The Early Stage

Jeremy Schwartz's thoughts on business development, current events, sustainability and seasons.
It’s been a while since posting here because I’ve been focused on Backerbase.
The discussion of the Discovery carousel minus community resonates 100% with what’s motivated me over the past few months.
Keeping track of projects, discovering new ones, being recognized and, yes, rewarded for being a good community member … . So many simple ways to create new, better, different experiences for crowdfunding’s most important players.

kthread:

kenyatta:

[….KT note: Condensed because it was getting unwieldy, hope Tumblr can add in some way to expand/condense threads with + signs soon…]But again, we’re talking about a show that already had a lot of brand equity and goodwill going into today’s announcement. To that end, this bit in Maura Johnston’s similarly worded post is important although I disagree with the sentiment:

4. Focusing on “the positive” in this case means supporting the old methods of bringing culture to market and applying a DIY smokescreen, instead of thinking critically about and actually changing the method by which that happens. If that makes you happy, then, go on with your bad self, but I thought the internet would provide some paths that weren’t so dependent on old models in order to succeed. 

I would like to see the Entertainment Industry change but it isn’t going to happen overnight and it isn’t going to happen Just Because The Internet. There is too much money and too much power entrenched in the old way of doing things. All of this Not Change you see happening is that power putting up a really well funded political, legal, and technical fight. Yes, Veronica Mars is a project for an already famous show, but its Kickstarter success still changes the conversation about how TV and film gets made.
But back to fatmanatee’s post: the success of the Marshmallows does nothing for unknown, unconnected creators on Kickstarter unless Kickstarter can get the backers of its high profile projects to discover some of the lesser known but equally intriguing small projects.  That sort of thing has to be planned and programmed. It doesn’t just happen through the implementation of a Discover page with a few carousels of local and staff pick recommendations. This happens through building a backer community that celebrates their continued involvement while fostering a culture of discovery.
The good news is that if anybody has a head start on figuring this sort of thing out, it’s Kickstarter.


——————
I just want to echo this part of Kenyatta’s post:

That sort of thing has to be planned and programmed. It doesn’t just happen through the implementation of a Discover page with a few carousels of local and staff pick recommendations. This happens through building a backer community that celebrates their continued involvement while fostering a culture of discovery.

Cassie Marketos was doing just that at Kickstarter for years until recently, so yeah, they do have a head start. I really like the notifications when my friends back projects, but there is so much further they could push right now with the ‘similar to this’ recommendation model when you are on a Kickstarter page and backing something (MAKE ME FILL MY CART! SHUT UP AND TAKE MY MONEY! esp since I’m spending future dollars) and, as Kenyatta points to, with surfacing recs for newbie or occasional backers of high-profile projects [“Looks like you’re new here, take a look over here at…”]. Also by emphasizing when a project creator you have supported backs a project - there should be a requirement that a project creator has to have been part of Kickstarter for a few months and backed say, 4 projects. And I say that as a project creator who had an amazing experience running a Kickstarter campaign.


It’s been a while since posting here because I’ve been focused on Backerbase.

The discussion of the Discovery carousel minus community resonates 100% with what’s motivated me over the past few months.

Keeping track of projects, discovering new ones, being recognized and, yes, rewarded for being a good community member … . So many simple ways to create new, better, different experiences for crowdfunding’s most important players.

kthread:

kenyatta:

[….KT note: Condensed because it was getting unwieldy, hope Tumblr can add in some way to expand/condense threads with + signs soon…]

But again, we’re talking about a show that already had a lot of brand equity and goodwill going into today’s announcement. To that end, this bit in Maura Johnston’s similarly worded post is important although I disagree with the sentiment:

4. Focusing on “the positive” in this case means supporting the old methods of bringing culture to market and applying a DIY smokescreen, instead of thinking critically about and actually changing the method by which that happens. If that makes you happy, then, go on with your bad self, but I thought the internet would provide some paths that weren’t so dependent on old models in order to succeed. 

I would like to see the Entertainment Industry change but it isn’t going to happen overnight and it isn’t going to happen Just Because The Internet. There is too much money and too much power entrenched in the old way of doing things. All of this Not Change you see happening is that power putting up a really well funded political, legal, and technical fight. Yes, Veronica Mars is a project for an already famous show, but its Kickstarter success still changes the conversation about how TV and film gets made.

But back to fatmanatee’s post: the success of the Marshmallows does nothing for unknown, unconnected creators on Kickstarter unless Kickstarter can get the backers of its high profile projects to discover some of the lesser known but equally intriguing small projects.  That sort of thing has to be planned and programmed. It doesn’t just happen through the implementation of a Discover page with a few carousels of local and staff pick recommendations. This happens through building a backer community that celebrates their continued involvement while fostering a culture of discovery.

The good news is that if anybody has a head start on figuring this sort of thing out, it’s Kickstarter.

——————

I just want to echo this part of Kenyatta’s post:

That sort of thing has to be planned and programmed. It doesn’t just happen through the implementation of a Discover page with a few carousels of local and staff pick recommendations. This happens through building a backer community that celebrates their continued involvement while fostering a culture of discovery.

Cassie Marketos was doing just that at Kickstarter for years until recently, so yeah, they do have a head start. I really like the notifications when my friends back projects, but there is so much further they could push right now with the ‘similar to this’ recommendation model when you are on a Kickstarter page and backing something (MAKE ME FILL MY CART! SHUT UP AND TAKE MY MONEY! esp since I’m spending future dollars) and, as Kenyatta points to, with surfacing recs for newbie or occasional backers of high-profile projects [“Looks like you’re new here, take a look over here at…”]. Also by emphasizing when a project creator you have supported backs a project - there should be a requirement that a project creator has to have been part of Kickstarter for a few months and backed say, 4 projects. And I say that as a project creator who had an amazing experience running a Kickstarter campaign.

(Source: fatmanatee)

anyapechko:

#GetLuci #subway #lights #nyc #matter

anyapechko:

#GetLuci #subway #lights #nyc #matter

Crowdfundraising will *also* take ~3 months

Elad Gil had a post this week why fundraising from conventional private capital sources (VCs, angels) will usually take two-three months. It occurs to me that that general rule applies to crowdfunding, too. I think this is important for anyone who wants to go the crowdfunding route to understand from the outset. What takes so much time?

  • Research, 2 weeks: Almost all crowdfunders are first-time crowdfunders and need to educate themselves on all aspects of the market. While there’s an emerging library of decent resources, a would-be crowdfunder still needs to read and digest it.

  • Planning, 2 weeks: SeizeTheCrowd is built on the premise that good campaigns are the result of planning and not viral serendipity. At this stage a fundraiser needs to hone in on their marketing message, identify likely backers and start priming the pump among friends and family so they launch strong.
     
  • Pre-Campaign Execution, 4 weeks: Video needs to be shot, photos need to be taken, rewards need to be designed and priced out, influencers need to be contacted, social networks need to be expanded, and so on.

  • Campaign, 4 weeks: Hitting launch is, to paraphrase my high school year book quote, the end of the beginning. You’re going to spend these days beating the bushes, drumming up coverage, reminding friends, family and friends about the campaign, FB posting, tweeting, pinboarding, responding to emails, writing updates, and having trouble sleeping.

 So there you have it: The life cycle of a crowdfunding campaign. Remember: Crowdfunding does not just happen; it is not an alternative to other methods of raising capital but NOT NECESSARILY AN EASIER ONE. Good luck!

Doing a Crowdfunding Campaign? Learn from Obama.

For all the talk (including on this page) of the revolutionary nature of crowdfunding, it’s really a pretty old fashioned model: It’s more or less what political parties and public radio stations have been doing forever. With that in mind, here are a few things that we can learn from the Obama fundraising machine. (Note: I was on Michelle Bachmann’s mailing list for some reason and her team did a lot of the same; which is to say this is an apolitical post about political fundraising.)

  • Use relevant influencers: You might not think that the President would need influencers to amplify and disseminate his message but he’s definitely using them. In the past week I’ve gotten emails “from” Bill Clinton, Michelle, Beyonce and Kal Penn and I assume that this group is not random: I’ve been sliced and diced into a cohort that is thought to be susceptible to influence by former presidents, smart women, talented singers and well-educated low-brow comedians. My parents probably get emails from Steven Spielberg, Madeline Albright and other boomers. Point being: Have a deep think about who your target market is and work back from there to figure out which influencers you want on board.

  • Set up intermediate goals and create (meaningless) deadlines to spur action: Anyone who’s done sales knows that it takes something extra to get an interested person to actually pull their wallet out and pay over some cash. There are all sorts of techniques to close the deal including creating deadlines and meaningless milestones. Obama’s got both of these techniques down. I received an email from Bill Clinton on Friday telling me that the FEC fundraising deadline is approaching and so I should give right now. I don’t know how meaningful this deadline is — and Bill’s email didn’t really clarify — but I did feel a momentary impulse to hurry up and donate. Bill’s email was followed up by a series of emails over the weekend pushing to get the campaign’s 10 millionth donation. Again, a fundamentally meaningless milestone but a useful one in spurring action.

  • Create lots of impressions: The number of emails Obama sends out borders on insane but I’ll admit that I donated in response to one of those emails. I don’t know if it was the 20th or 30th or 40th they sent my way but the constant bombardment did its job. NB: I’m not suggesting bombarding your supporters but it’s simply true that multiple emails will eventually convert some people. The question is whether the gain in those supporters is worth the possible alienation of others.

  • Design interesting rewards: Notwithstanding the fact that Obama is asking for donations and that the grand ‘reward’ is a certain electoral result, the campaign offers to give you something of value (even if only sentimental) to get you to act. Photos, bumper stickers, t-shirts, something. Most noteworthy, I think, is that almost all of which serve to broadcast the campaign message. And then, of course, there’s “Dinner with Barack”, which the campaign has tried to convince me has become a well-known and loved tradition. Obviously not every campaign can offer “hang out with the most powerful person on the planet” as a carrot but every campaign can think about rewards that create personal connections between the fundraiser and their supporters.

So, that’s how you raise hundreds of millions of dollars from millions of people.

I’ve Said it Before and I’ll Say it Again: It’s a Regular Capital Market

I’ve been saying for months now that crowdfunding represents a brand-new micro-public capital market and should/will act like the conventional capital markets that have evolved over the past couple hundred years around the world.

With this in mind, it’s been obvious to me what should happen when people who have raised funds fail to deliver: Nothing. In a capital market ‘investors’ take on some risk (i.e., they give their money to someone else) in exchange for a chance at a reward. The key is for the investor to have enough information that they can understand just how risky the risk is and decide whether the reward makes the risk worth it.

This is the essence of disclosure and it’s critical.

And, starting today, Kickstarter is going to require more and better disclosure for certain types of projects. Finally!

Projects in the Hardware and Product Design categories will now have to tell backers the “risks and challenges” associated with the project and how they will overcome them. This sounds an awful lot like the “Risk Factors” section of an SEC filing (with the addition of mitigating measures) and moves rewards-based crowdfunding one step closer to functioning like the US capital markets.

In addition, product simulations and product renderings are now prohibited, presumably because they are too often different (and better than) the product that eventually gets delivered. Again, the idea that the marketing materials need to be more or less accurate is one that we find in the conventional capital markets, albeit with a very different formulation.

The upshot to all of this is that Kickstarter helped crowdfunding enter its adolescence today today.

Even in Crowdfunding, It’s Buyer Beware (Obviously)

Felix Salmon has a post out today that’s about a topic that’s become (for unknown reasons) near and dear to my heart over the past couple weeks. The focus of the piece is a project to create some sort of awesome LED lightbulb that Felix is pretty sure will never actually ship. He seems to know a lot about what it takes to make a brand-new lightbulb and makes a compelling case that is worth reading but, for our purposes, the final paragraph is the key one.

So my feeling is that both Kickstarter and the tech blogosphere should start being a lot more skeptical about the claims made in Kickstarter videos, where anybody can say pretty much anything. And anybody thinking about supporting Lifx should take a deep breath and just wait until the product exists, instead. It’s funded, now, so pre-ordering on Kickstarter doesn’t cause the product to get made, it just maybe gets you the product a couple of weeks earlier. And in return for that negligible upside, you’re taking on the risk of a huge downside — that you lose all that money entirely, with nothing to show for it at all.

I couldn’t agree more.

My feeling is that the evolution of the crowdfunding market will be towards more thoughtful investing by backers who have been burned themselves, have heard of others getting burned or who are not credulous early adopters and know that, actually, some things are too good to be true.

The evolution will also be to a more nuanced understanding of what crowdfunding actually is, since it’s becoming clear that it’s not a simple pre-sale mechanism. Felix alludes to this when he mentions the “negligible upside” and the “risk of a huge downside”. What you really get when you back a crowdfunding campaign is “exposure” to risks and rewards associated with the project: If the project comes to fruition then your reward is a discount to the retail price, early access to the product, some sort of thanks, etc. The flipside is the risk that the project doesn’t come to fruition and you lose everything. As with the sale of actual securities, the key is for the backer to have enough accurate information to be able to assess the risk and reward.

No, You Don’t Deserve a Refund (Cont’d)

My post on what should happen when crowdfunded projects fail to deliver — short answer: Nothing — has received a couple of interesting responses, including this one from Fund All Be All, who wrote:

Whoa whoa whoa, why should we be encouraging people to just give up if they can’t deliver? Even if they burn through all of the crowdfunded money shouldn’t they still try to some how deliver on promises? Letting people crash and burn like this would hurt the entire crowdfunded scene.

The first thing to note is that I am definitely not encouraging people to just give up and, of course, I think they should try to deliver on their promises. And I am not suggesting that we let people crash and burn. Instead, I’m trying to figure out what should happen after the crash has happened and the fire has burned out.

In those cases, Fund All Be All’s suggestion that project creators should “keep at it” despite their struggles is not one that a project creator could follow in any meaningful way. As with any enterprise, you can only keep going for as long as you’ve got cash and other necessary resources. Once you’ve run out and can’t find more, there is nothing left to do but give up. This is sad. This is a disappointing. This is a truth that is bigger than crowdfunding.

So, when it comes to failed projects, there is a choice between two evils.

On the one hand, the project creator can persevere despite the futility of the situation. I don’t know what that would mean in practice — should the creator try to take out a loan in order to do what they weren’t able to do with their crowdfunded money or to refund their backers? — and my fear is that the prospects of having to continue down a useless path or ending up with an unaffordable liability will scare off prospective project creators.

On the other hand, campaign backers can accept that they took a risk when they invested and that their gamble didn’t pay off. Fund All Be All’s fear is that this will “hurt the entire crowdfund scene”. I don’t think that’s the case. Crowdfund backers know that they’re taking a risk when they back a campaign and they should do their due diligence just like any other investor. As long as they haven’t been scammed, I think they’ll come back to the crowdfunding market and make wiser decisions.

Given the relative risks — backers losing relatively small investments, project creators having strong disincentives even to try — my inclination is to choose the one that will make it easier for good faith project creators to make a go of it.

No, You Don’t Deserve a Refund

NPR ran a piece this weekend called “When a Kickstarter Campaign Fails, Does Anyone Get Their Money Back?" and accurately concluded that, generally speaking, they don’t.

And I think this is okay.

While this might sound like a cold way to treat generous people I’m pretty sure it’s entirely fair (assuming the crowfundraiser didn’t flat-out scam their backers). Lots can happen between the funding of a project and its coming to fruition and the risk that something adverse happens during that period is one that project backers willingly expose themselves to and which they’re compensated for with the promise of a “reward”. It’s classic: Risk —> Reward.

An example: 

Let’s say a campaigner wants to raise money to start a new line of hand bags. Their campaign page features sketches of the bags, videos of the founders  and, of course, an array of tiered “rewards” that campaign supporters will receive for financially backing the project. All of the rewards are variations on an opportunity to pre-buy the bag at a discount. That is, the “reward” for being an early supporter of the hand bag company is the sum of (i) the value of the bag and (ii) the difference between the regular retail price and the discount price. (If the retail price is $100 and you get it for $75 then the net value of the reward is $25.)

Except, that’s not a complete description of the reward.

The real reward is either (A) the sum of (i) the value of the bag and (ii) the difference between the regular retail price and the discount price if it ever gets made or (B) nothing, if the bag never gets made.

It is a campaign backer’s willingness to expose themselves to the risk that scenario B occurs that entitles them to their reward. The corollary is that if the risk comes to pass they have no claim to compensation.

So now let’s assume that the campaign met its campaign goal, received the money from Kickstarter, spent all its money in a good faith effort to produce the handbags but is not able to deliver. What should happen?

My feeling is that nothing should happen. The project backers took the risk that the project creator would fail and now that the creator has, in fact, failed they are in no position to complain. There are lots of differences between getting “rewards” and getting equity in exchange for investing but in this crucial way they are similar: You run the risk of losing your investment.

So, a general rule: A project creator who spends his crowdfundraised money on the project does not owe his backers a refund if he fails to deliver.

One exception to this general rule: If the handbag people didn’t spend all of the money in their failed attempt to produce or can somehow recover the cash (sell off the bolts of leather and sewing machins, et cetera) then I do think they should reimburse their backers on a proportional basis with whatever they’ve got left or can recover. Analogizing to the equity situation, this is like the winding down of the company and backers should get their proportional share of whatever is left over once all “senior” people have been paid. (Aside: Maybe there’s an opportunity for an enterprising person to buy these ‘claims’ for pennies on the dollar and try to recover en masse.)

Bottom line: If what you want is a guaranteed opportunity to get some object that is going to be produced then you should wait until it has been produced and pay full price. If what you want is an opportunity to pre-order that object at a discounted rate then you should be prepared for the prospect that it never gets made and that you might not get anything for your money.

There Are No Crowdfunding Secrets

I’ve spent a lot of time lately thinking about crowdfunding strategies and, judging by the number of “Secrets of Crowdfunding” posts and expert talks out there, I’m not the only one trying to figure out how to crack this nut. (I’m one of the few, however, who’s trying to make a business of it.) A few examples: Venture Beat wrote a “Secrets of" post a couple days ago based on a talk given by Adam Chapnick of Indiegogo; RockThePost ran a how-to session last week; and Scott Steinberg did a “Secrets of” Q&A way back in May (he’s also written the “Bible”)

If you’re thinking of doing a campaign, you should read at least two but no more than four of these “Secrets of” posts. (If you’re a person who learns by listening, you should go to one “Secrets of” talk.) While it might feel like you’re working on your campaign by reading/attending more than four of these, you’re probably procrastinating. The dirty secret of crowdfunding is that, like most things, the key is to execute on whatever plan you come up with.

That means spending serious time researching campaigns in your vertical. Dan Misener’s Kickback Machine is a very helpful resource, especially if you’re doing your campaign on Kickstarter.

That means thinking deeply about who your project’s stakeholders are — hint, it’s not just your end user — and figuring out how to engage them as supporters and message amplifiers. The gold standard here is still join.app.net and Ouya.

That means designing compelling rewards and making sure that the economics of each one makes sense — another hint, the time you spend organizing/packing/shipping is money.

That means figuring out what the message of your campaign is beyond that you want money to do something. For Neighborhoodies, the message was ‘we want to initiate some local economic stimulus’ and not ‘we want to make high-end hooded sweatshirts’.

That means designing a strategy to maintain momentum throughout your entire campaign. One idea: Hold back a killer reward and announce it half-way through.

That means figuring out what skills you don’t have and that don’t make sense for your to learn and getting people on board who can help you. Before the crowd comes the team.

Crowdfunding is a public act and by studying the state of the art (and reading a couple “Secrets of” posts) you’ll have a decent idea of what to do. The true challenge — and the problem that I’m trying to solve with SeizeTheCrowd — is doing what you know you’re supposed to do.

Neighborhoodies — How We Did It

SeizeTheCrowd’s first campaign, Neighborhoodies on SmallKnot, finished up yesterday and was a big success all around. Their goal was $7500 and ended up raising $9450 from 72 different investors. I’m very happy for Lori and her team and proud of Josh (marketing/PR) and Dave (video) for helping them achieve this success. So, what’d they do right?

  • Strong community-centric message: Neighborhoodies’ was raising money to fund a new line of higher-end sweatshirts but the message of the campaign was more about the social impact of supporting the new line. Namely, Neighborhoodies plans to do their production in Brooklyn, where they’re located, and contract with single mothers on a flexible basis. While the new line was prominent in their video and text pitches, I think they made the right move in emphasizing the ‘local economic stimulus’ aspect since it gave backers a common link beyond an interest in cool sweatshirts bought at a discount.

  • Strong pre-launch effort: It’s well-known that the first 1/4 to 1/3 of a campaign’s supporters will come from the campaigner’s personal and professional networks. That is, strangers jump in and support only after they see that others have been willing to put their money down. To get the ball rolling campaigns need to do off-line pre-launch sales to their core supporters and make sure that this core group is ready to go when the campaign launches officially. Neighborhoodies did a good job with this.

  • Intra-campaign flexibility and excitement: Another well-known fact of crowdfunding is that campaigns tend to stall a bit after the initial excitement has worn off and before the frantic final days begin. I’ve thought a lot about strategies to make the boring middle a bit more exciting and think that Neighborhoodies did a good job in this area. They tweeted and posted to FB regularly and, interestingly, they came up with exciting “news” to share with their community. A lot of the news came out of partnerships with other Brooklyn companies: The Mutual sweetened the rewards by offering free membership to campaign backers, others stepped in by offering to a host a party, et cetera. Each of these partnerships provided good reasons for Neighborhoodies to contact their community and effectively expanded their network since each of these partner-allies had an incentive to support the campaign.

As I said, I’m extremely proud of everyone who worked on this and am grateful to Neighborhoodies for the opportunity!