If you are unaware of the crowd-sourcing website, Kickstarter, I'm here to give you a bit of information regarding that and how they nearly killed the underwear start-up Flint and Tinder. Kickstarter is a crowd-sourcing website works in a way that people put their idea and people that want to pledge and support the idea they vote in dollars. This pledged amount is given to the project if the said project hits the certain goal they receive the money. The 'pledgers' then are given the rewards-often an unreleased product- from the kickstarter company.
In the case of the start-up underwear company, Flint and Tinder, they had far too much support and raised nearly 8 times as much as they originally had planned on! Which one may think this is a good thing, right? They collected nearly $300,000 dollars while they only projected about $30,000 or so. And before this massive crowdsource, the most effective campaign had only amassed a measly $64,000, comparatively of course. This pre-projection equaled out to about 3,000 garments in a two-week turnaround time, but with the strong support they received they were now on the hook for making 23,000 orders, which turned out to be three months late! After all said and done with the original pledgers, they found themselves in the hole for $30k! With them being a start-up they had to produce 1 extra pair for every 6 made due to all of the first-time mistakes that many companies go through.
This brought the creator of Flint and Tinder, Bronstein, to a cross road; to give up on the business, or to continue his niche that he had found and begin on his next venture. Bronstein recalls that "I used to cry on my way into work. It's hard to walk into a room and be a leader when you don't have all the answers." He went on to continue his dream and actually raised $850,000 from Zappos founder Tony Hsieh and other Zappos team members. But what does this near death experience really tell the future user of Kickstarter? It truly illustrates the problems with Kickstarter's fundraising model for both backers and creators.
Some problems that other Kickstarter project campaigns face are as followed:
1) It's not clear who's supposed to vet Kickstarter projects.
The Kickstarter website merely accepts or denies the submission with little research of validity. It's backer beware and they now attempt to make it clear that backing campaigns could be risky.
2) Backers don't always know what they're purchasing.
To newcomers, Kickstarter may be confusing to the backers. Is it a preorder site like Amazon or a place simply for donations? They have now created new criteria for Kickstarter campaigns. They are now limited to pictures of current, working prototypes, not hypothetical, cool sounding but impossible products to execute, like before.
3) There's no way to cap a total fundraising goal.
If the creator of the campaign stops offering rewards, it may bode well for the company do to the possibility of a mass overhaul like the underwear company faced. If you were to cap the reward portion of the campaign, people can still donate but from past experience they have found that the pledger is there for the reward!
4) Kickstarter inadvertently exposes key financials about companies.
With the Kickstarter being public knowledge, it is open to the public to scrutinize and badger the company. It gives suppliers a ton of leverage when they are able to see your prices you sold them for, number of items you sold, and the timeline in which you sold them for.
5) There's no good way to refund all the backers after the first month or two of a campaign.
6)Kickstarter only solves a small problem for aspiring entrepreneurs.
Very little guidance is available after the campaign has run it's course and the companies are on their own. This can be a huge risk for inventors and the backers that are affiliated with the project.
So, is Kickstarter worth the headache?
According to Bronstein, he'd do it all over again even with the pain of losing money upfront and dealing with a mass amount of orders in a small time frame. Getting this exposure is essential for a company and once the kinks are worked out, it can run smoothly and continue as successful companies do!