By: Steve Zachmann, contributor
A quick preamble… I’m about to go off on a rant about Kickstarter, but just because I don’t like Kickstarter doesn’t mean that I don’t like the people utilizing it. Individuals can (and probably should) take advantage of whatever edge they can get when trying to accomplish their dreams. So while I fervently dislike the idea of Kickstarter, I don’t hate anyone whose taken advantage of it. That being said, if you’re currently running a Kickstarter campaign and any of this hits close to home for you, then maybe check yourself.
It promotes bad business principles.
In the days of yore, before the Kickstarter revolution, people actually had to have a business model. If you wanted to start a business, you had to do a lot of research on the issues you would face during the formation and initial growth of your business. It behooved you to have a three month, six month, and one year plan for your business. Back in the day, if you wanted to start a business you had to understand business.
With Kickstarter though, it seems that anyone with a good product idea can start a business. When you back a “project” on Kickstarter what you’re really funding is a business. The campaign presents you with a project, but if the project is successful and turns a profit, that person or business directly benefits. But do you know anything about the business that you’re backing? Have they presented any info on their business strategy? To be fair, many Kickstarter campaigns try to give a lot of information up front, right on their Kickstarter page, but a lot of times that info is just about the project, not about the company’s actual business plan. Why does this matter? Because when you hand over your hard-earned money to someone in hopes that they’ll come through with the product, you want as much assurance as you can possibly get that they’re actually going to deliver. A project and a business are one in the same, make no mistake. You have no control over how the individuals creating the project choose to spend your money, so if they have no business sense and they waste the funding, too bad for you.
It’s an investment, where is your return?
People (or banks) used to actually invest their money. When you fund a Kickstarter campaign, you’re essentially investing in a company, but you gain none of the benefits that an actual investor would. In fact, Kickstarter is very clear that backers cannot receive financial benefit from companies or projects that they back. This is absolutely insane to me.
Here’s how things used to (and still should) work: If you had a good idea for a product or a business you’d come up with a business plan and a presentation about your product. You’d present it to potential investors who, if they liked your idea, would back you. But those investors expected that because they were risking their money on an unproven idea that they’d be compensated for their risk. So if your product turned out to be the next Minecraft they would get some percentage of your profits in exchange for backing you before you were successful. This is exactly what Kickstarter is except that you don’t get anything for the money you put in. Sure, you get a copy of the product and maybe some extra token of gratitude, but you never see any of the real profits. Take the Oculus Rift for example. It started as a Kickstarter project. There’s a good chance that some of you gave Oculus some money because the project looked fantastic. Guess what, it was fantastic. So fantastic in fact that the company got bought out by Facebook for two billion dollars. But Oculus Rift would have never been what it was if it hadn’t been for your contribution before it was proven. So where is your return on investment? In the pockets of the Oculus guys of course. You invested your money in an unproven and unreleased product but you got zero return on that investment. Twenty years ago (probably even 5 years ago), that would seem ridiculous. It gets even worse for Kickstarter backers, too.
Kickstarter sucks for backers.
Beyond the fact that you don’t see any return on your Kickstarter investment, you have no control on project scope changes, price changes, etc. I was talking to a friend who backed a game on Kickstarter. They were angry because of how the game’s price had changed. Here’s what happened: My friend contributed $5 to the Kickstarter campaign and received a copy of the game when it was released. Up until right before the game launched it was supposed to have $5 price tag. Right before launch though, the team decided to make it free. My friend ended up paying $5 for a free game.
Let’s analyze that for a second. This friend of mine believed in this company and this project before it was completed. He put his money on the line and supported an indie developer when they needed it most. In return he paid $5 for a game that others got for free. I could go pick up this particular game right now on a number of platforms and play it for free, and I did nothing to support the team. I’m not sure if my friend will ever support a Kickstarter campaign again, but I wouldn’t blame him if he didn’t. What benefit was there for him, as an early supporter? What did he gain by helping the little guy? Nothing. In fact, as soon as the little guy didn’t need him anymore, they spit him out.
A couple pre-emptive counter-arguments.
Because someone will inevitably post a comment on here about it, let me respond to the argument that “you don’t have to participate in Kickstarter”. Of course you don’t have to participate in Kickstarter. You don’t have to do anything beyond eating, sleeping and securing shelter when the elements require it. The problem is that Kickstarter has become some type of positive buzzword. Kickstarter, because of good marketing, has become something people want to participate in. Kickstarter wants you to think that it’s super cool to support a product you like…but you already do that when you buy the product after it’s released. When a game is released and you buy it, are you not supported the team who made it? Of course you are. But Kickstarter wants you to think that you’re somehow better and cooler for having done so before it was a real thing. Kickstarter is ultimate hipster deity, it knew about everything before it was cool. But for all the reasons I’ve already listed, you shouldn’t give you money away, no matter how cool the project looks. If you think a Kickstarter project is cool, bookmark the page and comeback to it months later to see if the project is completed. If it is, go buy the product.
Some will say that Kickstarter helps get more products in front of consumers; products that those consumers might actually want. In some cases (maybe most), successful Kickstarter campaigns result in successful products and happy customers. My problem is that the precedent being set here is just plain wrong. People should not be expected or encouraged to give their money to others, without either a guarantee that they’ll receive a product (that’s called a preorder) or some type of reward system for taking the risk (that’s called investing). Backers on Kickstarter get neither, and the more successful and well known Kickstarter gets, the larger the precedent it sets, and ultimately, the more bad business people it attracts.