Friday, October 29, 2010

The Kickstarter Revolution

Anyone who's run the gauntlet of trying to get funding for a creative project from foundations, or investments from angel investors or venture capitalists, knows how grinding the process can be. Kickstarter was started in April, 2009 as a service that helps writers, artists, musicians, filmmakers and entrepreneurs to get funding for their projects from individuals, rather than from foundations, corporations or professional investors. Kickstarter has two important provisions: Every project has to set a funding target and a deadline. If the project reaches the funding target on or before the deadline date, the project gets funded and the sponsors have to live up to their commitments. If the project doesn't meet the funding target by the deadline date, the funding commitments are canceled and no money changes hands.

When Kickstarter launched, it was far from certain that enough interesting projects would surface to fund, or enough people would provide funding to make it work. However, word spread about the service very quickly. There are no official statistics on the number of projects that have been funded or the number of people who have participated, but hundreds, if not thousands, of projects have been funded in the 18 months that Kickstarter has been operating.

One of the things that makes Kickstarter unique is that sponsors aren't investing in a business--they're buying a product or service. For entrepreneurs, that means that they don't have to give up equity in their company to get funding. There's no problem with securities sales. In addition, the risk to sponsors is dramatically limited, since unpopular projects don't get funded and the sponsors never have to pay.

I've purchased a set of prototyping icons and a tripod mount for my iPhone 4 through Kickstarter. The iPhone 4 tripod mount project is still underway, and it's impressive to see the effort being made by the two developers to manufacture the mounts. Many of the projects submitted to Kickstarter will be one-off efforts, and the artists and entrepreneurs will go off to do other things, but some of the projects will result in long-term businesses and artistic efforts.

Kickstarter is already taking over the role of book publishers by paying author advances and the costs of editing, designing and printing books, record companies by paying musicians' advances for recording, producing and mastering music, and angel investors by paying design and manufacturing costs for hardware, software and services. It represents a true revolution in the way that individuals and businesses can raise money to work on projects that they care deeply about.

There are already a number of other groups following the Kickstarter model, and more are sure to come, especially considering that Kickstarter's transaction partner, Amazon, only works with creators and sponsors with U.S. bank accounts. The Kickstarter model could work very well in Europe, Asia, Africa, South America and Australia--anywhere where some people have creative ideas and others have the money to fund them.
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