The Early Stage

Jeremy Schwartz's thoughts on business development, current events, sustainability and seasons.

[fatmanatee]

[kenyatta]

[….KT note: Condensed because it was getting unwieldy, hope Tumblr can add in some way to expand/condense threads with + signs soon…]

But again, we’re talking about a show that already had a lot of brand equity and goodwill going into today’s announcement. To that end, this bit in Maura Johnston’s similarly worded post is important although I disagree with the sentiment:

4. Focusing on “the positive” in this case means supporting the old methods of bringing culture to market and applying a DIY smokescreen, instead of thinking critically about and actually changing the method by which that happens. If that makes you happy, then, go on with your bad self, but I thought the internet would provide some paths that weren’t so dependent on old models in order to succeed. 

I would like to see the Entertainment Industry change but it isn’t going to happen overnight and it isn’t going to happen Just Because The Internet. There is too much money and too much power entrenched in the old way of doing things. All of this Not Change you see happening is that power putting up a really well funded political, legal, and technical fight. Yes, Veronica Mars is a project for an already famous show, but its Kickstarter success still changes the conversation about how TV and film gets made.

But back to fatmanatee’s post: the success of the Marshmallows does nothing for unknown, unconnected creators on Kickstarter unless Kickstarter can get the backers of its high profile projects to discover some of the lesser known but equally intriguing small projects.  That sort of thing has to be planned and programmed. It doesn’t just happen through the implementation of a Discover page with a few carousels of local and staff pick recommendations. This happens through building a backer community that celebrates their continued involvement while fostering a culture of discovery.

The good news is that if anybody has a head start on figuring this sort of thing out, it’s Kickstarter.

[kthread-blog]

——————

I just want to echo this part of Kenyatta’s post:

That sort of thing has to be planned and programmed. It doesn’t just happen through the implementation of a Discover page with a few carousels of local and staff pick recommendations. This happens through building a backer community that celebrates their continued involvement while fostering a culture of discovery.

Cassie Marketos was doing just that at Kickstarter for years until recently, so yeah, they do have a head start. I really like the notifications when my friends back projects, but there is so much further they could push right now with the ‘similar to this’ recommendation model when you are on a Kickstarter page and backing something (MAKE ME FILL MY CART! SHUT UP AND TAKE MY MONEY! esp since I’m spending future dollars) and, as Kenyatta points to, with surfacing recs for newbie or occasional backers of high-profile projects [“Looks like you’re new here, take a look over here at…”]. Also by emphasizing when a project creator you have supported backs a project - there should be a requirement that a project creator has to have been part of Kickstarter for a few months and backed say, 4 projects. And I say that as a project creator who had an amazing experience running a Kickstarter campaign.

[theearlystage-blog]

It's been a while since posting here because I've been focused on Backerbase.

The discussion of the Discovery carousel minus community resonates 100% with what's motivated me over the past few months.

Keeping track of projects, discovering new ones, being recognized and, yes, rewarded for being a good community member . . . . So many simple ways to create new, better, different experiences for crowdfunding's most important players.

[anyapechko]

#GetLuci #subway #lights #nyc #matter

[theearlystage-blog]

Crowdfundraising will *also* take ~3 months

Elad Gil had a post this week why fundraising from conventional private capital sources (VCs, angels) will usually take two-three months. It occurs to me that that general rule applies to crowdfunding, too. I think this is important for anyone who wants to go the crowdfunding route to understand from the outset. What takes so much time?

Research, 2 weeks: Almost all crowdfunders are first-time crowdfunders and need to educate themselves on all aspects of the market. While there's an emerging library of decent resources, a would-be crowdfunder still needs to read and digest it.

Planning, 2 weeks: SeizeTheCrowd is built on the premise that good campaigns are the result of planning and not viral serendipity. At this stage a fundraiser needs to hone in on their marketing message, identify likely backers and start priming the pump among friends and family so they launch strong.  

Pre-Campaign Execution, 4 weeks: Video needs to be shot, photos need to be taken, rewards need to be designed and priced out, influencers need to be contacted, social networks need to be expanded, and so on.

Campaign, 4 weeks: Hitting launch is, to paraphrase my high school year book quote, the end of the beginning. You're going to spend these days beating the bushes, drumming up coverage, reminding friends, family and friends about the campaign, FB posting, tweeting, pinboarding, responding to emails, writing updates, and having trouble sleeping.

 So there you have it: The life cycle of a crowdfunding campaign. Remember: Crowdfunding does not just happen; it is not an alternative to other methods of raising capital but NOT NECESSARILY AN EASIER ONE. Good luck!

[theearlystage-blog]

Doing a Crowdfunding Campaign? Learn from Obama.

For all the talk (including on this page) of the revolutionary nature of crowdfunding, it's really a pretty old fashioned model: It's more or less what political parties and public radio stations have been doing forever. With that in mind, here are a few things that we can learn from the Obama fundraising machine. (Note: I was on Michelle Bachmann's mailing list for some reason and her team did a lot of the same; which is to say this is an apolitical post about political fundraising.)

Use relevant influencers: You might not think that the President would need influencers to amplify and disseminate his message but he's definitely using them. In the past week I've gotten emails "from" Bill Clinton, Michelle, Beyonce and Kal Penn and I assume that this group is not random: I've been sliced and diced into a cohort that is thought to be susceptible to influence by former presidents, smart women, talented singers and well-educated low-brow comedians. My parents probably get emails from Steven Spielberg, Madeline Albright and other boomers. Point being: Have a deep think about who your target market is and work back from there to figure out which influencers you want on board.

Set up intermediate goals and create (meaningless) deadlines to spur action: Anyone who's done sales knows that it takes something extra to get an interested person to actually pull their wallet out and pay over some cash. There are all sorts of techniques to close the deal including creating deadlines and meaningless milestones. Obama's got both of these techniques down. I received an email from Bill Clinton on Friday telling me that the FEC fundraising deadline is approaching and so I should give right now. I don't know how meaningful this deadline is -- and Bill's email didn't really clarify -- but I did feel a momentary impulse to hurry up and donate. Bill's email was followed up by a series of emails over the weekend pushing to get the campaign's 10 millionth donation. Again, a fundamentally meaningless milestone but a useful one in spurring action.

Create lots of impressions: The number of emails Obama sends out borders on insane but I'll admit that I donated in response to one of those emails. I don't know if it was the 20th or 30th or 40th they sent my way but the constant bombardment did its job. NB: I'm not suggesting bombarding your supporters but it's simply true that multiple emails will eventually convert some people. The question is whether the gain in those supporters is worth the possible alienation of others.

Design interesting rewards: Notwithstanding the fact that Obama is asking for donations and that the grand 'reward' is a certain electoral result, the campaign offers to give you something of value (even if only sentimental) to get you to act. Photos, bumper stickers, t-shirts, something. Most noteworthy, I think, is that almost all of which serve to broadcast the campaign message. And then, of course, there's "Dinner with Barack", which the campaign has tried to convince me has become a well-known and loved tradition. Obviously not every campaign can offer "hang out with the most powerful person on the planet" as a carrot but every campaign can think about rewards that create personal connections between the fundraiser and their supporters.

So, that's how you raise hundreds of millions of dollars from millions of people.

[theearlystage-blog]

I've Said it Before and I'll Say it Again: It's a Regular Capital Market

I've been saying for months now that crowdfunding represents a brand-new micro-public capital market and should/will act like the conventional capital markets that have evolved over the past couple hundred years around the world.

With this in mind, it's been obvious to me what should happen when people who have raised funds fail to deliver: Nothing. In a capital market 'investors' take on some risk (i.e., they give their money to someone else) in exchange for a chance at a reward. The key is for the investor to have enough information that they can understand just how risky the risk is and decide whether the reward makes the risk worth it.

This is the essence of disclosure and it's critical.

And, starting today, Kickstarter is going to require more and better disclosure for certain types of projects. Finally!

Projects in the Hardware and Product Design categories will now have to tell backers the "risks and challenges" associated with the project and how they will overcome them. This sounds an awful lot like the "Risk Factors" section of an SEC filing (with the addition of mitigating measures) and moves rewards-based crowdfunding one step closer to functioning like the US capital markets.

In addition, product simulations and product renderings are now prohibited, presumably because they are too often different (and better than) the product that eventually gets delivered. Again, the idea that the marketing materials need to be more or less accurate is one that we find in the conventional capital markets, albeit with a very different formulation.

The upshot to all of this is that Kickstarter helped crowdfunding enter its adolescence today today.

[theearlystage-blog]

Even in Crowdfunding, It's Buyer Beware (Obviously)

Felix Salmon has a post out today that's about a topic that's become (for unknown reasons) near and dear to my heart over the past couple weeks. The focus of the piece is a project to create some sort of awesome LED lightbulb that Felix is pretty sure will never actually ship. He seems to know a lot about what it takes to make a brand-new lightbulb and makes a compelling case that is worth reading but, for our purposes, the final paragraph is the key one.

So my feeling is that both Kickstarter and the tech blogosphere should start being a lot more skeptical about the claims made in Kickstarter videos, where anybody can say pretty much anything. And anybody thinking about supporting Lifx should take a deep breath and just wait until the product exists, instead. It’s funded, now, so pre-ordering on Kickstarter doesn’t cause the product to get made, it just maybe gets you the product a couple of weeks earlier. And in return for that negligible upside, you’re taking on the risk of a huge downside — that you lose all that money entirely, with nothing to show for it at all.

I couldn't agree more.

My feeling is that the evolution of the crowdfunding market will be towards more thoughtful investing by backers who have been burned themselves, have heard of others getting burned or who are not credulous early adopters and know that, actually, some things are too good to be true.

The evolution will also be to a more nuanced understanding of what crowdfunding actually is, since it's becoming clear that it's not a simple pre-sale mechanism. Felix alludes to this when he mentions the "negligible upside" and the "risk of a huge downside". What you really get when you back a crowdfunding campaign is "exposure" to risks and rewards associated with the project: If the project comes to fruition then your reward is a discount to the retail price, early access to the product, some sort of thanks, etc. The flipside is the risk that the project doesn't come to fruition and you lose everything. As with the sale of actual securities, the key is for the backer to have enough accurate information to be able to assess the risk and reward.

[theearlystage-blog]

No, You Don't Deserve a Refund (Cont'd)

My post on what should happen when crowdfunded projects fail to deliver -- short answer: Nothing -- has received a couple of interesting responses, including this one from Fund All Be All, who wrote:

Whoa whoa whoa, why should we be encouraging people to just give up if they can’t deliver? Even if they burn through all of the crowdfunded money shouldn’t they still try to some how deliver on promises? Letting people crash and burn like this would hurt the entire crowdfunded scene.

The first thing to note is that I am definitely not encouraging people to just give up and, of course, I think they should try to deliver on their promises. And I am not suggesting that we let people crash and burn. Instead, I'm trying to figure out what should happen after the crash has happened and the fire has burned out.

In those cases, Fund All Be All's suggestion that project creators should "keep at it" despite their struggles is not one that a project creator could follow in any meaningful way. As with any enterprise, you can only keep going for as long as you've got cash and other necessary resources. Once you've run out and can't find more, there is nothing left to do but give up. This is sad. This is a disappointing. This is a truth that is bigger than crowdfunding.

So, when it comes to failed projects, there is a choice between two evils.

On the one hand, the project creator can persevere despite the futility of the situation. I don't know what that would mean in practice -- should the creator try to take out a loan in order to do what they weren't able to do with their crowdfunded money or to refund their backers? -- and my fear is that the prospects of having to continue down a useless path or ending up with an unaffordable liability will scare off prospective project creators.

On the other hand, campaign backers can accept that they took a risk when they invested and that their gamble didn't pay off. Fund All Be All's fear is that this will "hurt the entire crowdfund scene". I don't think that's the case. Crowdfund backers know that they're taking a risk when they back a campaign and they should do their due diligence just like any other investor. As long as they haven't been scammed, I think they'll come back to the crowdfunding market and make wiser decisions.

Given the relative risks -- backers losing relatively small investments, project creators having strong disincentives even to try -- my inclination is to choose the one that will make it easier for good faith project creators to make a go of it.

[theearlystage-blog]

No, You Don't Deserve a Refund

NPR ran a piece this weekend called "When a Kickstarter Campaign Fails, Does Anyone Get Their Money Back?" and accurately concluded that, generally speaking, they don't.

And I think this is okay.

While this might sound like a cold way to treat generous people I'm pretty sure it's entirely fair (assuming the crowfundraiser didn't flat-out scam their backers). Lots can happen between the funding of a project and its coming to fruition and the risk that something adverse happens during that period is one that project backers willingly expose themselves to and which they're compensated for with the promise of a "reward". It's classic: Risk --> Reward.

An example: 

Let's say a campaigner wants to raise money to start a new line of hand bags. Their campaign page features sketches of the bags, videos of the founders  and, of course, an array of tiered "rewards" that campaign supporters will receive for financially backing the project. All of the rewards are variations on an opportunity to pre-buy the bag at a discount. That is, the "reward" for being an early supporter of the hand bag company is the sum of (i) the value of the bag and (ii) the difference between the regular retail price and the discount price. (If the retail price is $100 and you get it for $75 then the net value of the reward is $25.)

Except, that's not a complete description of the reward.

The real reward is either (A) the sum of (i) the value of the bag and (ii) the difference between the regular retail price and the discount price if it ever gets made or (B) nothing, if the bag never gets made.

It is a campaign backer's willingness to expose themselves to the risk that scenario B occurs that entitles them to their reward. The corollary is that if the risk comes to pass they have no claim to compensation.

So now let's assume that the campaign met its campaign goal, received the money from Kickstarter, spent all its money in a good faith effort to produce the handbags but is not able to deliver. What should happen?

My feeling is that nothing should happen. The project backers took the risk that the project creator would fail and now that the creator has, in fact, failed they are in no position to complain. There are lots of differences between getting "rewards" and getting equity in exchange for investing but in this crucial way they are similar: You run the risk of losing your investment.

So, a general rule: A project creator who spends his crowdfundraised money on the project does not owe his backers a refund if he fails to deliver.

One exception to this general rule: If the handbag people didn't spend all of the money in their failed attempt to produce or can somehow recover the cash (sell off the bolts of leather and sewing machins, et cetera) then I do think they should reimburse their backers on a proportional basis with whatever they've got left or can recover. Analogizing to the equity situation, this is like the winding down of the company and backers should get their proportional share of whatever is left over once all "senior" people have been paid. (Aside: Maybe there's an opportunity for an enterprising person to buy these 'claims' for pennies on the dollar and try to recover en masse.)

Bottom line: If what you want is a guaranteed opportunity to get some object that is going to be produced then you should wait until it has been produced and pay full price. If what you want is an opportunity to pre-order that object at a discounted rate then you should be prepared for the prospect that it never gets made and that you might not get anything for your money.

[theearlystage-blog]

There Are No Crowdfunding Secrets

I've spent a lot of time lately thinking about crowdfunding strategies and, judging by the number of "Secrets of Crowdfunding" posts and expert talks out there, I'm not the only one trying to figure out how to crack this nut. (I'm one of the few, however, who's trying to make a business of it.) A few examples: Venture Beat wrote a "Secrets of" post a couple days ago based on a talk given by Adam Chapnick of Indiegogo; RockThePost ran a how-to session last week; and Scott Steinberg did a "Secrets of" Q&A way back in May (he's also written the "Bible")

If you're thinking of doing a campaign, you should read at least two but no more than four of these "Secrets of" posts. (If you're a person who learns by listening, you should go to one "Secrets of" talk.) While it might feel like you're working on your campaign by reading/attending more than four of these, you're probably procrastinating. The dirty secret of crowdfunding is that, like most things, the key is to execute on whatever plan you come up with.

That means spending serious time researching campaigns in your vertical. Dan Misener's Kickback Machine is a very helpful resource, especially if you're doing your campaign on Kickstarter.

That means thinking deeply about who your project's stakeholders are -- hint, it's not just your end user -- and figuring out how to engage them as supporters and message amplifiers. The gold standard here is still join.app.net and Ouya.

That means designing compelling rewards and making sure that the economics of each one makes sense -- another hint, the time you spend organizing/packing/shipping is money.

That means figuring out what the message of your campaign is beyond that you want money to do something. For Neighborhoodies, the message was 'we want to initiate some local economic stimulus' and not 'we want to make high-end hooded sweatshirts'.

That means designing a strategy to maintain momentum throughout your entire campaign. One idea: Hold back a killer reward and announce it half-way through.

That means figuring out what skills you don't have and that don't make sense for your to learn and getting people on board who can help you. Before the crowd comes the team.

Crowdfunding is a public act and by studying the state of the art (and reading a couple "Secrets of" posts) you'll have a decent idea of what to do. The true challenge -- and the problem that I'm trying to solve with SeizeTheCrowd -- is doing what you know you're supposed to do.

[theearlystage-blog]

Neighborhoodies -- How We Did It

SeizeTheCrowd's first campaign, Neighborhoodies on SmallKnot, finished up yesterday and was a big success all around. Their goal was $7500 and ended up raising $9450 from 72 different investors. I'm very happy for Lori and her team and proud of Josh (marketing/PR) and Dave (video) for helping them achieve this success. So, what'd they do right?

Strong community-centric message: Neighborhoodies' was raising money to fund a new line of higher-end sweatshirts but the message of the campaign was more about the social impact of supporting the new line. Namely, Neighborhoodies plans to do their production in Brooklyn, where they're located, and contract with single mothers on a flexible basis. While the new line was prominent in their video and text pitches, I think they made the right move in emphasizing the 'local economic stimulus' aspect since it gave backers a common link beyond an interest in cool sweatshirts bought at a discount.

Strong pre-launch effort: It's well-known that the first 1/4 to 1/3 of a campaign's supporters will come from the campaigner's personal and professional networks. That is, strangers jump in and support only after they see that others have been willing to put their money down. To get the ball rolling campaigns need to do off-line pre-launch sales to their core supporters and make sure that this core group is ready to go when the campaign launches officially. Neighborhoodies did a good job with this.

Intra-campaign flexibility and excitement: Another well-known fact of crowdfunding is that campaigns tend to stall a bit after the initial excitement has worn off and before the frantic final days begin. I've thought a lot about strategies to make the boring middle a bit more exciting and think that Neighborhoodies did a good job in this area. They tweeted and posted to FB regularly and, interestingly, they came up with exciting "news" to share with their community. A lot of the news came out of partnerships with other Brooklyn companies: The Mutual sweetened the rewards by offering free membership to campaign backers, others stepped in by offering to a host a party, et cetera. Each of these partnerships provided good reasons for Neighborhoodies to contact their community and effectively expanded their network since each of these partner-allies had an incentive to support the campaign.

As I said, I'm extremely proud of everyone who worked on this and am grateful to Neighborhoodies for the opportunity!

[theearlystage-blog]

Creative Mornings' Big Raise -- It Doesn't Just Happen

I wrote a blind item-type post a couple weeks ago about how working in NYC's high creative metabolism neighborhoods allowed me to reconnect with a linchpin of the world's creative community. Well, that linchpin was Tina Eisenberg (aka Swiss-Miss) and when I said that she is a linchpin of the world's creative community, I wasn't being hyperbolic. Tina is the woman behind Creative Mornings, the "monthly breakfast lecture series for creative types", which started in NYC and now has chapters in dozens of cities around the world and which launched a Kickstarter campaign last week that blew past its goal of $35,000 in only a few hours.

It just so happened that my first day in Tina's studio, Studiomates, was about a week before the campaign launch. I'll never know whether the timing was serendipity or a function of Tina's shrewd puppet-mastery -- I had told her about SeizeTheCrowd when we met in the deli -- but it gave me the opportunity both to observe talented people game-planning their campaign and offer up my two cents on what they might do. They were far along the right path before I ever showed up but I gave them a hand by suggesting some ways that they might maintain excitement and momentum throughout the campaign and avoid the middle-third doldrums.

This past Friday was my second day at Studiomates and I was welcomed with shouts of "perfect timing!" since Tina's mouse was literally hovering over the "click here to launch your Kickstarter campaign" button as I entered the studio. We took a couple giddy photos and screenshots and then Tina hit "Launch". The first supporter stepped up a minute later, both of the $10,000 rewards got snapped up in the next couple hours and the campaign was well beyond its $35,000 goal by the end of the day. Incredible.

Tina has done such an amazing job building a creative empire that Creative Morning's eventual campaign success was to my mind a bit of a foregone conclusion. Her team, nevertheless, worked incredibly hard and did some textbook things right that allowed Creative Mornings to have such phenomenal success.

First, develop a network that is ready to jump. Not everyone will have 300,000 Twitter followers when they push their launch button but every would-be campaigner should do their best to increase their network and make sure they're excited for the launch. Your first-degree network will be your earliest supporters and will help amplify your message to the world-at-large. (As an aside, it'll be interesting to see whether and how the composition of backers will shift from people who were already fans of Creative Mornings to people who discovered it during the course of the campaign.)

Second, expand your appeal by leveraging other people's networks. As a linchpin Tina is connected with other influential people and she had the good sense to get them invested in her campaign's success by baking them into the campaign rewards. So when the campaign launched, the message was amplified and spread by these other influential people and their networks. (Jessica Hische, 47K followers; Stewart Butterfield, 6500 followers, etc.) Seeing the same campaign announced and pushed by multiple people and through several channels is important to getting people to actually take action. (I wrote about this is my post about the nature of 'campaigns'.)

Third, have a video that communicates community but doesn't get bogged down in detail. The Creative Mornings video is long on origin story and community and short on details and I think that's great. In many cases the thing that motivates people to back a campaign is the opportunity to be part of (and give back to) a community and not necessarily the specific nature of the reward or thing being created. For Creative Mornings, community is the secret sauce and even though the campaign is going to fund a technology build-out they rightly focused on how the campaign will pull the community together.

I'm excited to see what Tina and her crew have up their sleeves for the next 26 days!

[theearlystage-blog]

The Platform Wars

A friend asked me recently what I thought will happen with all the niche crowdfunding platforms. It's a question I've thought about a bunch and in this post I predict that equity-based funding portals' two sets of customers -- issuers and investors -- will allow portals to successfully focus on niches. [Insert caveats about TONS of regulatory uncertainty here.]

Campaigns will rely on portals to deliver investors interested in specific opportunities

Since issuers will have limited ability to promote their offerings, funding portals will be critical for a campaign's prospect of being discovered by likely backers. The ability to consistently deliver investors will emerge as a major differentiator among platforms and platforms will be much more than commoditized back offices. Given my sense of likely investor behavior (see below) portals will focus on specific verticals in order to build brands known for delivering critical masses of likely backers to companies in their chosen niches.

Investors will frequent portals that have niche inventory so that they can invest in companies that they understand better than the rest of the market

Without investment banks and armies of analysts working to identify good investment opportunities (at least at the beginning), investors will have to rely much more on their own knowledge when making their investment decisions. Since people can't have information advantages in everything, they'll narrow their investment focuses to areas where they think they've got a shot at having a good insight: doctors invest in healthcare, locals in companies from their neighborhood, et c. Rather than trolling across several funding portals to find a few companies in their sweet spot, investors will park themselves at the one or two portals that consistently have a good inventory of those companies. (On the other hand, if every investor on a platform has the same information advantage . . . ?)

So . . .  Funding portals will try to dominate a niche or two.

Niche or not, everyone will still face the challenge of running effective campaigns. Hence . . . SeizeTheCrowd.

[theearlystage-blog]

Crowdfunding Rewards are Derivatives (I think)

I've written previously about Ouya's strong team and great updates but I haven't yet said much about their rewards. (By the way, with 55 hours left in their campaign Ouya has raised $6.8m from almost 52,000 backers. Expect these totals to increase dramatically as the campaign sprints to the finish line. Kicktraq is predicting $7.5m.)

What is noteworthy about the rewards is that they are aimed at two sets of distinct but symbiotic groups -- gamers and developers -- and that the values of some of the rewards are correlated with the general value of Ouya.

$10 level: 1572 gamer backers --> $15,720

$25 level: 1614 gamer backers --> $40,350

$95 level: 1000 gamer backers --> $95,000

$99 level: 38,373 gamer backers --> $3,798,927

$140 level: 4,527 gamer backers --> $633,780

$225 level: 2,288 gamer backers --> $514,800

TOTAL: 49,374 gamer backers; $5,098,577; Average: $103.26/backer  

$699 level: 506 developer backers --> $353,694

$1,337 level: 201 developer backers --> $268,737

$5,000 level: 4 developer backers --> $20,000

TOTAL: 711 gamer backers; $642,431; $903.56/backer

The first question that comes to my mind when I look at these numbers is the extent to which one group's support spurred on the other group's support. Did the developers start signing up once they saw that there was an enthusiastic audience for their games? Or, did the gamers start signing up once they saw that there was a committed community of developers? Did each group support the project without consideration of the other? I'd be very grateful to hear from people who have experience with feedback loops between content creators and content consumers who might be able to explain what likely happened.

The next thing that I notice is the relative size of the developer backers' contributions. Even excluding the $5,000 level backers, the developers contributed an average of $880. These backers could afford to go big because their rewards are a sort of derivative: They don't (indeed, can't) get equity in the company but the value of their reward is derived from Ouya's overall success. As such, they were willing to make a much larger investment in the project since the return on the reward is a function of Ouya's success (something of a lock, it would seem) and their own talent (something that they have good information on).

Writing this post has me wondering other novel ways to create "derivative" rewards whose value are a function of a campaigner's success. Ouya has shown the way for platform-type projects (I think you priced your developer rewards too low, Dalton!) but there might be ways to apply this to other types of campaigns:

consumer apps: ad space rewards --> allow the backers to re-sell;

theater projects: bulk tickets rewards --> allow backers to re-sell at market rates;

I'm sure there's more. Anyone?

[theearlystage-blog]

High Metabolism Cities

Yet another Wall Street Journal story jumped out to me over this past weekend. It was a bit of fluff about why some big and dense cities have high creative and economic "metabolisms" while other big and dense cities don't. The author's explanation is that high-metabolism cities do a better job of maximizing 'the potential informal contact of the average person in a given public space at any given time'.

As an average person who often finds himself in various public spaces, I can confirm anecdotally that when it comes to creative metabolisms New York's tech neighborhoods are 17 year-old boys.

Here are a couple real-world examples:

I spent a day last week Loosecubing in DUMBO and, having forgotten to bring my lunch, hopped down to the deli on Jay Street. While waiting for my sandwich I found myself standing next to the founder of a very up-and-coming dating site and then, on the way to the cash register, I ran into one of the cornerstones of a very hip creative community who I had known slightly years ago. Two minutes of chatting with the dating site founder yielded a lead for SeizeTheCrowd and five minutes of chatting with the creative cornerstone yielded an invitation to work out of her studio some time.

When I returned to the office I decided to be a friendly co-worker and introduced myself to  the woman sitting to my left and the man sitting to my right. Turns out the woman was someone who I had been meaning to connect with based on a mutual friend's suggestion. And the man was a recent transplant from Austin with experience in building and running large-scale crowdsource-ish contests. Beyond being pleasant to talk to, I am sure that these two will be excellent professional contacts in the coming months and years.

The best part of these interactions were that they didn't occur in insider-y spaces. We were not at exclusive clubs or expensive power lunch restaurants; the deli was affordable and getting office space through Loosecubes is free.

This was "what a small world!" at its finest and most productive.

[theearlystage-blog]

"The segregation of capitalism from virtue"

I pulled the title for this post from Charles Murray's recent Wall Street Journal op-ed piece, which is a tiny bit lengthy and much too sophisticated for me to understand perfectly but which is worth reading if you are in love with Steve Jobs, dubious of Mitt Romney and pretty sure you're a capitalist but not sure why.

Since not everyone has a WSJ subscription (thanks, Andrew!) or the time to read the whole thing, I've pulled out a few passages that struck me.

To accept the concept of virtue requires that you believe some ways of behaving are right and others are wrong always and everywhere. That openly judgmental stand is no longer acceptable in America's schools nor in many American homes.

Surprisingly, Murray does not take the supposed rise of moral relativism to explain why teenage girls are getting pregnant or why people are watching a lot of reality TV these days. Instead, Murray argues that the lack of fixed virtues explains why finance people have been acting like such "dishonorabl[e] and reckless[]" jerks and not as the "seemly" "stewards" we need them to be. This acknowledgment that a group of people who have screwed up in a variety of really big ways over the past ten years have actually been in the wrong is an anomaly on an opinion page that consistently argues that the screw ups aren't that bad, that the people who are upset about them are just jealous, and that, in any event, they were the government's fault.

Another striking passage:

The U.S. was created to foster human flourishing. The means to that end was the exercise of liberty in the pursuit of happiness. Capitalism is the economic expression of liberty. The pursuit of happiness, with happiness defined in the classic sense of justified and lasting satisfaction with life as a whole, depends on economic liberty every bit as much as it depends on other kinds of freedom.

I have no idea whether the U.S. was created to foster human flourishing but I do appreciate Murray's turn of phrase "capitalism is the economic expression of liberty". (Can anyone tell me whether that is his formulation?) I also appreciate that Murray acknowledges in no uncertain terms that other types of freedom are as important to happiness as economic liberty. This is a welcome bit of fresh air on a page that is (appropriately, I guess) so single-mindedly focused on matters of economic liberty that it sometimes seems that the road to happiness is paved only with bricks of gold, has no speed limits and could handle more cars going even faster if there were no cops. 

One final passage for all you entrepreneurs out there:

Successfully starting a business, no matter how small, is an act of creating something out of nothing that carries satisfactions far beyond those of the money it brings in.

So, so, so, so true. And something for all of us to keep in mind as we keep trying.

[theearlystage-blog]

Ouya -- Still killing it

When I last wrote about Ouya, they had absolutely killed it in the first couple days of their campaign and had raised $3.8 million from 30,000 backers. I noted at the time that their massive success was not a fluke and, instead, was the result of a professionally run marketing and messaging campaign.

Well, with 12 days left in the campaign the Ouya team is continuing to kill it. They're up to to $5.7 million and almost 44,000 backers. While the insanity of the early days has clearly died down they're avoiding the mid-campaign flatlining that's typical of most campaigns.

And how are they doing this? The clearest answer is updates, updates, updates. They've done six so far.

Update 1: The "Can you believe what we've done together" thank you post. Critical for everyone from the juggernaut to the glorified friends and family. Remember, the key is creating a sense of community and explicitly sharing the success of your campaign with the backers is a great way to do this.

Update 2: Real-time update on the product itself and teaser about new rewards.

Update 3: Introduction to a critical team member. Sharing the success with the product team is a pretty canny move given that Ouya's backers probably skew tech-y.

Update 4: Introduction of first game. Definitely a tweet-able tidbit.

Update 5: Quirk. A birthday message and a branded giveaway. Increasing the sense of intimacy between the campaign and the backers plus an easy trojan horse messaging opportunity.

Update 6: Another update on the product itselfwith images and a critical strategic partner. Again, both are easily shared tidbits.

The moral of this story is that the campaign has continued to engage and enlarge their community by periodically doling out share-able updates. Keep up the good work!

The other moral of this story is that successful crowdfunding requires a level of sophistication that SeizeTheCrowd is trying to provide to everyone.

[theearlystage-blog]

Crowdfunding Cutting Edge -- Meetup 1

I launched a Meetup group focused on crowdfunding a couple weeks ago and the first event was Monday night at Flavorpill's offices. (Thanks @jainspotting!)

It was a great and diverse group and I think I managed to speak with almost all of the 30-something people who showed up. There were inventors, developers and non-profit board members contemplating campaigns. There were startup crowdfunding platforms looking to out-maneuver the big boys. There were forward thinkers wondering how the market will evolve in the coming months and years. There were lawyers, real estate investors and graphic designers. In short, there was the seed of a community that will grow and evolve as this brand-new capital market grows and evolves.

Judging by the number of people who suggested that I send out a list of attendees' contact info (with permission only, naturally), I got the sense that getting this group together in one room has prompted thoughts even beyond the cutting edge.

The next event will be August 28 at Flavorpill's office and will feature a short presentation by an industry expert. Given that the first event was oversubscribed it'd be a good idea to RSVP early.