The clock is ticking. Hunched over the computer screen, a backer of a popular crowdfunding site hits the refresh button every few seconds to check whether his latest investment, an online game, has hit its target funding amount.
Does this sound like a healthy dedication to helping entrepreneurs start companies? The experts believe otherwise; they argue that this is an addiction not too dissimilar to Internet poker or online shopping.
“I admit there’s something seductive about kickstarting a game,” one user confessed on a community forum dedicated to the topic of “Kickstarter addiction”.
Kickstarter is one of a growing number of crowdfunding sites for creative people to showcase their ideas and ask for funding. For gamers and hardware enthusiasts, it is often the only way to get their ideas off the ground. Venture capital funding — if it comes at all — is reserved for later-stage companies with a full engineering team, distribution strategy and over a million users.
The site made the headlines this summer with a record fundraise for a new gaming console. Equally as fascinating as the Ouya console, which topped a record $8.5 million on Kickstarter, are its 63,000 backers, many of whom frequently pour thousands of dollars into projects that may never see the light of day.
A growing number of people will attest to the rush of donating their hard-earned cash to projects on crowdfunding sites, and tracking them as they build companies or crash and burn.
It’s time we took a deep dive into the mentality of the “serial backer”: Are they good-hearted souls who can’t stand to see young visionaries give up, or are they like stockbrokers, making a bet on the companies that can succeed?
And this begs the bigger question: if their addiction is actually helping people, should we try to stop them?
Backers carry the lion’s share of the risk
Kickstarter is still a relatively young business, so there are flaws to be ironed out. It’s still unclear what happens when a project is cancelled, or a team doesn’t deliver its product on time. Hacker friends have told me they are tempted to launch fake Kickstarter projects — and simply walk away with the cash.
The rights of the people who back Kickstarter companies are also ambiguous, particularly when plans go awry.
According to the site’s Terms of Use, Kickstarter isn’t liable for damages or loss relating to “rewards or any other use of the Service.” It takes a five percent cut from any successful project. If there is a disagreement between a project and backer, the official rules stipulate that Kickstarter is not required to intercede.
“Kickstarter is under no obligation to become involved in disputes between any users, or between users and any third party.” (Kickstarter’s Terms of Use)
The media has endlessly speculated about what happens if a funded project fails, and whether backers are refunded. Backers are well aware of the risks. Yet, they throw caution to the wind and pour money into project after project.
There has got to be more to the story.
The Internet’s philanthropic generation?
Joshua Rogers, who works in quality assurance for an interactive media agency, has backed 32 Kickstarter companies. His pledges range from $10 to over $2500 across a variety of project types.
“I feel like I’m not a terribly creative person myself, but by enabling others to express their creativity, I might be helping in some small way,” he told me.
Typically, Rogers funds teams from the Chicago area where he lives, such as Arcade Brewery and Nova Cry, or themes he’s interested in like gaming projects OGRE and Shadowrun. For him, it’s about the all-important personal connection.
This tactic seems to be working; Rogers is one of the lucky ones. He hasn’t been burned by the experience, and only one of the projects he funded didn’t meet its goal. However, he told me that like most of his fellow backers, he’s still “waiting on a lot of deliverables,” from projects he has backed in the last six months. Read more about Kickstarter project delays here.
For Scott Morrison, who has backed an impressive 111 projects and counting in the past six months, it’s about feeling a sense of pride and ownership. “I back projects primarily because the project is for something that I want to possess,” he said. He told me he relishes the feeling of being one small part of a budding company.
Morrison works in the oil and gas industry. He also has a soft spot for the underdogs; teams that are struggling to meet their goal. “The other reason is because I think the project should exist and I’m willing to fund it even if it does not directly benefit myself.”
Good news for humanity: these crowdfunding sites appear to attract their fair share of genuinely well-intentioned people.
It’s not charity: there are tangible rewards
However, note that it’s not just good will. While Kickstarter backers can not ask for financial returns or equity, or solicit loans, they do have early access to products. It may seem like small gains to you, but it matters in the startup community, which prides itself on being early adopters.
With the passing of the Jobs Act, the tide may be turning. Although he’s satisfied with the current system, Rogers told me that he’s in favor of the idea of trading equity in exchange for crowdfunding. It’s not Kickstarter’s policy, but competitors like Fundable and Founders Club let anyone back a project for as little as $1000, and offer a piece of the company in return.
If Kickstarter does revise its policies, these serial backers will have the know-how to pick up the most promising ideas, and will be well-positioned to reap the rewards.
“I didn’t sleep until it was finished. I was refreshing too much.”
Gaining early access to new products doesn’t seem like sufficient explanation for the preponderance of people that back dozens of projects.
Perform a Google search for the term “Kickstarter addiction”, and you’ll find scores of community forums dedicated to the topic. As one anonymous backer posed (and received over a dozen responses):
“ feels like I’m checking the Board & Card Games section every day to see what’s new…I can’t be the only one… Am I?”
“None of the projects that I have backed have so far failed since I backed them,” said Morrison, the backer who has funded over hundred projects.
Serial backers are always testing themselves on their ability to pick the most successful projects, similarly to placing a bet on the speediest racehorse or greyhound.
There is a also rush that comes with watching the total funding amount increase as the clock ticks. Will the project meet its goal? It’s similar to the excitement that you feel when you’re in a heated bidding war on eBay, or you’ve posted an item that receives an offer in the final minutes.
“Backing Kinetic Void was quite memorable,” said David Paye, a serial backer from Australia who has funded over 50 Kickstarter projects. “On its final day, it managed to get the 45 percent needed to get it over the line.”
“It practically came down to the final hour. I didn’t sleep until it had finished, I was refreshing so much,” he added.
The rise of the crowdfunding community
For some backers, it’s not just about chasing a high or the opportunity to do some good. Funding a projects gives them the sense of being part of a budding online community.
In his day job, Paye works for a hardware store in his native Australia. Backing Kickstarter projects lets him feel connected to the tech scene. He admits he’s “not exactly in the target country ,” and that he is too “separate from the epicentre to feel connected.” For wannabe entrepreneurs or startup enthusiastics in the scattered corners of the world, crowdfunding offers an escape.
Similarly to many angel investors, Kickstarter backers will often tell you they like to get personally involved with their projects, and take an active role in mentoring the teams.
“That’s one of the keys to a successful project,” said Morrison, “The establishment of that connection between creator and backers.”
[Photo courtesy of Wikimedia Commons]This article originally appeared on VentureBeat
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