Kickstarter re-commits to ideas instead of pre-orders

Kickstarter updated its policies for product design today: a move that will cost the firm money but relieve tension caused by fast promises and slow delivery.

By Glenn Fleishman

The crowdfunding site Kickstarter updated its policies for hardware and product design categories today in a manner that will absolutely cost the firm money, but relieves a bunch of the tension that's been rising over the last year with million-dollar-plus fundraising for items that see substantial delays in delivery.

Kickstarter won't allow drawings or simulations for products and electronics. Only the current state of a prototype can be pictured or shown in action (if there is any action) in video. Further, project creators can't sell multiples of an item, except if it's a set of disparate things. This will change things in a big way that should be good for Kickstarter and creators both. (All project impresarios will also have to fill out a "risks and challenges" section about what could go wrong and why someone is competent to fulfill the project. I encouraged this already to anyone asking me how to plan a project; I'm glad it's codified.)

Kickstarter began as a way for creative projects to bring their audience to a place where it was easy to give money that was primarily support for an idea and secondarily relied on rewards, much like public radio and TV. You don't back a ballerina choreographing and staging a performance because you want the tote bag she designed, and you could always buy a ticket to her show later. No: you're buying into her success.

In that model, the reward is a separate thing from the thing being backed. For instance, 99% Invisible, a radio show I love, raised money to fund its third season. The rewards are notepads, T-shirts, audio recorded by host Roman Mars, and more. But the true reward is that we all get the show (and 40 episodes instead of 30). The $170,500 raised (for a $42,000 goal) doesn't mean more gizmos must be made; rather, Mars hired a near full-time editor, can produce a video episode, and will create a smartphone app, as well as hire designers to revamp the Web site. (He can also sleep a bit more.) The scope changed slightly, but not overwhelmingly. He has a bunch of shipping envelopes to stuff for a short period of time.

That's distinct from the rising trend since not long after Kickstarter's early days for both newbie and professional industrial and hardware designers to turn to crowdfunding for new projects. In this model, the project and the reward are essentially identical. Some rewards include intangibles, special editions, and the like. But the essential process is a pre-order: "Give me that thing." Those backing a project are mostly not patrons of an idea. When the thing is late or it never emerges, that then turns into a consumer-protection issue rather than one of  disappointment or frustration.

Way back in November 2009, I backed John Sundman's new book "Creation Science." It's still not in my hands. He wound up becoming more successful than he'd imagined in other areas, and the funding for the book was relatively tiny. He works a living. I didn't give $15 to demand a book in a year! I gave it because I liked his writing. Someday, I hope, to read the book. But I'm not disappointed that it's not done, because his career and life have improved so much. That's what being a patron is about, as opposed to being a consumer.

Arts that become expressed as an instantiation—like a book or movie, rather than performance or an event—float a little between product and idea. But I'd argue that you're still backing bringing something into intellectual existence, which then gets manufactured in a very standard way into something digital or physical. An iPhone dock, however pretty, is an iPhone dock. A film is an idea made manifest in its creation, and the arts of mechanical and electronic reproduction puts that idea in your hands.

There's also a reason to call out hardware and products as opposed to computer software. Software has much the same problem whether you fulfill 100,000 copies or 1,000 copies through a digital download. Software has a much higher risk of delay. (Go read Scott Rosenberg's Dreaming In Code for an exegesis on why.) But that risk is better implicitly understood by most of us who have waited for a software update or new release than tapping our foot for prototyped things made of atoms that appear to be ready to head into a manufacturing cycle.

Conflict over the patron/consumer worldviews has grown this year as computer hardware and other projects started bringing in dozens to a 100 times the original goal amount to receive funding. Delays abound with completed projects, and concerns remain over projects that haven't passed their deadline. This is partly because of scale.

The makers of the Pebble E-Paper Watch set out for $100,000 and brought in $10.3 million before halting the campaign. Delivery was planned for September, but now is "soon." A target of 15,000 watches a week is the goal towards making about 85,000 total. That means even were shipping to begin in October, some backers wouldn't see a watch til December.

People are also concerned about Ouya, an open-platform video game system that raised $8.6 million against a $950,000 goal, and has rewards to fulfill of roughly 60,000 controllers by March 2013. It has to go from production to manufacture, as well as finalizing the software platform  and releasing a developer SDK.

I could go on. Wired ran a story about five overdue Kickstarters a few months ago (a couple of which have now finished fulfillment), and I have a clipping file in Instapaper of more than a dozen articles that look into which big projects are late.

Many people ask me regularly, knowing my interest in crowdfunding, whether Kickstarter has hit the inflection point of having too many big projects too fast that are out of control. I say, no: every project has its own community and audience. Failures or delays in big projects won't necessarily have a halo effect outside the group that backed them, although a continued pattern in that direction (especially if a complete, million-dollar-plus wipeout occurred) could certainly cause a broader level of aversion.

Yancey Strickler, one of the company's founders, spoke at the XOXO Festival last weekend, and I had a moment's chat with him. As he did on stage, he emphasized to me that the staff isn't as fascinated with the blockbusters as the rest of the world appears to be. Thousands of projects run through Kickstarter every month, and most are modest. A healthy half are funded, putting hundreds of dollars to tens of thousands of dollars towards quite achievable goals. They love the little stories, of which there are so many.

This new policy seems absolutely consonant with Kickstarter's chief stated goals: turning ideas into reality, not selling stuff. Kickstarter takes 5% of all funded projects. With these rules in place, perhaps Pebble would have funded at $1,000,000 instead of ten times that. That would have reduced Kickstarter's fee from $500,000 to $50,000. But the potential drop in commissions doesn't seem to bother the founders as they recalibrate against their founding mission. It doesn't hurt that many of Kickstarter's investors are community builders who may want a financial return, but not at the expense of the broader mission.

One of the bits of buzz about Kickstarter, including at the XOXO conference, was how a new model might emerge for dealing with things being manufactured in large quantities that had never been made before. It's possible Kickstarter closing some doors here means another company will open them, with a different set of rules and expectations, and perhaps a real focus on incubating, accepting pre-orders for, and releasing mass-produced products when the time is right.

Published 4:47 pm Fri, Sep 21, 2012

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About the Author

Glenn is a veteran technology journalist based in Seattle who contributes heavily to Macworld, including as a columnist and co-host of its podcast. He writes about science and technology regularly for Economist, Boing Boing, Fast Company, MIT Technology Review, and other publications. He's been blogging since 2001 at his Glog. In October 2012, Glenn won Jeopardy! twice. He tweets — a lot — @glennf.

38 Responses to “Kickstarter re-commits to ideas instead of pre-orders”

  1. trackofalljades says:

    Some of the details in the “new rules” seem potentially problematic, but overall it’s good to see them reminding people of this. It’s frustrating that anyone needs to be taught that investment and purchase have different definitions…but that’s more a failure of parenting and education than anything Kickstarter is at fault for.

  2. Daneel says:

    I’d rather it went the other way, actually; I’d like Kickstarter to become more of a crowdsourced venture capitalism scheme. I’d let projects offer equity instead of ‘rewards’.

    The announced changes might be more in line with what the original idea was, but for me, this probably makes it much less likely that anything I want to back will be on there, because pre-ordering cool stuff is exactly what I like about Kickstarter. And I say that as a backer of one of those case studies covered on Wired.

    I do think that some of the project organizers should set an upper limit for what they are after, though – that way they might prevent some of those scaling issues they seem to be having.

    I can’t see how these new guidelines will work for projects like Pebble – are they still allowed to sell single instances of the project in question, at least? If they can only ask for cash and give overpriced stickers, t-shirts and mouse mats in return then I can’t see how hardware projects are going to be a big success on Kickstarter ever again. Sounds to me like they want it just to be artists looking for patrons.

    • This seems to me part of the way in which a company either sticks to what sees as its best part, changes direction, or gets unfocused. I thought Kickstarter might split into two separate parts: one for ideas, performance, art, etc., in which the outcome was clearly stated as not guaranteed; and one that was more focused on a vetting and incubation process to help makers produce things to sell at an early stage.

      Instead, they’re recommitting to the former, and making it a harder slog to push for the latter.

      The mistake that sometimes get made (and not by you, Daneel) is that one firm that’s successful in the middle of an area should do everything around that area. If there’s enough motivation and money, we’re going to see several companies capitalize on this change.

      Also, when the JOBS act is fully digested, regulated, etc., then we’ll see more direct micro-investing.

    • invictus says:

      I’d let projects offer equity instead of ‘rewards’. 
      You mean something like this?
      Or perhaps like this?

  3. chuckwaugh says:

    As a project creator who just finished shipping YESTERDAY (about 3 months late!), I can say that these rules are bad.

    Why?

    Mainly because it penalizes the creators of projects and does not educate or warn the backers.
    Savvy Backers (like savvy investors) understand that it is a risk to back a project. it may not actually pan out! WOW!  What a concept. That’s the point of backing an IDEA as opposed to backing a PRODUCT.
     Inexperienced backers think that everything should be perfect and ship on time with no problems.  Savvy backers know that most things pan out because the creator is deeply invested financially and emotionally in the project, but not all do end up panning out. Huh! That’s life.

    In my own project I was called an ‘amateur’ by one irate backer. And, I agreed – that’s the point here – it’s a START-UP, not a finished company. 

    In my project I was late – seriously late.  Why? Because the prototype didn’t scale up to the finished product.  We then had to invest in injection tooling (thousands of dollars!) and try the design out to find out it failed. You see, a 3D printed proto is NOT the actual as-injected-with-the-exact-resin finished product. It didn’t fail dramatically, it failed just enough to make me say “Don’t ship it – redesign it.” That sucked up a month and half of time and few thousand more dollars.
    That’s what Research and Development is all about – figuring it out!
    We had other problems I will not bore you with.Suffice it to say: Life isn’t perfect and development is HARD..

    My responses to the changes are:

    1) The ‘Risks and Challenges’ section is just words. Now, me, I’d be honest and say I’m a design engineer with a successful project completed (albeit late from my initial estimate), I work late at night sometimes and make silly decisions at times.  But others?  They could say whatever they want and wait for the internet to (possibly) ‘out’ them as not being who they say they are.

    2) The ‘No renderings and no simulations’ rule is Draconian and Procrustean.It cuts off the best part of explanation because we don’t fit the bed of ‘actual’. Maybe the rule should be: Rendering and simulations are OK… IF and ONLY IF your proto can show the same general capabilities.  Oh, wait!… but that makes it hard for KS to vet projects.  They might actually have to engage the creators, which they currently don’t in any meaningful way.

    3) No multiples offered. Ridiculous!  
    The advantages of scale in manufacturing are real.  Making a hundred of something can be darn near the same cost as making a thousand (as the book project I just published can attest to).  That drives down the individual cost and makes the overall ‘profit’ much more.[BTW: ‘profit’ is in quotes, because, even though I raised $70K on KS, that is happily vacuumed up in all the other costs of patenting, producing the video, all the ancillary materials, prototyping costs, etc., etc., etc..) 

    Lastly, I suggest that there be a pop-up unavoidable window when the ‘Back This Project’ button is clicked.  And, just like in an investment scenario in business, it would ask the backer to agree to these statements:

    A) I understand that backing a project does not guarantee that I will receive the reward offered exactly when promised or at all.  There is risk involved as well as reward.

    B) The loss of my pledge will not harm me financially in any appreciable manner.  

    C) I have the funds available to back this project and understand that I will not be charged until the funding goal is reached.

    That puts the backer on notice that this is a real-world fund-raising effoprt, NOT A STORE.

    Enough!
    I disagree with these rules and I suggest that the onus be put more on the backers to be wise about their ‘investment’, not on the creators who have already risked so much to present their idea on Kickstarter.

    Charles Waugh
    WOXOM
    Boring, OR (yes, it really is called Boring!)

  4. Izen_Anet says:

    I also think these new rules go in the wrong direction. I do think that people understand that what they are doing is a preorder. I can’t find any concrete reason why this would be bad. If Kickstarter really wants to draw a line, why not have two sorts of projects (ideas, and products)?
    I can see that, from Kickstarter’s persepective, this might be a matter of branding. But my guess is that this is mostly a legal issue. If these are indeed preorders, then they become liable for a lot of things.
    My real fear would be that an alternative (for preorders) does not arise fast enough. The success of Kickstarter really feels like a transition, which threatens the old model (it’s really like p2p, but for funding instead of distribution). Right now the old model is not doing anything to defend itself, but the slower the transition, the more chance it will have to.
    On the other hand, the worst case scenario would be if Kickstarter died of legal troubles. So maybe this is for the best.

  5. Kim Keeline says:

    Anything that makes people trust Kickstarter more is good.  My project’s deadline is Monday and I know that too many people worry about Kickstarter’s reputation.  (Look up Celebrity Sonnets if you want to see my project).

  6. therantguy says:

    Kickstarter is trying very hard to deny what it actually is. I find it funny to listen to people talk about Kickstarter as if it’s a fund for ideas rather than stuff. You know who funds ideas? Investors. You know what they get? Equity.

    You simply cannot say to people…”hey, I’ve got a great idea, give me $100 so I can make and sell these things to other people while you get a warm and fuzzy feeling inside”…that just not reality…at the end of the day either people get equity or they get stuff…and Kickstarter is trying to have it both ways…and you can’t.

    • hughstimson says:

      Am I wrong in thinking that there have been thousands of Kickstarter projects that have done exactly the thing you’re claiming can’t be done?

      • invictus says:

        Yes, you are.

        Pretty much all projects offer some kind of compensation or reward. It might be overpriced with respect to what the backer receives, but the vast majority of backers don’t go in for the $1 “I just want to support this project for the warm fuzzies” level.

      • You’re not wrong. Most of the comments are conflating the types of things that get backed on Kickstarter: products, ideas and cultural capital.  I regularly back projects where I care more about the cultural capital than the reward. It’s nice to get a postcard or a letter or a call out from an art show, a theatre piece or a dance company but that’s not why I back them. Indeed I know sending that stuff is annoying for a project so I often give money and select “No reward”. I back them because Arts funding sucks. I rarely, if ever, even get to see the final show and I don’t overly care. I also find that the vast majority of them execute.
        I sometimes back products if they look interesting but I generally approach that with a different risk equation: it’s R&D it might not become real. If other backers aren’t mature enough to understand that 75% of small companies fail then that’s an educational failure not an organizational one.

    • I tend to disagree, because the stuff in the “idea” category I mention is typically not stuff of value; rather of sentiment. In the “product” category, the stuff is the stuff that’s being made.

      The tote bag versus the iPhone dock.

  7. greggman says:

    Does anyone think 10% to Kickstarter and 10% to Amazon is a little too much for doing almost nothing but run a website to host projects on? I’m honestly curious. 

    • chuckwaugh says:

      Kickstarter takes 5%.
      .Amazon gets between 3% and 5% depending on the type of credit card used (a rewards card vacuums more to support it’s ‘rewards’ to the user)

      • What Chuck said on percentages.

        In terms of “doing almost nothing,” Kickstarter is extremely useful at 5% for most people who don’t know how to build an account system, accept fees (even if they paid less than 3-5% to process credit cards), and manage mailings to those who pledged.

        Also an individual or small business who takes in more than a few hundred to a few thousand dollars with a new merchant-card account will find those funds frozen for up to six months. Kickstarter uses Amazon’s payment system for collecting fees, and Amazon’s relationship with banks requires only a short holding period instead of weeks or months.

        I have, in fact, built such a system for one Web site, and we decided to run our own subscription fundraiser which had aspects of crowdfunding. It all went very well. But we had hundreds of hours of programming and integration in place, and a long history with our back-end payment processor, and had already integrated payments for one kind of thing.

        Software companies and other firms, especially with track records and existing ordering systems, are much better prepared to offer pre-order pricing for new products, and they may be able to take lessons from crowdfunding and not use Kickstarter or other sites. But that seems to me a subset of all the tens of thousands of projects that pass through Kickstarter, Indiegogo, and a few other sites.

    • hughstimson says:

      10% to Kickstarter seems pretty fair to me. I’m guessing many or most of the projects would, realistically, never have come together if Kickstarter (or IndieGoGo) didn’t exist to facilitate them.

      10% seems like a reasonable cost of business if it legitimately makes the difference between your business existing or not.

      Or if your prefer a econ-speak assessment, price is rarely a function of cost to the producer, but rather of the value to the buyer. And the Kickstarter value is high.

    • Chloe Eudaly says:

      If you think Kickstarter is doing “almost nothing” then try launching a crowdfunding project on your own website and see what happens. Not everything is going to fly on Kickstarter but it is truly an amazing resource for the right projects.

  8. chromatius says:

    Please, ‘explanation’, ‘elucidation’, ‘investigation’, ‘outline’ but not ‘exegesis’. Just wrong on so many levels, including just being plain wrong.

    • ocker3 says:

      The term would perhaps be best used to describe a book or work that reviews/explains/expands on Dreaming in Code, rather than an explanation of what Dreaming in Code does.

    • It’s a metaphor, colorful fellow—the text is the software on which he’s performing exegesis. Sigh. One tries to make a little subtle joke, and the literalists come out.

  9. yoshua says:

    To date, the only kickstarter projects I’ve gone for are the product kind. No offense to everybody and their brother who wat th do an art project or record an album, but I’m not gonna go for any of them. I’m only interested in the STUFF! If your music is good enough afterward, I’ll buy it. The projects that really get under my skin are the ones that pretend to be a charity.

  10. Wayneburg says:

    Hey for anyone interested in the non-product Kickstarter art projects… I wrote a guest article about some of the details that goes into starting up a project. I think some of it pertains to this discussion.

    http://scifistorm.org/2012/09/17/kickstarting-the-tuning-a-sci-fi-indy-about-mind-reading-gone-wrong/

  11. Mazoola says:

    Hell, I’m still trying to get a Dreammachine out of David Woodard — 7-1/2 years after I sent him half a grand through PayPal. A few months’ slip on a $15 item doesn’t even register above the noise…

  12. penguinchris says:

    Interesting – and disappointing – development from them. Like others have said, I’m (mostly) only interested in the tangible products that arise from Kickstarter, not the other stuff. I’ve only backed one and I received it within their estimated timeframe (it got sent to my parents’ house so I don’t actually have it in my hands yet, but that was my fault) but there have been many more I would have funded if I had more money right now.

    It’s also mainly disappointing to me, though, because I have a product I was planning to launch with Kickstarter, somewhat soon. I suppose there are other sites but naturally the advantage of Kickstarter is that it’s the biggest and most well-known site, which is important for people who don’t expect tons of free publicity for their idea or product.

  13. crwatson21 says:

    The composition-commissioning project I am currently running on Kickstarter seems to be exactly the kind of project no one in the comments here would back.

    I am disappoint, mutants.
    (search KS for Tromboteam if interested)

    • Backed! Great to see new composition especially for a neglected instrument like the trombone.

    • invictus says:

      Not to sound too harsh or anything, and I hope you get funded, but… Your failed business model is not my problem

      And really, think of it this way: If your offering doesn’t appeal to a wide enough audience, wouldn’t you rather learn that *before* you spend $6K on the idea rather than *after*?

      • You’re missing the point. He’s not building product and he’s not selling the commissioned work. He’s producing cultural capital. That’s totally different from the types of project the article is discussing.

        • invictus says:

          Someone here is certainly missing the point, yes. Now read my comment again and point out where I referred to anything in the original article.

          Craig Watson’s offering is, essentially, an opportunity for the masses to become patrons of the arts. If that offering isn’t appealing enough to attract the funding he is soliciting, then… Alas.

          • Sorry if I misconstrued you but a lot of other comments (and IMHO your comment reads that way too) in the thread basically ignore the fact that the change only impacts projects in the Hardware and Product Design categories.

          • invictus says:

            So let’s see… crwatson21 makes a comment on a post that doesn’t actually affect him — since his offering is neither hardware nor a product being designed — and complains about how people commenting on the changes to the aforementioned categories aren’t willing to participate in his kickstarter campaign. I reply — not to the original post, you’ll note, but to crwatson21 — by pointing out that if he fails to gain the necessary support for his project, it’s hardly the potential supporters’ fault. I’d say that crwatson21 is suffering from mis-targetted promotion syndrome. 

            Nothing in my comment referenced the original post. But then, nothing in crwatson21’s comment was relevant to the original post, either. So please, explain to me why you decided that I
            a) ignored the fact that the change wasn’t applicable to crwatson21’s category of fundraiser
            b) should care, when replying to a comment that has nothing to do with the aforementioned changes

    • GawainLavers says:

      Is it fission jazz?

  14. ultranaut says:

    I’ve given up to (approximately) 16% of my relatively small income to various projects via Kickstarter. There’s one project I’ve given more money than I typically sacrifice to the cause that has simultaneously disappointed and impressed me, there’s a handful that did “things” and emailed me about them, there’s a few that did not quite reach their goals, and there’s even less that reached their goals and I subsequently lost track of (for the most part I will return (eventually), depending on my degree of boredom).

    I do have a small collection of physical objects that have resulted from money converted to “capital” via Kickstarter. One of them is a very popular shirt that spreads joy and curiosity every time I wear it in public, another is a signed original copy of something with historical significance to my culture. There are two CDs, at least one poster, three postcards (one from someone I already knew!) , and one t-shirt I have washed twice but never worn (I have higher standards in clothing). 

    On balance; between the excess income I’ve spent on cultural production via localized debauchery, “investments” with at least some intent of seeding financial capital, and debt “servicing” for previous endeavors in existence, I would place debauchery in an open lead with Kickstarter cruising in second place while laughing at “investments” (for showing last place debt whose bitch it really is).

    Thus far I have helped make awesome roboticists do their thing for the good of humanity, radical media professionals produce their messages from beyond mediocracy, indie gamedevs make some damn fine art that will inspire all children of our future to visions of grandiourocity (by our standards, at least!), and some other random shit like devious architects of infrastructure bringing the awesomeness of the future to refugee parties in the farthest corners of our discontent civilization.  

    I have minimal regrets.

    • ultranaut says:

      The point I was trying to make: Kickstarter is inherently awesome, it wasn’t founded just to be another glorified postfactory for neotraditional consumerism! (not that there’s anything wrong with that…)