Tuesday, December 13, 2011

Kickstarter -- "wisdom of the crowds" project funding -- like the Altair

Kickstarter is a Web platform for funding projects in music, film, art, technology, design, food, publishing and other creative fields. People post project proposals on the Kickstarter Web site along with a financial goal. The public is invited to pledge financing for the project, and Kickstarter holds the pledges in escrow until the goal is reached.

The funds are only collected if the project meets its financial goal within a set time.

The folks who pledge funds do not get equity in the project, like a venture capitalist would, but they can get perqs like T-shirts or products, depending upon how much they pledge.

For example, I recently wrote a short post on a Kickstarter proposal for the TouchFire keyoard overlay, which claims it will improve touch typing on the iPad. Folks who pledged could either make a small contribution to encourage the idea or pledge more to get a T-shirt or purchase a TouchFire from the first production run.

TouchFire set a fund raising goal of only $10,000, and 3,146 people pledged $201,400 -- twenty times their funding target. (Since it was oversubscribed, the first production run is sold out, but you can place an order for one from the next batch at touchfire.com).
Kickstarter is a cool “wisdom of the crowd” way to raise capital, and the crowd seems to like this idea.

People also like the idea of Kickstarter. As of October 11, over a million people had backed projects, 166,823 of those had backed more than one, and they had pledged over 100 million dollars. To put that in context, the 2011 fiscal year budget for the National Endowment for the Arts is $154 million.
Kickstarter reminids me of the MITS Altair -- the first mass market hobbyist PC. MITS was a near-broke calculator company when they brought out Altair kits, which were featured on the cover of the January 1975 issue of Popular Electronics magazine. MITS financed the kits by asking for payment in full at the time you placed your order. I guess they cashed the checks, bought the parts, stuffed them in baggies and sent them out.

I sent my check and got my kit. There was no Kickstarter process to hold our checks in escrow, we were enthused about the Altair and trusted MITS. Those were different times.