Kickstarter has been hailed as a great way for businesses to fund new projects or even feel out the market since its inception in 2009.
We have mentioned Kickstarter on multiple occasions at Resilient Communities. Historically, the platform has been an excellent way for startups in the resiliency space to acquire funding and support for new projects.
We recently covered The Farmery, an urban food initiative created by Ben Greene. This is an excellent example of how Kickstarter has been able to fund projects that we can all benefit from in the future.
Unfortunately, it seems that Kickstarter may be in decline. Here are three reasons why Kickstarter may not be a sustainable fundraising platform in the future:
Lack of Traffic
As is the case with most things, it seems that Kickstarter is “wearing off.” In other words, it has lost its luster as a new product that draws traffic by interest alone.
If we look at the following information from Quantcast, we can see that traffic to the Kickstarter website has begun to fall off and the trend seems bent on decline.
What this means is that most new projects try to mimic the success of other projects. Usually this is accomplished by generating traffic through other avenues (such as their own network or advertising systems) instead of relying on organic traffic for their Kickstarter project.
The reach to get the project started is up to you. You can’t rely on Kickstarter for it. Kickstarter can help you make more money if you raise more than your goal…then you become a success story they will slap on their home page. We’ve seen many projects go from 100% funded to over 300% in a day or two as Kickstarter starts to show their campaign on the homepage.
Ultimately, this means it is very difficult to find unique projects. For example, if you search Kickstarter for new projects based on resiliency, they can be difficult to find and even more difficult to differentiate from one another as everyone strives to attain “viral” status.
This movement away from an organic project creation mentality isn’t exactly Kickstarter’s fault; however, the company has done little to mitigate the widespread damage being done by these “SEO-centric” campaigns.
Moving Away from Tech
Kickstarter has had many successful technology projects created using its platform. However, it seems that art has become the predominant project found on the site.
While there’s nothing wrong with arts (photography, movies, etc.), the move away from technology-based projects is definitely not going to help Kickstarter in the future. Over 80% of technology projects on Kickstarter do not even reach 20% of their funding goal. Typically, in the technology world, this means the project doesn’t happen at all.
As you can see, over half of all Kickstarter projects fail and there is a definite tendency towards art-based projects.
On a positive note, food projects due better than many other categories on Kickstarter. Companies like The Farmery can attribute some of their success to this platform and make a significant impact on global resiliency.
The New Horizon in Fundraising
With the demise of Kickstarter seemingly imminent, what will startups due to raise funds for projects that may not have immediate mainstream appeal? After all, we have highlighted many small businesses that can attribute at least some of their success to using Kickstarter as a fundraising platform.
Fortunately, the JOBS Act changes everything. Scheduled to go into effect on September 23 of this year, the JOBS Act moves fundraising back to the local platform.
This allows potential businesses to use well-established social media channels and niche websites to spread the word about their fundraising efforts.
Currently, companies are not allowed to freely advertise their fundraising efforts to the general public.
This means that even Kickstarter campaigns cannot be advertised openly on the Internet. This new piece of legislation allows companies to advertise openly about their fundraising efforts (for the first time in over 80 years).
Many of the current laws were put into place to protect people from making uninformed investments. Specifically, large investments require that a potential investor be “accredited.” An accredited investor is someone deemed by the SEC to have a certain amount of net worth. In other words, the SEC feels that these individuals are better able to absorb a bad investment without falling into bankruptcy.
Startups looking to attract the attention of accredited investors will still be required to operate through sites like Kickstarter and Crowdfunder. These companies are responsible for verifying the credentials of potential investors.
The point is that we are beginning to see a movement back to local fundraising campaigns. A company is able to advertise locally (where they typically have the strongest support) and hopefully draw more fundraising revenue as a result.
The JOBS Act also means that small startups can raise up to $1 million per year without being required to file for a public offering. An IPO can cost thousands of dollars in registration fees and take months to do properly.
The government acknowledgment of crowdfunding as a legitimate source of financing for new businesses is a huge step forward in building stronger communities that are more self-reliant.
It will be exciting to see some of the new startups that appear after the new JOBS Act takes effect at the end of the month.