Kickstarter makes changes in response to crowd funding execution risks

On September 20th 2012, Kickstarter announced a few rule changes on their weblog in an article ‘Kickstarter is not a store‘. The changes are meant to enforce that Kickstarter is not a place where you buy products that are finished, but a place where you can back exciting projects with an element of risk and adventure. What is the motivation behind these changes, how are they received, and how will other crowdfunding platforms respond?

The need for change
The idea behind Kickstarter is that people start creative projects, and backers pledge money to fund these projects. The backers are rewarded with gifts. The gifts can be anything, from thank you notes and postcards to signed artwork and meet and greets with the makers. For some projects, getting a finished product is one of the rewards.

The need for change stems from the fact that some projects are too successful: rather than raising the sum required for the project, the projects ‘oversell’ and end up with hundreds of thousands of extra dollars. Examples are the Peble watch ($ 10 million pledged) or Printrbot . For more examples, see the Kickstarter most funded list.

Why would backers pledge money to projects that already have the money they need? Some backers are not really interested in funding the project, but are buying the gifts. They read the gift descriptions, choose how many and which version of the product they want, and place their order. When the project goes smoothly, these backers receive their gifts on time. These customers are satisfied and will return to kickstarter in the future. The problem lies in project execution: many projects do not meet their initial shipping estimates or cannot make their project to look exactly like the initial artwork. Some backers are surprised by this, and kickstarters have changed the rules to make the risks more clear.

To get a feeling for the delays you can expect even for relatively small projects such as boardgames, check this list of late deliveries and, for fairness reasons, the list of board games delivered on time.

What has changed?
Any project page must have a section risks and challenges, just to make sure backers understand the risky nature of projects. The section contains a link to the Kickstarter statement on accountability.

Secondly there are some changes to hardware and design projects. These projects can no longer offer multiple projects as rewards: this makes the rewards section look less like a sales checkout.

Finally computer generated artwork is no longer allowed. The pictures on the project page must show the current prototype version, and leave the fantasizing about projects to the imagination of the backers.

Impact for other crowdfunding platforms
For any crowdfunding platforms, execution is a major concern. The platforms however reward their backers often with profit shares rather than gifts, so the risk of being perceived as a shop is much smaller.

SellanApp, a crowdfunding platform for Apps, has an active role in execution, for instance by screening and selecting the right app builders. At Symbid the backers have some level of control over execution since there is a cooperation that oversees the management of the company. They also have a clear risk warning, something any platform should have and most have by now. At first glance, Indiegogo has a similar model to kickstarter, but has not responded yet with similar changes.

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