Yellow Brick founder talks crowdfunding: now and the future
Andrew Eckerman is the CEO and Founder of Yellow Brick, a social marketplace with apps that combine projects from close to 40 crowdfunding sites from around the world to mobile devices, enabling the user to search for projects they want to support based on the criteria that are important to them.
Yellow Brick gained recent attention when the released statistics that say 44% of Kickstarter projects are funded versus 31% of initiatives on Indiegogo.
Mr Eckerman recently spent some time answering questions about Yellow Brick, the current state of the crowdfunding industry and where it might be headed in the future.
In this first of a two-part interview, we discuss Yellow Brick, the current state of the crowdfunding industry and Indiegogo versus Kickstarter.
Describe what motivated you to develop Yellowbrick.
The most fun I’ve had in my career was working with early stage start ups in Boston while I was in graduate school.
When I left the turnaround industry I decided I wanted to put together a business that helped early stage entrepreneurs and ideators build their dreams into reality.
Around that same time the JOBS Act was signed into law and I quickly brought myself up to speed on the crowdfunding industry as a whole.
YellowBrick started as a stand-alone platform, but I quickly saw a gap in the industry that would one day be critical to its overall success – an aggregation engine for the hundreds of different crowdfunding portals all over the world.
As I began building YellowBrick, the implications of global versus local became apparent to me so we endeavored to create an engine that allowed the user to engage the tools at whichever level best suited their interest, either local or global.
The impact crowdfunding will have on the global economy long term is where we have YellowBrick pointed now.
How has the crowdfunding industry developed? What has stood out?
Crowdfunding as a concept has been around for a long time, but as an industry is still very young with a number of paths available ahead.
What is most concerning to me as I look at the global landscape is how much potential there is for globalization of private finance and how few inter-country transactions are actually occurring.
I understand the prevalence of in-network funding, or funding projects of people you know or your friends know. However, the real opportunities are in expanding those boundaries to areas and ideas where there is a real opportunity to significantly change the landscape of, not just a single entrepreneur or a single cause, but a town, city or even country.
With significant economic challenges confronting countries such as Spain and Greece, not to mention other third-world countries, crowdfunding has an opportunity to significantly impact the young people and eventually the general economy in these challenged areas.
I think Indiegogo has scratched the surface on this opportunity but there is so much potential I find it hard to ignore. YellowBrick has been looking at the global opportunity for impact, putting together plans of attack on how to drive this interest.
We are targeting the end of the summer to launch a couple specific initiatives targeted in this direction as test cases.
Why is Kickstarter’s success rate that much higher than Indiegogo’s?
Our data indicates Kickstarter had a 44% fully funded success rate in the 1st quarter of 2013 while Indiegogo had a fully funded success rate over the same period of 31%.
There are likely many drivers affecting these numbers, but, I believe the leading drivers are, first, the difference in project listing criteria and, second, the availability of Flexible Funding Goals on IndieGoGo.
First, Kickstarter has a strict policy on what type of projects can be listed on their portal. This limits type and number of projects that can be listed. Indiegogo does not have any significant restrictions and pretty much anyone can try to crowdfund anything provided it is legal and meets a few other general guidelines.
The impact is clear when you look at project counts.
For example, Kickstarter users may launch three thousand projects a month while Indiegogo users will launch 10 thousand.
It just makes sense the additional volume would translate to a lower success rate. The Flexible Funding Goal is impactful in the fully funded success metrics because a project owner may launch a project on Indiegogo as a Flexible Funding Goal project and will receive any funds raised regardless of reaching 100% funding.
When this approach is used Indiegogo charges a higher fee for using their site if the project does not hit 100%.
If the project does reach 100% or higher the fee structure reverts back to the fully funded structure.
From an industry perspective this feature is sometimes discussed as a reason why Kickstarter is a better portal to raise on because it has a reputation for higher quality projects.
Regardless of whether this is true or not isn’t as important as the economic benefit to the portal and to the project owner who does not believe they will hit their goal.
It would seem that when Flexible Funding Goal projects along with the higher fee standard are considered it may be possible Indiegogo has a revenue structure that may have longer legs than the “Industry Leader” Kickstarter.
I won’t speculate on either company’s exact revenue numbers or profitability, but it is an interesting divergence in market strategies.
Certainly if a project owner isn’t confident they will receive the full goal but still believes they can issue rewards at lower funding levels that project owner would be smart to use a Flexible Funding Goal approach and receive the funds available rather than spend the time and energy attempting to raise 100% only to not reach the goal.
Both Indiegogo and Kickstarter declined to participate in this article, save for Indiegogo saying “Please note that YellowBrick’s release is not reflective of our data which is proprietary and we don’t disclose publicly.” Are you surprised by this?
Not at all. YellowBrick can be thought of as a fancy blog. We use the embed codes both sites provide to list the project and simply attach the data about each project to allow for advanced filtering and search.
We are happy to partner but we are very early stage and wouldn’t expect either of the industry leaders to work with us the same way our smaller partners do.
In your release you mention hoping to increase the visibility of smaller niche sites so they can be more utilized, then later say that the site you list on has very little to do with your success. Can you comment on this?
There are a couple reasons why the portal you list on has very little to do with whether you get funded or not.
First of all, most reward projects are listed on one of the top two sites, Kickstarter and Indiegogo, and those sites only have so many ways, and really so much real estate to promote the projects on their site.
There’s only so much space on their home page and so many tweets, and emails they can send each day.
It is very difficult to be listed on the front page of either of these sites, and typically it is the projects that already have solid momentum who end up there since those are the projects that generate revenue for the site.
So, how is the site actually helping the project get funded? On a smaller niche site, this problem is significantly reduced with fewer projects on the portal. However, right now these sites are struggling to gain traffic which severely limits their ability to help their project owners.
YellowBrick provides an additional avenue to promote projects, to share the growth and opportunity that are occurring in the crowdfunding industry around the world, and generally help niche sites gain more recognition by those people interested in finding projects to fund.
Second, it has been generally shown that a project owner must lean on their own network to get somewhere between 30% and 50% of their funding goal before people who are completely outside the network will begin to take notice and contribute.
I believe a significant driver of this is the lack of knowledge about or understanding of the crowdfunding industry by the general public. I’m no longer amazed when I talk about YellowBrick to people how few even have heard the word crowdfunding.
Some people know about Kickstarter and actually think that ubiquitously Kickstarter is crowdfunding.
The industry as a whole has a responsibility and a need to expand this understanding for the industry to reach its potential.
YellowBrick is attempting to do our part by listing the different sites, and showing all the projects in one place while recognizing the differences in each portal and celebrating those differences.
In the last two weeks crowdfunding has shown what some consider its sleazier side, with the campaign to purchase the video allegedly showing Toronto’s mayor smoking crack cocaine.
What if anything can or should be done to police this behavior?
Nothing. The crowd and the portal’s management will police it in line with their values. In addition, the portals are all independent while still being held within their local, federal and international laws. There isn’t anything more to do in my opinion.
Are there some smaller sites that have caught your eye? If so, which ones and why?
There are several out there that are really solid portals offering something exciting.
However, the ones I get the most excited about are the ones overseas. For example,Crowdfunder.co.uk is a reward site recently involved in the merger market with their merger with PeopleFund.it.
Lanzanos.com from Spain is picking up some good momentum and has a number of exciting projects in Film & Video and Music. iPledg.com out of Australia is a portal I am a fan of.
The founders really have their hearts in the right place and I expect these guys will be doing some big things over the next couple years.
Finally, Appsfunder.com, which is based in Hong Kong, has really the first international revenue share and lending model at play in the app market.
I would recommend checking all of these portals out and taking a few minutes to search for other crowdfunding portals in any region or category you can think of. Odds are there is a portal out there at that level.
What types of crowdfunding projects would you most likely support?
I support a number of crowdfunding projects.
One of the benefits of being in my position is you talk with project owners a lot and you’re always seeing new ideas and hearing the passion in the founder’s voice. Mostly though, I find myself funding projects that are product focused and are ideas that would help my life, entertain me, or expose me to something new and exciting.
I do tend to think of rewards-based crowdfunding as shopping. Whether you’re interested in music, technology or art, you’re essentially purchasing a good or access to an event before it is actually available.
On the cause front I, like most crowdfunders I think, look for projects that are near funding, but mainly are causes I believe in.
When I say causes I believe in I also need to believe in the project owner as both a visionary and someone who can execute. I need to believe they have the cause closest to their heart and that they are trustworthy and true to themselves.
I look for specific language in their write ups that convey these things, and for the emotion in the video they present.