Criticisms of using Kickstarter to begin a restaurant
Recently, several St. Louis-based companies (or entrepreneurs) have made use of Kickstarter to collect funds in order to open restaurants. At one point in time, I thought this was a smart idea. In fact, if you check my Kickstarter backing history, you’ll find I’ve supported a few St. Louis locations that opened just through this method.
But as I think about it more, I realize that I really dislike the idea of using Kickstarter to open a restaurant. There are a few reasons why.
First, Kickstarter clearly states in its FAQ that funds are meant for use for projects only, explicitly underlining that starting a business is not a valid use of Kickstarter money. Restaurants are able to bypass this somehow.
Second, it seems questionable to begin a serious money-making venture on the backs of future patrons. “We are going to ask for your money now so that we can charge you more later” seems like the wrong way of doing things, when perhaps the steps involved should be (1) start a business, and (2) charge people for your product, which, if it’s good, will be paid for.
Third, somehow it’s considered newsworthy when a restaurant asks for money. St. Louis news seems especially interested in providing free publicity to people asking for money, which confuses me. If you have not yet produced a product, do not have a location, or perhaps even a track record, why are you news? Will news organizations suffer blowback if they recommend Kickstarter-began businesses that fizzle?
Fourth, there are some questionable workarounds that take advantage of Kickstarter’s policies. Kickstarter is famous for its all-or-none method of raising funds: Either the individual gets the money if he or she makes the desired total, or he or she doesn’t. But what’s to keep an individual from kicking in his or her own personal funds to cash in the money of others? If I’m $2,000 away from my goal of $10,000, why wouldn’t I pay two thousand, even out of pocket (and suffering Kickstarter service fees) to get the $8,000 on the table afterward? Maybe this is illegal, fine. Then I pass along $2,000 for a friend to “donate.”
One comment I hear occasionally is, “If you don’t like the business, don't support it.” That’s a fine rule to an extent, but think of a scammer on the side of the street trying to sell you faulty merchandise. Maybe you know better and don't purchase a pair of “Fauxkley" sunglasses from him, but don’t we have an obligation as a city to get that guy off the street so he doesn’t dupe others?
There's an interesting discussion occurring on the St. Louis Yelp boards regarding this topic. It's unclear whether the general public supports or disproves of using Kickstarter to earn restaurant funds.
As usual, I’d love to hear people’s thoughts on this. I’m not sure I like what I’m seeing. It’s entrepreneurial, but I’m not sure I like it.
