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Crowdfunding is on the rise, and while crowdfunded investments in startups are some months off in the United States, services like Kickstarter have given individuals and businesses a viable way to raise money -- in some cases hundreds of thousands or millions of dollars.
As the most prominent crowdfunding platform in the U.S., Kickstarter's biggest success stories are well-publicized, but there's also a dark side to Kickstarter that is increasingly being talked about.
There has been a lot of discussion about the way Kickstarter "hides" failed projects, and recently, the subject of refunds for projects that fail or aren't completed on time has been a source of debate.
At the heart of the debate is the perhaps-not-so-convenient fact that many Kickstarter projects make big promises that are likely to be difficult -- if not impossible -- to deliver. Technically, backers are supposed to understand that a project may or may not succeed, but in practice, Kickstarter in many cases serves as a pre-purchase mechanism. Like a gadget that somebody is hoping to build? Back her project and you're paying to develop something that will eventually be built and delivered to you.
It's a sticky subject for Kickstarter and one that could very well threaten the service's future. So yesterday, the company took to its blog with a strong message: "Kickstarter is not a store."
Writing "It's hard to know how many people feel like they're shopping at a store when they're backing projects on Kickstarter, but we want to make sure that it's no one," Kickstarter's Perry Chen, Yancey Strickler and Charles Adler announced changes that they hope will make this clear. Those changes include:
- A new Risks and Challenges section that project creators must complete. This is designed to give potential backers an understanding of the risks associated with a project and gives the creator an opportunity to explain why she's qualified to overcome any challenges that are anticipated.
- A restriction on simulations and renderings for physical products. Creators can only display what exists today; they can't use impressive-looking images or videos showing what a product will do in the future.
- A prohibition on offering multiple quantities. According to Kickstarter, "offering multiple quantities feels premature, and can imply that products are shrink-wrapped and ready to ship."
On paper, Kickstarter's changes seem sensible and it will be interesting to see what impact, if any, they have on the service's popularity with both entrepreneurs and consumers.
At the same time, Kickstarter's challenge isn't necessarily making sure that creators and backers know the score. If Kickstarter is to keep things under control as it grows, it will need to remind itself that it's not a store too. As an astute Hacker News commenter observed, in promoting one of its biggest success stories to date, the Ouya video game console, Kickstarter promoted the project, writing, "In just 24 hours, 20,000 people bought an Ouya console - a product they had never heard of before yesterday." Oops.