Kickstarter

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Sharing Economy

Kickstarter is a crowdfunding platform launched on April 28th, 2009, by Perry Chen, Yancey Strickler and Charles Adler based in Brooklyn, NY.  The company allows creatives to bring projects to the market using the alternative financing model to raise money from many project “backers” from across the internet.  The platform has funded over 200,000 projects to the tune of almost 6 Billion dollars and backed by nearly 20 million people the initial launch.  The Kickstarter model is “all or nothing,” meaning if you don’t reach your fundraising target, you get none of the money you raised.

This model connects creatives, those who need things, and backers, those who have something, and, in both cases, the common denominator is money.  The definition fits the sharing economy, as crowdfunding is a product of the sharing economy.  I prefer the term “access economy” brought forward in the HBR article by Eckhardt and Bardhi.  The Kickstarter platform provides the means for creatives to get temporary access to cash to “make” whatever product or service they are trying to finance, usually with reasonably long window of time before they have to deliver the promised value to the customer.  This two-sided platform acts as a micro-lending platform and provides an alternative means of financing projects.  It also provides a means for creatives to market and launch their new product ideas, reaching a far greater audience than they may be able to do independently. 

Creatives should deploy innovative methods using Kickstarter as part of the product development cycle whereby early development concepts can gain feedback from the marketplace.  This approach would break from a typical stage-gate process where consumers are only briefly engaged at ideation stage and then not again until product launch.  Innovative companies could “hack” the Kickstarter model by launching earlier versions, obtaining early customer feedback and gaining interested potential consumers.  At which point they could move off the platform and get consumers to help in a “co-creation” process to help refine the product before launching again on Kickstarter or some other crowdfunding service.  The platform has challenges, and backers are taking a chance on these creatives to deliver the goods.  With only a 39% project success rate, an analysis by the University of Pennsylvania, however, indicates that only about 9% of projects fail to deliver their rewards to backers and projects that raise less than $1,000 tend to fail the most.

Considerations for Kickstarter:

  1. Consider how to leverage the consumer, aka “backer,” into more of a prosumer role, so they can help manage part of the process and not just provide funding.
  2. Develop a rating system for both creatives launching projects and for the backers that support them. 
  3. Apply the concept of “surge pricing” to Kickstarter projects.  Perhaps surge means the front-of-the-line service or expedited shipping in exchange for a premium price.

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