Kickstarter: a Case Study

Once again, I’m taking too long between posts because of my work. Add to that internet shortages (ironically enough – a topic I’m currently reading about in a book about networks), computer reboots and document recovery failures, and you get a week’s delay. Let’s hope this one will be interesting enough to be worth the wait :).

I opened this blog right after I made the conscious decision to invest time in learning about startups to inspire my own future goal – which is, in its full abstraction, to create projects that will allow people’s offhand actions in their daily lives to serve a secondary purpose. Practically, this means:

  1. Create a project that will be used by many people (the crowd).
  2. Create, through the crowd’s work as a mass of humans, a secondary product that cannot be matched by machines of programs.

Specifically, my focus was to think of products that will be free, or even reward their crowd, being funded instead by people (the funders) who will pay for the secondary product produced by the crowd’s work, via the primary product. In short – join the crowdsourcing craze I keep posting about! Once I understood how many crowdsourcing projects already existed, I figured that in order to support my goal, I should look into projects of this kind that appeal to me and study them – not in order to mimic them, but rather to learn how to build a product that will be useful enough to gather a crowd and financers, while staying free and profitable.

Before opening this blog, I wrote down my analysis in Word documents. Now that I have this blog, whose purpose for me is to support my reading by giving me a place to express the things I’ve learnt, I can think of no better place to share my analysis directly, rather than focus solely on general discussions. It’s my great pleasure to start this trend by analyzing Kickstarter – a social funding site for well-defined projects.

First, a little background:

Kickstarter is a website that allows users to post projects and offer rewards as incentives to raise funds. In effect, it’s a platform that allow people to fund their projects using a crowd of backers rather than traditional funding methods. I’ve seen the name come up several times in blogs and sites I read, but it wasn’t until Rich Burlew, the writer of a webcomic I’ve been following for several years named ”Order of the Stick”,  began raising funds for reprinting his books that I’ve actually used it. Since then, I’ve been hooked – helping fund several projects I liked as well as keeping up with updates on these projects.

In fact – that’s what makes this site special – since the funding is social, it is expected of the projects’ creators to be social- share updates, react to the crowd’s questions, requests, and build up support. The “Order of the Stick” pledge drive is a great example for that – over the course of the last month, Rich expanded the prizes he offered to keep the pledge going, shared interesting updates, answered questions, addressed requests and even made creative charts describing the pledge’s progress and following their own weird plot as the pledge goes on.

As I began wandering through itself, I found myself drawn to more projects, pledging, commenting and following them as well, despite having never heard of their creators prior. While admittedly I could be a fool for doing so, I won’t be the only one – these projects are funded by thousands of individuals interested in the products, the creators, and/or the rewards, and while not all projects get funded (the site’s statistics say that under 50% do), the projects that end up successful raise anywhere between a few hundred to over one million (!) dollars. Finally, if for some reason the project you opted to fund is one of the 50+%, you lose nothing – it’s all or nothing, so if the goal wasn’t reached in the project’s time limit, no one has to pay anything.

So what makes Kickstarter work? To frame this large question, I looked at the following smaller questions, in hopes that they can help my current analysis as well as support my analysis of other projects as well.

1. What is the primary (for the crowd) service provided?

By my own definition, the primary service is the service provided for free. In Kickstarter’s the free service is the site’s crowdfunding platform. Assume your project fits the site’s criteria, you can use the site to create a project page, with your own content, that will support your attempt to generate funding for your project by garnering interest and providing rewards for your funders. The site itself will host your crowdfunding project and publish projects it’s editors like and support. In fact, some of the Kickstarter’s employees are backers themselves – supporting projects they like financially.

2. Who are the project’s crowd?

Anyone with an idea for a concrete project that needs backing can use this site, as long as they meet certain criteria themselves, meant to assure the identity of the person getting the money from the crowdfunding project. This does limit the people who are able to post projects, but being a free platform, and one open to US citizens (quite a big crowd, after all), it creates enough content to generate interest.

3. What is the secondary (for the funders) service provided?

The beauty of this site is that there is no single secondary service. Every project is its own service – due to its creative nature or the rewards it offers. Some people will back a project to support a comic book artist or an independent company they like, others to buy a cool product, while others yet, to try out new board or card games. Each person and project create different service combinations, which is what gets people (or at least, got me) hooked to the site.

4. Who are the project’s funders?

Unlike most crowdsourcing projects, the funders are smaller than the crowd of users using the site for free. Anyone pledging money for a successful project also funds Kickstarter itself, which earns 5% of each successful project’s earnings.

5. How does the project gather it’s crowd?

Beyond what I’ve discussed above when describing the project itself, I see a few more points that help lure projects in:

  1. Mistakes are allowed – thanks to the all or nothing approach, if a project is not fully funded, no money transfers hands.
  2. Publicity – the site has gathered some major publicity on the web and regular media, inspiring more projects to post on the site.
  3. Project blog – the site itself has a blog, highlighting success stories, encouraging more people to join.
  4. Ease of use – the site’s interface is clear, and extensive support is provided before joining, making it an easy task.

6. How does the project gather its funders?

Beyond what’s already been discussed:

  1. Tangible rewards – people know what they’re getting for their money up front. If a project isn’t fully funded – no money changes hands.
  2. Content is value – each project generates a project page and updates, even after funding has ended, making it more engaging for people to join and contribute to.
  3. Social response – projects evolve and react to their funders, allowing them to affect the project itself, get more rewards, and involving them more to the extent of increasing their initial contribution (and I’m speaking from experience here).

7. What are the main challenges for this project and how does it address them?

User identity:

User identity is an issue for both the project administrators and backers. The project administrators need to make sure that they get the money they need for their projects and rewards from real people, while the backers of the projects want to make sure they’re backing a real person and a real project, so that they get what they’ve payed for. Identity is the only way to ensure accountability for the money involved in these projects, and considering the scam stories that occur on the internet when accountability is limited, this is a very big issue issue.

Kickstarter addresses this in several ways:

  • Users are forced to use Amazon payement, which is linked to a credit card and must be confirmed for business users.
  • Project creation is limited to US citizens with a social security number and driver’s license – providing real identity to the project administrators.
  • Users are encouraged to be social and link to their other sites and social networks, providing further evidence to their real identity.
  • Each project requires approval from itself before being posted, providing human confirmation.

Only time will tell if these methods are affective, but I can imagine more measures will be taken over time to ensure this remains a non-issue – as one flop can end the whole endeavor.

Limiting the crowd:

Since I don’t know how much profit the site currently makes, but assuming the goal of the site is to grow, it will need to examine how to expand into more market. Currently, it is limited in terms of technology (does not support Paypal and other financial services), geography (for projects) and in terms of its projects’ scope (which are limited both in terms of tangibility and topics). Obviously any expansion can be risky, but might become necessary with the site’s growth, or if members want to increase to profits, not to mention if competition arises.


I find this site both enjoyable to browse and exciting to follow, being a platform for amazing projects that might have never existed or been available to me without it. I can only hope to produce a project that is equally successful and enjoyable myself in the future!

Please share your thoughts on my analysis. Also, make sure you check out the projects I mentioned in the post – all of which I’m backing personally, off course.

via tumblr at February 19, 2012 at 03:16AM. Originally posted on


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