A few years ago, a smartwatch called the ‘Pebble Watch’ made headlines when it secured KRW 20 billion in funding for a product development project using only videos and photos. It attracted around 70,000 backers. This was possible thanks to Kickstarter.
Kickstarter is an online fundraising platform that helps people with ideas bring them to life. In the field technically known as crowdfunding (Crowdfunding), Kickstarter has become the world’s leading company. Innovative projects in fields ranging from art, science, and food to technology are posted continuously, and members can contribute at whatever level they choose, from KRW 5,000 to several million won.
Kickstarter’s story begins with a young concert promoter living in the United States. He planned to invite a famous overseas DJ to perform in the United States, but struggled to raise the money needed to secure a venue. He wondered whether there was a way to eliminate the potential risk of paying a large sum to rent a venue only to lose money later if too few tickets were sold.
This became the inspiration for Kickstarter’s business model: sell tickets first (receive backing), then book the venue, invite the DJ, and take the other steps (carry out the project).
How Kickstarter Differentiated Itself and Rose to the Top
As befits a startup based in New York, a city with a strong artistic identity, Kickstarter featured many projects in performance, visual art, and music from its early days. More recently, many projects have also appeared that creatively incorporate new technologies, to the point that Kickstarter has become a must-visit destination for anyone seeking innovative examples in the Internet of Things (IoT). How did Kickstarter reach its current leading position?
According to recently released data, 12% of creators (Creators) who successfully secure backing on Kickstarter return to launch another project on the platform. The creator of the Pebble Watch mentioned earlier also launched another project on Kickstarter. What is the secret to bringing these creators, its core customers, back?
1) Advance project review: In keeping with Kickstarter’s purpose as a platform created to support creative projects, a new project must meet the standards of Kickstarter’s reviewers before it can be listed. Projects may be rejected if they are not creative or novel. Although the company has recently introduced partial automation through algorithms, it still maintains a process in which people personally review and approve around 60 percent of submitted projects. Simply being listed on Kickstarter is effectively a recognition of a project’s uniqueness.
2) High success rate: When creators successfully secure backing for their first project on Kickstarter, their chance of successfully funding the next project is around 73 percent. This success rate continues to rise—to 80 percent for a third project, for example—and reaches an impressive 91 percent by the time a creator launches a sixth project. This is related to a culture of repeat backing. Nearly KRW 2 trillion was pledged on Kickstarter over the past four and a half years. Around 60 percent came from backers who had supported projects at least twice. Eight people had even backed more than 1,000 projects.
3) Ability to build fan communities: The success rate rises as described above because backers (Backers) who supported an earlier project tend to support the creator’s new projects as well. Creators themselves reportedly say that the best thing about Kickstarter is the ability to build a fan community of their own.
Kickstarter has already become a platform with hundreds of thousands of active participants, and a growing number of people now use it to gauge demand and conduct advance marketing before a product launch, even when they do not need funding.
Lessons from Kickstarter’s Innovative Thinking
On the surface, Kickstarter is no different from hundreds of other crowdfunding platforms. Yet a major reason it was able to reach the top is that it has never forgotten its original mission as a funding platform for creative artists. Its practice of reviewing every submitted project and approving only creative projects worthy of support, despite the considerable staff and expense involved, reflects a clear understanding of why the company exists.
Another factor is its effort to build strong bonds between creators (Creators) and backers (Backers), grounded in a mature sense of community. This encourages both those who successfully receive backing for projects they created and those who supported them to keep creating and backing projects. Ultimately, it is a clear demonstration of the strengths of a community business model rather than a transactional business model.
The first lesson we can learn is that even something most people take for granted can still be completely changed (receive backing first and then make the product), and that staying true to the idea and philosophy behind that change can enable a company to become the leader in a particular field.
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