Kickstarter: Crowdfunding Portal, or Pre-Order Store?

Chris Shuptrine
Apr 4, 2016 · 4 min read

In anticipation of a Kickstarter campaign for my company LiftUp, I’ve spent the last four months obsessed with the site. Before then, like many, I knew Kickstarter only as that quirky crowdfunding site that helped make innovative (or bizarre) ideas a reality, like Coolest Cooler and the potato salad one.

Cut to now, and I’m not sure I’d still describe it that way.

Not to say the projects aren’t innovative anymore. They still are. But I no longer think that Kickstarter is a true ‘crowdfunding’ platform. Here, I’m going to define ‘crowdfunding’ as a funding process whereby a large number of people give a small amount, as compared to more traditional funding paths, like self-funding, venture capitalists, and debt. Implicit in ‘crowdfunding’ is the assumption that these products don’t exist and that it’s only because of ‘the crowd’ that they get created.

I say this because recently I’ve seen more and more companies using Kickstarter not as a crowdfunding platform, but as a pre-order store.

(To be clear, since I was focusing on the ‘technology’ category, my argument focuses on tech products. But, I’m also seeing it happen for physical products of all types.)

Take the first Pebble, which brought in over $10M in Spring of 2012. Before then, though, Pebble could raise only a relatively small investment ($375K) and ran the risk of going under. Kickstarter was their best, if not only, option for becoming a real company. They threw a Hail Mary, and 69K backers caught the pass.

As with many Kickstarter projects, the time to deliver was longer than expected, taking around a year for some. But, this is not unusual for ideas that are going from prototype to mass production. In fact, it should be expected that the wait is 6+ months.

Transport to Feb of 2015 and you see Pebble launching a campaign for Pebble Time, which finished with over $20M and nearly 80K backers. The earliest shipments were for May, about 2 months from the campaign’s end. To have confidence in such a timeline, Pebble must have already built the product.

In that case, is it fair to say Pebble Time was a true crowdfunding campaign? Or did Pebble use Kickstarter more as a pre-order platform to create buzz?

As it’s not fair to extrapolate with one use-case from a year ago, here are some other high-profile examples of companies that straddle the crowdfunding/pre-order divide:

  1. SpeedX Leopard — Launched on 3/23/2016, they reached over $1M in less than 8 days and are on track (according to Kicktraq) for $3M+. SpeedX is also a VC-backed company, with $10.08M in funding ($8.08M just eight months ago) and 50+ employees. Everything about the bike is awesome, but I don’t think Kickstarter will be the reason SpeedX becomes a real product.
  2. SoundBoks — They just ended, with 1,559 backers and $784K raised. According to their reward tiers, their earliest shipments are set for this month, April, the same month the campaign ended. I think there’s little room to argue this is anything other than a pre-order campaign.
  3. Sense — A Top 50 all-time Kickstarter campaign ($2.4M), Sense’s company — Hello, Inc — had already raised $10.5M before running a Kickstarter. While an additional ~25% in pre-orders helps with delivery and market validation, Kickstarter seems more of an opportunistic play than a necessity.

Also — I don’t want to sound like I don’t respect these successful Kickstarters. They are innovative, beautiful, and well-marketed. And these pre-order campaigns are far from a majority of the 700+ tech products currently live (in fact, still only a small percentage).

But the question is, as Kickstarter becomes more mainstream, will we start to see more projects that don’t need Kickstarter, but, instead, are just treating it as a way to get product-launch publicity?

In other words, will Kickstarter’s mission statement morph from ‘We help bring creative projects to life’ to ‘Hey! Check out this cool thing that’s coming out next month’?

Because if that happens, there will be consequences:

  1. Unreal expectations about delivery: ‘Well, this project shipped the next month. Why is yours taking seven months?’
  2. Unreal expectations about pricing, too. A best practice for creators is to offer their products at a discount vs retail. Unfortunately, this is also a dangerous practice because (1) it’s way too early to know the exact retail price, especially without knowing what your order quantity is yet, and (2) discounting rewards can lead to trouble (AKA, Coolest Cooler, Ada, Cubii, Zano). But companies that have cash or the product already built can afford this. If potential backers come to expect discounts, this becomes a Catch-22 for smaller companies. Do they not offer a discount and see lower sales, or offer a discount and risk going under?
  3. Decreased visibility for companies without substantial marketing budgets (which true crowdfunding campaigns likely won’t have), due to (1) higher advertising costs if every Kickstarter campaign is vying for attention, (2) limited press coverage, as there’s journalist fatigue toward Kickstarter, and most hobbyists don’t have $50K to spend on PR firms, and (3) limited organic discovery, since KS’s popularity algorithm incorporates backer volume, which will skew toward the companies with higher budgets.

I love Kickstarter and all it stands for. And I’ve been very happy with our experience (we hit our goal in 2 weeks). My concern isn’t with the present; I just worry that, over time, Kickstarter will start to look and act like a pre-order platform.

Not only will this lead to identity issues for Kickstarter, but it’ll leave behind the innovative hobbyists to whom Kickstarter owes its roots.

Thanks to

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