Kickstarter Won't Sell Out | Company of the Year Runner-up
Perry Chen, the CEO of Kickstarter, the world's most popular crowdfunding website, takes a moment to compose himself.
It's early November in San Francisco, and Chen is onstage at the GigaOm RoadMap conference at San Francisco State University, chatting with GigaOm founder Om Malik--a calmer, more avuncular version of TechCrunch's brash founder, Michael Arrington.
After a few softball questions, several minutes into the interview Malik tosses a subtle curveball. As the "Kickstarter movement" grows, Malik wants to know, how does Kickstarter reconcile that growth as a company?
I go to a lot of start-up events and I've interviewed hundreds of venture-backed entrepreneurs, and so I had a feeling of what Chen might say--something to the effect of "we'll try to harness that growth and scale as a company."
After all, all venture-backed start-ups want to grow as fast as possible, right? Wrong.
"As a company, we want to stay small," Chen says. "We're committed to staying small. We're biased to staying small. We still want to do great things, but we want to take our time. We don't ever want to sell this company; we don't ever want to IPO. We want to build an institution that is around for generations. We want to stay committed to the one thing we do well and do it better every day, and not necessarily get into other things. We have a lot of work to do to shape the experience around what we're working on, and that's our challenge."
Chen officially co-founded Kickstarter with Charles Adler and Yancey Strickler in April 2009, but Chen had the idea for a crowdfunding site all the way back in 2001, when he tried--and failed--to organize a jazz concert in New Orleans.
Crowdfunding is a fairly simple concept. Project "creators"--as they're known on Kickstarter--upload an outline (and video) of what they plan to create and how much money they'll need to raise to realize their goal. Backers then pledge specific amounts of money; if and when the project is fully funded, the transaction is completed, and the creators receive the funds. Projects that don't meet funding requirements within the alotted time period are, essentially, considered failed, and backers keep their funds.
Eight years after the initial idea, and armed with $10 million in venture funding from several investors, including VC Fred Wilson and Twitter and Square founder Jack Dorsey, Kickstarter launched online and began seeding the next generation of creative people doing creative things.
In just three years, Kickstarter has become nothing short of a production powerhouse. The site has launched nearly 80,000 projects and deployed more than $350 million. Although it doesn't release revenue statistics, Kickstarter, which has about 40 employees and is based in Manhattan's Lower East Side, takes a 5% commission from each completed project, so it's not hard to back-solve what it might be making.
Kickstarter's biggest competitor, Indiegogo, is less transparent about how much total money its users have generated. But it is quickly becoming a formidable foe; the company has raised more than $16 million in venture capital, and many of its projects--including the building of a museum devoted to engineer and physicist Nikola Tesla--have raised more than $1 million.
The quality of the projects on Kickstarter has been remarkable, too: About 10% of the films at last year's Tribeca Film Festival, Sundance, and South by Southwest were funded, at least in part, by Kickstarter, and two films even garnered Academy Award nominations. And thousands more books, art projects, design objects, music albums, and documentary films owe their creation, at least in part, to Kickstarter.
There are big-ticket items, too. Some projects--such as that to create Pebble, a smartphone-linked watch that has raised nearly $10.3 million--have gained widespread attention. But Chen insists that the lion's share of Kickstarter projects raise anywhere from $1,000 to $10,000. He's adamant about this last point because he does not want Kickstarter to be seen as a marketplace for products. At its core, Kickstarter is about creative projects and art, Chen believes--not investing or shopping.
"It's not a store where you're shopping; it's not Best Buy," Chen said onstage at the GigaOm conference. "You're supporting someone in an early stage who's going on a journey to create this thing, and you should understand that's what you're getting involved in…you're not buying something off of a shelf."
Earlier this year, when the JOBS Act essentially made it legal for investors to gain equity through online crowdfunding, many assumed Kickstarter would begin building a platform to comply with the SEC regulations, allowing part-time investors to capitalize off of Kickstarter projects.
They were wrong--Chen says the company will not serve as a platform for equity crowdfunding. To do so, he says, would be selling out.
"We're going to keep focusing on what we do," Chen says. "The most disruptive aspect to this type of crowdsource funding is the removal of the investment component."
Chen believes Kickstarter needs to remain a platform for creative people. And introducing an equity or investment component, he believes, would jeopardize Kickstarter's future as a company.
"People are supporting projects because they want to see them happen," Chen says. "It's so different than supporting a project because you hope it profits. The bar is so much lower--it's 'Hey, I like this project.' It's so much different than 'Will this thing make money?' Ninety percent of the ideas in the world aren't built to make money, so we're thrilled to be able to help that full spectrum--and not just focus on such a small piece of it."