It should be noted that they have not really raised any equity capital. The $1M are pre-orders for the iPod Nano watch, and hence is revenue. In this sense, Kickstarter is ingeniously being used as a platform for virally marketing the product (concept) and as a sales channel. Kudos to them for their success.
Kickstarter is shaping up to be the ultimate R&D/test marketing platform. You have an idea, you can make prototypes, you test market the prototype on Kickstarter, the consumer speaks with their wallet, and you can either take it to the mainstream or gracefully exit whilst giving away some "exclusive" tchotchkes to the people who paid in.
It could also become the manufacturing version of a "pop-up store", where potential buyers are given "exclusive" timed access to a product before it hits the mainstream outlets. This exudes value (like the Humble Game Bundles or Macheist) while focusing laser-sharp on just one product (a la woot) and is compelling to our baser consumer desires for access, urgency, and exclusivity.
Could be an interesting pivot for kickstarter (or perhaps be a nice niche for someone to exploit).
Actually I have been toying with this idea as a new way to produce art. Books. Movies, etc.
Because if take as an axiom that "once it's out there, it will be copied" then what if all the reliable money to be made was already made before the movie was released, and at the theaters, concerts, and physical books?
You could follow the progress of movies and fund them if you liked what you saw.
Thank you for making this point. I've been going mad trying to explain to friends that, in this case, the money isn't "funding" in the traditional sense. Selling pre-orders is entirely different than receiving funding. In normal funding scenarios, the person providing the capital does so in order to receive some financial benefit in return for risking their money on the project. In this case, you're just pre-ordering various product packages. There is no return on your investment.
I'm guessing that they also secured a credit line based on the pre-orders, so they have enough cash to pay for prototypes, raw materials, molds/tooling, etc...
A) acquire MINIMAL and hire Scott Wilson
B) produce their own version
C) not enter this market...
As a fashionable, designed product, it seems right up their alley, and Moore's Law says each version will get smaller. It's one of the few positions to carry a device, that people are used to (phone, watch, wallet, purse, keys, glasses, shoes, clothing, necklace, bracelet, ring).
Somewhat tangentially, kickstarter seems to be one of the most successful startups these days, but you rarely hear about it. Why is that? They made, what, 100k off this item alone?
It seems like a company angels would do well to invest in...
Their margins aren't that high. They charge 5%, and I think ~3% goes to Amazon, so on this they'll make ~$20k.
And since most projects are much smaller, I'd guess that in an average month, $1M is roughly the sum of all of their pledges. $20k/month is not a lot to run a business on. So I'd guess that they've taken investment.
This is incorrect. The 5% fee is actually charged in addition to Amazon's fees. (see https://www.kickstarter.com/help/faq#WhatFeesDoesKickChar). This doesn't make much of a difference in profitability (20k vs 50k still isn't a whole lot), but it's something. Enough, at least, to keep bootstrapping.
And that's the main point of it - not to make a whole bunch of money, but to offer a really great service. As evidence, the Kickstarter guys have been going for a few years now, and it wasn't until very recently that they started taking any money out. They're really passionate about helping artists, filmmakers, and creatives find the funding that they need.
Ah, true. I thought their margin was double that. They scale very well, however, since new projects cost them barely anything (just pageview bandwidth). I'd imagine that most of that money just goes in their pockets, which is still quite good for the future.
I saw Kickstarte mentioned in a regional South African airline's inflight magazine today (1time) - a photography project about South Africans and their bicycles.
We keep reading stories with business porn in the titles. Kickstarter is totally awesome, don't get me wrong. And this is a cool idea.
But the critical question is: how the heck did one random idea get so much movement? Because it's not just random, and it's not just generated by quality. If there's one thing I've learned on the web, is that social sites are somewhat deterministic.
So -- wonder what they did? Cross-promote? Blog a lot? Get some good press? That's the kind of stuff that is truly interesting and valuable, not the one mil in funding or even the coolness of the idea or the site.
A good product design, those renderings are eye candy for tech blogs to repost, a great video, and people love rooting for the small guy. It's almost... why wouldn't it get a ton of press.
Now if 5 or 6 of you guys upvote it in the "golden hour" -- the initial hour after entry -- it hits the front page and 20x more people see it, creating a small bit of a cascade reaction. Depending on how many votes it gets in the first hour, there is a somewhat exponential relationship to the eventual total number of votes.
Small groups of people can have large impacts. Knowing this, I sent an email to a few of my friends telling them about my post after I wrote it.
I know to do this because I've been on HN for a while. A voting ring is one thing (and bad), but simply knowing how to work the site is something else. That's the difference between cheating and just making the right moves at the right time. There are a few folks that like my writing, and pointing out to them that I posted something is in both of our best interests. So I think I'm okay doing this.
All sites are like this -- small numbers control larger numbers. There's a lot of theory, and I've read a lot of articles that almost describe what we're talking about, but my experiences with HN was I just had to spend time here and get to know folks.
I can't believe that there aren't shortcuts, but from where I'm sitting not many people are sharing them. And if you think about it, that's probably a good thing. If there were a magic formula, everybody would use it and it would stop working. Then there would be some new magic formula.
No easy answers, but I sure would like some more help on how the things I've learned at HN apply to other places like kickstarter.
