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The Get Ahead Guide: Perry Chen Thinks His Website Could Be as Big as YouTube

Isn't the concept of a giant website a bit passé?
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Perry Chen wants to gather a million mini-Medicis on the Web. His site, KickStartr.com, is an online community designed to help artists, musicians, athletes, inventors, and filmmakers raise small sums of money from a large number of patrons to help them fund their projects. A band might upload audio and video of itself, submit a description of expenses for recording an album, and watch the money roll in.

The only catch: Users must set a deadline, ranging from a day to a few months, by which they must raise the entire amount they ask for. If they miss their goal, they don't get the money. In this way, Chen hopes his site will mimic the urgency of an eBay (NASDAQ:EBAY) auction.

At the moment, only a rudimentary site exists, and it draws minimal traffic. But Chen plans to launch the full-fledged site this summer. The revenue model? Some combination that includes advertising, charging a listing fee, taking a tiny percentage of every dollar raised, and offering users upgrades such as a Web analytics package to help fundraisers manage their campaigns.

The founder: Chen, 32, has been a day trader and opened an art gallery and has dabbled in the music business. That last gig led to KickStartr. Frustrated at how hard it was to raise money to pay for two Austrian DJs to come to the U.S., he came up with the notion of soliciting funds online. "There are all sorts of good ideas out there that never have a chance to succeed," says Chen, who hooked up with Sunny Bates, the founder of an executive search firm who agreed to serve on his advisory board. "He's worked incredibly hard on this, and he's got a great sense of timing," says Bates. "And he comes at it from a real missionary perspective rather than a mercenary perspective."

The numbers: Chen has raised $200,000 from a group of backers that includes the comedian David Cross. The Arrested Development star has also agreed to raise money for a project of his own via KickStartr to help promote the site. Like many Web 2.0 ventures, the company expects to operate at a loss for at least two years -- and its revenue model could generously be described as a work in progress. However, Chen projects revenue of $250,000 in 2008 and $5 million in 2009. If that comes to pass, Chen expects to raise more capital.

The market: KickStartr's target audience is big. There are five million bands on MySpace alone, and social networking continues to gain steam: 70 percent of teens and 40 percent of adults visit a social networking site at least once a month, according to the research firm eMarketer. Globally, ad spending with social networks is expected to hit $3.8 billion by 2011, although selling ads against the quirky content found on social networks requires some finesse. Peer-to-peer lending is growing fast, too, led by sites like Prosper.com, Richard Branson's Virgin Money, and the Lending Club. So far, none of these sites let users post audio and video, but that could change. Similarly, YouTube or MySpace could add a fundraising feature, or Facebook's Causes application could move beyond charity.

Challenges and opportunities: Should KickStartr become a destination website, like eBay, or a company that makes a widget that can be easily placed on other sites, like Slide? It's an important question. Large sites require promotion and server capacity, which are costly. Widgets are easier to distribute virally, but you give up control of the user and limit your ability to make money selling ads. For now, Chen is hedging his bets. Users will soon be able to add KickStartr widgets to MySpace and Facebook pages, but a central site will still host users' content.

It's also worth noting that, in the offline world, only a limited number of people fund the arts, especially at the grass-roots level. Fostering a new level of support for the arts may be KickStartr's biggest challenge.

Advice From Ted Leonsis

Leonsis is vice chairman emeritus of AOL, chairman of Revolution Money and Clearspring Technologies, and co-owner of the NHL, NBA, and WNBA franchises in Washington, D.C.

"A business like this suffers from what's euphemistically known as the chicken-or-the-egg problem. No one would pay a newspaper to list a classified ad if the newspaper had no circulation. And no one would read that classified section if there were no listings. So how is KickStartr going to get people to list their fundraising needs -- and pay listing fees -- without a critical mass of visitors?

"Then there's the question of scale. Unless you can show 20 percent month-over-month traffic growth, you're not perceived as a viable Web 2.0 company. If Perry can begin to build that kind of traffic, then he can slowly begin to attract advertisers and partners, and KickStartr can make the claim that it is sort of an eBay for fundraising. But pretty quick, Perry needs to get a million monthly unique visitors just to matter in this market, and probably more than that to feel safe.

"He also has to find a way to compel users to spread the word about the site. I'd make the listings free. I also think KickStartr has to be an application, not a destination. The Web 1.0 world was all about a website and URL. The Web 2.0 world is about distribution, viral marketing, and creating smart tools that can be placed anywhere on the Web. Facebook and MySpace have such big audiences that I think KickStartr should focus on just being a widget that can easily match the creatives and the passionates out there with the people who are willing to fund them. Keep in mind that it hasn't been proven that people will fund artists and athletes on the Web. I, for one, don't wake up each morning and ask, Who am I going to give my money to today?"

Final Thoughts From Perry Chen

"I agree that it will be crucial for KickStartr to have a strong widget component. But like YouTube, we're the kind of business that can be both a destination website and an application that lives on other sites. As far as listing fees go, I still think it makes sense to charge a nominal fee, let's say a dollar. It will create a small, reliable revenue stream for us outside of advertising and is likely the best way to keep spam and fraudulent listers from clogging the site. I'm with Ted on the revenue questions. But the great thing about our model is that our users do our marketing for us. As soon as someone lists on our site, they're going to tell all their friends about it. That's how our site will grow."

KickStartr.com's Reality Check:

  1. Can a website that charges users a listing fee hope to grow fast?
  2. It takes some serious server space to build a major website. That requires capital.
  3. The business depends on a large number of people supporting the arts and other endeavors. Are people really that generous?
Last updated: Jul 1, 2008




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