Kickstarter made some changes to its site this week that it hopes will make the crowdfunding Goliath even easier to use, while admitting some of the eliminated aspects could be confusing for users.
The changes, which include a “Launch Now” feature, and the simplification of their rules of use should also grab market share from competitors such as Indiegogo.
Campaign designers who have successfully completed the basic information including proper description, rewards, funding goal and previous campaigns can choose a “Launch Now” option which, if the campaign satisfies thousands of different data points, allows that Kickstarter campaign to immediately launch without waiting to be assessed by site personnel.
As crowdfunding becomes more commonplace, this would appear to have the advantage of allowing those who clearly know how properly create a campaign to sidestep a needless part of the process. It also allows Kickstarter to more effectively deploy staff to other areas without the expense of bringing on additional personnel.
Kickstarter has also drastically boiled down their rules to three basic principles:
- Projects must create something to share with others.
- Projects must be honest and clearly presented.
- Projects cannot fund raise for charity, offer financial incentives, or involve prohibited items.
Kendall Almerico is the Founder and CEO of Fund Hub, a provider of compliance and due diligence services for broker-dealers, equity crowdfunding portals and others working with Regulation D, the JOBS Act and other areas of securities. He was recently named as the 17th most influential leader in the crowdfunding industry by VentureBeat. He spent a few moments to give his impression of the changes to Bankless Times.
What is Kickstarter’s reasoning (for the creation of the ‘Launch Now’ button)? Is it because, as crowdfunding becomes established, many people know how to create a campaign?
For people unfamiliar with the landscape, Kickstarter has always been highly curated. There are lot of rules to get a campaign on the site, and sometimes those rules were very difficult to understand or follow.
People would get frustrated with the process, or would get rejected without understanding why, and then would hop over to Indiegogo or another site and have no problem posting a crowdfunding campaign. Kickstarter was like that fancy new restaurant you want to go to but it was impossible to get a reservation. Indiegogo was like McDonalds.
But, if you weaved through Kickstarter’s vetting process and got on their site, your chances of success were greater than 40%. On all other rewards-based platforms, the chances of success were roughly 10% or less. It is not hard to figure out why. This was a classic example of quality over quantity.
I believe Kickstarter’s new rules are a response to two things: (1) watching potential users jumping ship to its competitors and (b) seeing Indiegogo get $40 million in capital from big name investors like Richard Branson.
Has the sheer volume of campaigns necessitated the creation of a reason to cut the number they must review?
I am sure, to a certain degree, this plays into it. Kickstarter has always claimed to have a human staff vetting each proposed campaign, but I am quite sure this “new” algorithm has been in beta for some time, making preliminary decisions to simplify the vetting process. They now feel comfortable enough to let the algorithm make some decisions for them. Obviously, when running a business, the more you can automate, the less payroll you have. Seems like good business sense for Kickstarter to automate the process if they can, as long as it actually works.
Some in the media feel this gives creators of suspect campaigns greater license to mislead supporters through suspect claims, visual misrepresentation and other methods. Do you share this worry?
Taking the human element out of the review process could lead to a slight increase in suspect campaigns, but I doubt it. The reality is that even with human oversight, suspect campaigns make it onto crowdfunding sites on occasion.
One of the things I love about crowdfunding is that the crowd itself usually does a great job of vetting the campaigns once they are published.
Given that Kickstarter is an all-or-nothing site, meaning that money is not released to the project creator until their goal is met, the incidence of questionable campaigns is reduced because the crowd has more time to research the campaign and it owners.
The crowd is remarkably effective weeding scammers out of the crowdfunding system. There were 75,000 crowdfunding campaigns worldwide in the first quarter of 2014. We heard very little about scams in that period. The percentage is incredibly small, because the crowd is so good at finding them and exposing them.
More product categories are being allowed, such as bath and beauty products and different types of software. These two product categories are becoming more popular in the marketplace. Is that the reason?
Kickstarter allowing new product categories on their site is simply good business. Bath and beauty products are popular, and are relatively low risk for the site. Who is going to get mad if the organic shampoo they help crowdfund really is not so great? Why not let the creators of these products crowdfund? It’s not like Kickstarter is allowing nutritional supplements or other categories of products that frequently include spurious claims of effectiveness.
This rule change seems more driven by simple business than anything else. My guess is, Kickstarter saw a huge number of proposed bath and beauty products get proposed and rejected on their site, then go to a competitor and get funded.
Kickstarter is the overwhelming choice in the industry yet some are suggesting this is an attempt to grab share from Indiegogo. What are your impressions?
There is no question whatsoever that Kickstarter is doing just that. When you see big time investors throwing money at your biggest rival, you have to respond. And even when you are in the lead, you can never have a big enough lead. Remember, the crowdfunding industry is in its infancy.
Kickstarter is the leader for now. Let’s not forget how quickly things change online. Anyone remember MySpace?