Starting a Kickstarter: A Word of Caution

Last November, two Los Altos seniors, singer-songwriter Zach Gospe and his manager Riley Soward used the popular fundraising platform Kickstarter to raise $10,606 for the professional recording of Zach’s latest album. It took only one month and 161 backers to reach their $10K goal, an incredible accomplishment defying expectations of all that’s possible for individuals armed with a dream, ambition and just maybe a quirky video appeal.

Whetting such appetites is the essential function of Kickstarter, the crowdfunding platform that has grown from its startup in 2009 to funding over 150,000 projects for a total $1 billion. Kickstarter has funded two academy award-nominated films, a movie for Veronica Mars fans and Zach Braff (the actor and director behind critically acclaimed “Garden State”), along with hundreds of video games, albums and products of all kindw The website has become a valuable resource for many well-thought-out projects that wouldn’t have happened otherwise.

The site’s popularity and exposure have grown, but so have the site’s less-advertised risks. Before investing in a campaign or starting your own, it’s important to be aware of what Kickstarter is and isn’t.

“We can all make great things,” reads the banner on the Kickstarter homepage. It’s a hopeful message for anyone who’s put off crafting their own novel or board game far too long. Unfortunately for many dreamers, the slogan is also a misleading one. Certainly we can all make great things, but can we manufacture, market and sell them to an audience? Not just anyone can organize the complicated processes and connections involved in turning such projects into a reality. Even for some of the most successful Kickstarters, failure to secure a comprehensive plan to use their requested funds effectively can lead to disaster.

For some entrepreneurs, such as boardgame maker Ed Carter, the cost of a successful campaign can be worse than a failed one. Carter raised nearly four times his pledged goal of $21,000 for his “Glory to Rome” game eschewing the corporate world, but ran into unexpected costs of manufacturing and distributing the product. He soon had to pay out of his own pocket to keep his promise to Kickstarter investors, eventually losing his home and declaring bankruptcy.

It’s important to keep in mind that Kickstarter is not a charity nor an instant success story. Each backer is an investor, a helping hand in the project’s fulfilment but also a person whose expectations and promise of a product need to be respected.

It turns out it’s much easier to fill a six minute video with optimism and quirky self-deprecation than it is to devote the careful attention to detail necessary to manage large sums of money efficiently.

For donors, it’s easy to get caught up in the hype of projects’ optimistic projections. Donating appeals to the excited kid in all of us that just can’t wait for the next big idea to become a reality. Though Kickstarter is not a charity, it appeals to the charitable temptation of helping a passionate individual realize his dream. At the same time, it’s not hard to see competence and feasibility where only hope and ambition may be stated.

To entice backers just a little bit further, many Kickstarters feature a rewards system, the closest function to a guarantee that certain levels of donation will receive some token of appreciation such as personalized CDs, thank you notes or even prototypes of the product.

Donors should remember, however, that Kickstarter is not a pre-ordering service, and their money is liable to a fair (read: hefty) amount of risk. This message came too late for thousands of unfortunate investors in ZionEyez, a cutting-edge pair of glasses that could record video in the wearer’s line of sight and upload it to Facebook. The wildly successful campaign of $343,000 (one of the largest ever at the time) quickly fell flat. Donors of $150 were promised a pair of the glasses by the winter of 2011, instead receiving sparse and defensive updates, which, inspired threats of a class action lawsuit. After a cryptic reference to seven more months needed, the campaign page stayed silent for over a year.

Kickstarter provides the platform for ambitious projects, and will sometimes take action in the face of outright scams, but there are no guarantees against campaign failures and subsequent backer disappointment. Fortunately, Kickstarter’s policy prevents a single dollar from going to projects unless all fundraising goals are met on time.

When engaging in this exciting new platform, students would best be served choosing wisely, and be comfortable with the place and purpose their money is going towards, and into whose hands. Donors and starters alike should remember to be smart and realistic about their expectations. Kickstarter may feel like a godsend for many ambitious projects, but it’s no miracle.