RESOLVED: Kickstarter-- the platform-- has to evolve. In the face of multi-million dollar "pre-order" campaigns and a seemingly loose quality control system, the crowdfunding giant is now risking its reputation by not providing a toolset and clear guidelines on what should happen if a product-based project goes belly up.

Check out Aarti Shahani's excellent ATC piece and then come back here and debate!

Program Note: I love adding people to Branches, provided they give a hint at what they want to add to the conversation in their request. Blank requests to join will be ignored.

Michael Barnard could weigh in on this one: the JOBS act has raised the bar for crowdfunding sites to vet out any scams, but this is more about contractual law. If a vendor fails to deliver, what legal recompense are users permitted? I would think that, as the piece concludes, everything hinges on whether it is a purchase or a donation. Seems like a case-by-case problem, no?

I think the purchase or donation issue is the big one. While K$ started as donation-- and still does a lot of business along that model-- projects like Pebble and Ouya are so clearly pre-order situations.

What'll be interesting to see are the inevitable startups geared around JOBS Act crowdfunding, and which will come out on top.

What is a reasonable timeframe to wait for a project to be fulfilled? How long should a backer wait before requesting a refund? How long before pressing the creator under the legal obligation of Kickstarter's Terms of Use? What about the money that backers have to spend on legal fees to have Kickstarter's Terms of Use fulfilled? Is that a fair tradeoff? Aren't most backers going to "let it slide" because $25 or $50 or even $100 is not worth the court costs to press for a refund? Doesn't that deterrent then make creator's legal obligations not so enforceable? Only high level backers in the thousands of dollars seem likely to press legal action. Is that fair?

This is according to Kickstarter's Terms of Use:

"Kickstarter does not offer refunds. A Project Creator is not required to grant a Backer’s request for a refund unless the Project Creator is unable or unwilling to fulfill the reward."

Also, "Kickstarter is not liable for any damages or loss incurred related to rewards or any other use of the Service. All dealings are solely between Users. Kickstarter is under no obligation to become involved in disputes between any Users, or between Users and any third party. This includes, but is not limited to, delivery of goods and services, and any other terms, conditions, warranties, or representations associated with campaigns on the Site."

Would Kickstarter the company be better off splitting their business into two separate streams?

The core platform could be made available for use as a "storefront" for pre-order situations, while the Kickstarter brand itself could be reserved for projects that clearly lie on the side of donations.

There is, after all, a huge difference between handing money to a filmmaker or writer who is promising you a story and handing that money to a would-be electronics manufacturer who is promising you a games console.

I wrote about this last night, but I really think the problem is two-fold:

1. Kickstarter relies so heavily on multiple reward tiers (usually with physical goods at each level), that people are led to believe they are purchasing an item instead of investing.

2. Kickstarter takes no responsibility, but simultaneously says that creators are legally obligated to fulfill rewards no matter what.

The easiest solution is to only have one reward tier (the minimum donation to hit that tier is set by the creator) that gives the backer the item. Backers can donate less and not receive anything except the satisfaction/credit for the project making it. Backers can donate more, but will only receive the product IF it comes into existence.

(cont.)

On top of this, Kickstarter should release the creator from legal obligation and message project-backing as exactly what it is: venture investing. Sometimes your ventures will not result in a completed product (this happens all the time in startups) and other times your ventures will result in a product.

The times a project succeeds and makes it to market will become much more celebratory as a result and the transparency/lack of extraneous rewards should take pressure off creators to do any more than focus on creating what the funding paid for.

More here: blog.capwatkins.com

Cap, thanks for sharing the link. Good reading, that.

While I think the "one reward tier" is an honest pitch for design/tech projects it leaves out the benefits of a "public radio" style campaign for other kinds of projects. That's what Roman Mars ran for his public media project 99% Invisible.

That's one of the things I thought was genius about K$ when I first started paying attention to it in '10. It was basically a public media pledge drive for average Janes and Joes.

kickstarter.com

Cap- Do you not think removing the multiple tiers would lead to kickstarter campaigns raising less money? I would guess that the different tiers often act as an up sell for someone to donate $50 instead of $20. Shouldn't backers already realize that they will receive the product IF it comes into existence?

Noah- I think the idea of kickstarter splitting into different streams is really interesting. Each stream could also develop more resources to help people with their projects. Ie (bad example) if you're in the filmmaker stream a successfully funded project could be provided with some equipment to use.

Something close to what Cap was talking about was The Cosmonaut (an iPad stylus) by Studio Neat. They were one of the first design teams to get a big buzz (with the Glif).

The Cosmonaut had only three tiers: $1, was a pay-what-you-wish tier limited to 3000 pieces. The goal was set at the number they needed to make the set. They added a $25 tier, which got you a stylus, and a $50 tier which got you two.

kickstarter.com

Re: more resources. I don't know if K$ itself should go that far, but I could see people building into or on top of the model to do similar things. More important right now, I'd think, is creating a more focused market for the different streams.

I actually think that Kickstarter is going to further widen its reach beyond movies, records, electronic products and the like, to other categories where money makes a difference. I am not thinking of going in the direction of Rally, though good causes should be funded, but more in the direction of having contributors express themselves through their funding. For example, do you want a certain law repealed? fund the effort. Do you think that a patent is bogus? fund its review.

I'd like to argue that, to crowdfunding, there is no difference between "pre-ordering" and donations; they both need to reach minimum funding to be able to deliver on the project. That's why the multiple tears don't matter either, these are only incentives for bigger donations.
It doesn't matter if the project is a movie vs a new techy item. Both can end up achieving funding but may still fail to deliver.
It comes down to marketing and budgeting, founders are making great catchy marketing videos but do they know what it actually costs to complete their project? - I'd like to see Kickstarter add a required field for budget, maybe even a timeline on implementation, and backers to be critical of that. This would also make legal action easier.

@Andrew, agree, something like a Business Plan that shows some effort in figuring out how to accomplish the goal.

I specially like this discussion as I am considering submitting a project to Kickstarter with very high tiers, where the high-tier funders would get licensing to the patents generated by the start-up. The product would be Intellectual Property-intensive Software: Source Code or a Library.

The big question facing Kickstarter is the definition of its community: Are we investors, consumers, philanthropists, or something in-between? Each of these user types holds extremely different (dare I say conflicting?) assumptions about the nature of projects and expectations on deliverables. Up to this point, K$ has allowed mixed messages to propagate as > $1MM hits like Elevation Dock, Double Fine Adventure, Pebble, and Ouya have flooded the site with individuals having a traditional consumer mentality. Unified messaging from Kickstarter on the nature of sharing risk in projects with creators would go a long way to ease this friction in mismatched expectations.

@Chris, good point, if K$ users are going to "graduate" to Angel/VC status then they should be prepared to not get anything for their contribution/investment.

This is a great discussion. I agree with the analyses of the problem provided above:
1- The contractual obligation of a project owner to kickstarter are really hard to enforce
2- The community is led to believe that their donations are pre-orders when they are effectively just donations with an option to get something if it works

Here some thoughts that Kickstarter should consider implementing
1- Create an optional "money back" insurance scheme. The point here is to materialize the risk that "donators" are taking. If I make a donation of $50 and am offered an optional $20 insurance premium to get my $50 back if the project does not deliver, I will understand that I am taking a significant risk. I will most likely not take the premium but I will have been warned in a very palpable way.
2- Reduce $ at risk. Kickstarter should hold a portion of the funds for longer, especially when the project raises large amounts of money. This is similar to typical venture funding mechanisms with funds committed but only released under condition that some milestones are reached

3- Increase the reputation pain you'll suffer if you cheat: create more stringent identity verification schemes, including access to project owners identity on several social networks.

@ Chris: Here's something I always say: there is NO Kickstarter community. There are a number of overlapping communities-- tech head, would be VCs, gamers, indie film fans-- who use Kickstarter as part of their community but Kickstarter itself doesn't have a community in the sense that everyone uses that term.

The project creators are their constituents, and indeed there are creators who make it a point to back other projects and foster a sense of community... but I don't see a lot of crossover between the different verticals.

I'd venture that each of the verticals has a different "ideal citizen".

@ Noah: Your point on the lack of a cohesive Kickstarter community makes a lot of sense, and would explain the mixed messaging on projects and deliverables. It's as though each project has its own sub-community; artistic projects attracting "patrons" and tech projects attracting gadget consumers.

With this in mind, is there value in identifying a project as belonging to a single vertical (art/social good project, tech gadget, music, etc.) and holding each vertical accountable to its own unique standard? For example, set the expectation that social good projects will not result in tangible rewards, while holding tech projects accountable to delivering the goods?

@ Chris: I think you hit the nail on the head there. In fact, K$ is already doing something that acknowledges the differences in the verticals by requiring "additional guidelines and requirements for Design and Technology projects. These include requiring creators to provide information about their background and experience, a manufacturing plan (for hardware projects), and a functional prototype."

That according to the "accountability" blog post they put up in the wake of the ATC story. [H/T to Cap for the link.]

kickstarter.com

Some of these things SEEM obvious, but as platforms attract more users it's just inevitable that certain things have to be spelled out.

I've backed a lot of projects. I consider each one MicroVC. In most cases I try to play it like that. Can they succeed? Then and only then do I look at the rewards.

So that being said, every one of the projects I've backed has funded. The majority have made good on their offers. Some I haven't seen anything out of at all.

What I think kickstarter should do is go back and periodic surveys asking backers just two questions. Did you get the rewards? Were they as described? A project doesn't get a "complete" badge until some percentage of people return these surveys. Pride can go a long way for the honest.

more in a sec...

I don't think kickstarter will ever be able to enforce a rewards policy that includes refunds. I think they should be very up front that your money isn't an investment (you don't own anything) it isn't a preorder (that implies a refund) it isn't a donation (that would be tax deductible and charitable and shit.) It's just a backing. A bet. That's more like it.

Because if they fuck up and drop that million on the wrong thing, the wrong manufacturer abroad, the wrong material then the money is gone and there will be no refund.

Blood does not come from a stone.

Backer Beware.

@Noah - good point that KS is fracturing around project type. I just wonder if one marketplace is best suited for all ventures/products/projects?

If I was KS, I'd focus on reputation and community. By rep, I mean who is the creator? What have they built? - figure out the right questions to ask about the creator. There will be the Airbnb "someone destroyed my apartment" moment, but you can delay/minimize this with better reputations.

By community, I mean create a real dialog amongst members. Today, you can comment (only if you backed a project) or email the creator directly - there's no public discussion. Today KS is a marketplace for projects, but it would be much more valuable with dialogue.

@Brad, for rep (more like ref) I check the creator in LinkedIn as if I was interviewing the person.

Last week's announcement of new project requirements for the Product Design and Hardware category is as good a sign as any that it's time to close this thread.

May your all your branches bring insight!