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    3 June 2013

    Kickstarter: Is Democratic Funding a Good Thing?

    I’m sure you’ve all heard about and even used websites like Kickstarter to back an awesome idea or something artsy. After seeing the success of the Kickstarter campaign for Veronica Mars, I got to thinking about some of the ups and downs of the crowdsourcing format.

    Crowdsourcing isn’t a new idea. Renaissance artists like Leonardo da Vinci couldn’t have thought up the helicopter without the help of wealthy patrons to keep him fed. The relationship was basically a retainer. A patron would pay an artist a specific amount of money and an artist like da Vinci would paint really good portraits of a rich guy’s dog in between between his helicopter dreams.

    The internet, as I’m you already know, changes the game. Kickstarter turned the patron-artist relationship into a democracy. If something is cool, people can literally vote for it with their wallets. An artist or entrepreneur writes out their idea and sets a monetary goal. If they meet that goal between one and sixty days of starting their Kickstarter, then they get all of the money pledged by donors.

    Where it gets funky, though, is accountability. The Kickstarter website does not guarantee that a creator will actually finish their product and accountability is definitely a concern when a collective investment of hundreds of thousands of dollars is on the line. What’s more interesting, though, is when a project becomes so popular that the creator receives more money than they could have hoped for from venture capitalists.

    Susan Wilson, an amazing mom and entrepreneur, started a Kickstarter to send her daughter to a game design camp to settle an argument between her kids. Wilson’s two sons made fun of Kenzie, her 9 year old daughter for wanting to make a video game. They called her dream a ‘waste of money,’ and mom decided to take the argument to Kickstarter. The original goal was $829. Exactly enough money to send Kenzie to the camp. Wilson never expected the response she got:  Over $20,000 in donations and a similar number of death threats.

    The message is undeniable. I mean, really, who wouldn’t want to help a little girl prove to her brothers that she can make video games too? The ensuing death threats, however, came after the internet hivemind discovered Wilson’s entrepreneurial background and called shenanigans. I don’t think Wilson intended to make $20,000, and I don’t think anyone donating money to her daughter felt like they were giving money to just one person. A response like that means there’s a market for diversity in the gaming industry and Wilson accidentally opened the floodgates.

    I like Kickstarter and watching cool ideas get financed is really exciting. I do, however, think the format should learn from the one thing that went wrong with Kenzie’s story. If you’re launching a business, your budget has to be tight. You should know exactly how much you’re asking your investors for, and Kickstarter should encourage the same principles.

    Kickstarter doesn’t allow crowdsourcing for charities. The cofounders of the platform have said that they don’t want to force their donors to pick between ending hunger and helping someone make some cool poetry. I agree with them and fully believe that charitable donations should be kept separate from crowdfunding.

    However, it’s hard to deny that if Kenzie and her mom had been able to donate the money over what she asked to charity, then there would’ve been no question about the intentions behind their project. I don’t think Kickstarter is going to change their policy on charity and I don’t fault them for holding their ground. An easy way around accidentally making $20,000, however, would be this: Allow the creator of a Kickstarter to pre-select a charity for the extra pledges received and only reveal which charity they selected after the funding period ends.

    I think this sort of change would make for an undeniably better perspective for crowdsourcing. If your idea is solid enough to donate money toward, I think you should at least know exactly how much you’ll need to make it happen. Am I wrong? Please don’t hesitate to let me know in the comment section.

    Matthew Toren is an Award Winning Author, Serial Entrepreneur, and Investor. He Co-Founded YoungEntrepreneur.com along with his brother Adam. Matthew is co-author of the newly released book: Small Business, Big Vision: “Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who Did it Right” and also co-author of Kidpreneurs.

    Follow Matthew on Twitter: @matthewtoren

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