful kickstarter already has their first run of customers. Startups generally fail when they can't scare up enough business, while kickstarters only fail if they can't actually produce the product they promised.
- timwiseman 14y ago
  This is an insightful comparison, but its significant to know that it is not actually a preorder. When you preorder you are entitled to demand the product or your money back, but with kickstarter if it fails after a good faith effort you probably have no recourse. With most preorders (not all, but most) the product is near completion when you put in the order, but with kickstarter that product is often little more than plans at the point of pledging. It is similar to a preorder, but the differences matter.
  - mikeash 14y ago
    Agreed. It's a different concept from both startups and preorders, but of the two it's more similar to a preorder. The ultimate point I'm trying to make is that, at the completion of a successful kickstarter, the creators have a guaranteed minimum customer base for the product, which puts them way ahead of the average startup. Success rates should therefore be much higher.
  - makomk 14y ago
    It's not clear the courts would buy this distinction if someone who backed a Kickstarter project did sue, though.
    - timwiseman 14y ago
      I am not a lawyer, but my understanding is the courts would see a distinction. Kickstarter goes out of its way to try to make sure people understand that it is not a preorder service, and many projects include a "risks" section specifically talking about how it could fail. There would be a clear case for fraud if the people asking for contributions just took the cash and walked. But in the event of a good faith effort that failed, I think the court would find that the contract was probably upheld. The possibility of failure was always there and what was promised was the effort.

by qznc 14y ago

Ntrails 14y ago

That depends on whether kickstarter can continue to generate sufficient revenue once people get "disillusioned". Otherwise someone else will come along with a similar concept but stricter rules and a higher potential success rate etc etc

potatolicious 14y ago

But Kickstarters aren't startups. This is specifically an avenue for lower-capital, lower-risk businesses to get the money they need to deliver products. If you're an angel or VC, the low success rate is countered by the large upside - a Kickstarter has no upside besides the cool t-shirt/game/gadget you were promised. The risk needs to be commensurate with that.

Xylakant 14y ago
Kickstarter does have an upside: The option of actually receiving a project that was deemed commercially unviable by a VC or other investor/company. Something that no one wanted to produce since "there is no market for it". So by becoming a backer you might end up with a product that otherwise would not be available. Granted, it's a small upside, but the risk is also lower.
- graysnorf 14y ago
  An additional upside for some projects: you may actively dislike many distributors/publishers for some industry and want to support indie production.
jiggy2011 14y ago
So basically, a lemon market. When I see for example a kickstarter game that has a $20 price tag for a pre-order "donation" that seems like reasonable value. If however the delivery rate is only 1/10 then that game actually costs me $200 (since I probably need to fund 10 games in order to get one I can play). Therefor if I only want to pay $20 for a game, I shouldn't pay more than $2 for a pre-order. The result of this is that genuine projects who stand a good chance of delivering have to grossly undercharge for pre-orders which starves them of the level of funding that they actually need.
- lambda 14y ago
  When funding something, you should consider its likelihood of succeeding and its value to you. If its value is around the price you're funding it at or slightly higher, then you should only fund things which have a high chance of success; from a proven team, that has shipped plenty of products before. For instance, a band that you like that's released several albums and is raising money for a new one, a studio that is developing a new game based on an existing engine, and so on. If it's a riskier campaign, like development of a new hardware product from a new company that has never shipped anything before, or an artist's first album, or some amazing new game with an amazing new engine that has all kinds of really neat features, with a game designer you like but a rookie team, then you should only fund it if it has significantly more value to you than what you are funding. Maybe you just think it's such a good idea, that even trying and failing and learning from that is worth the money you spend. Or maybe you think that it is a game worth $200; it's such a perfect game for you, that you would be willing to shell out $200 for it, or the equivalent, fund 10 such games for $20 and get one working game out of it. Or maybe you're just a big fan of the person you are funding, and don't mind giving them $20 even if you think they might not complete the project. So yes, you should be aware of the risks when funding something; that's why it's funding, and not buying a completed product. You should decide if what you're going to get is worth the risk. Far too many people seem to see Kickstarter as a pre-order system, where the product is basically ready but they want funding to determine how large to make the first batch and fund just the final manufacture. Maybe people think that because it does act that way for some products; but you really should not expect it to work that way for all products. If Kickstarter limited themselves to the pre-order model, that would vastly limit the kinds of things it would be good for. You seem to want only pre-orders, not to fund development, so maybe that would work for you. But some people want to be able to fund riskier, more wild ideas, and accept that risk. I think that they should be able to; the only trick is that there seems to be a good deal of confusion on the part of funders as to which projects are which type; people don't seem to be very good at judging the risks involved when funding a project.

mikeash 14y ago

It's not the same game at all, though. When you invest in a startup, you help them make a product which they then try to find customers for. When you back a kickstarter, you're basically pre-ordering the product. A successful kickstarter already has their first run of customers. Startups generally fail when they can't scare up enough business, while kickstarters only fail if they can't actually produce the product they promised.

timwiseman 14y ago
This is an insightful comparison, but its significant to know that it is not actually a preorder. When you preorder you are entitled to demand the product or your money back, but with kickstarter if it fails after a good faith effort you probably have no recourse. With most preorders (not all, but most) the product is near completion when you put in the order, but with kickstarter that product is often little more than plans at the point of pledging. It is similar to a preorder, but the differences matter.
- mikeash 14y ago
  Agreed. It's a different concept from both startups and preorders, but of the two it's more similar to a preorder. The ultimate point I'm trying to make is that, at the completion of a successful kickstarter, the creators have a guaranteed minimum customer base for the product, which puts them way ahead of the average startup. Success rates should therefore be much higher.
- makomk 14y ago
  It's not clear the courts would buy this distinction if someone who backed a Kickstarter project did sue, though.
  - timwiseman 14y ago
    I am not a lawyer, but my understanding is the courts would see a distinction. Kickstarter goes out of its way to try to make sure people understand that it is not a preorder service, and many projects include a "risks" section specifically talking about how it could fail. There would be a clear case for fraud if the people asking for contributions just took the cash and walked. But in the event of a good faith effort that failed, I think the court would find that the contract was probably upheld. The possibility of failure was always there and what was promised was the effort.