Kickstarter, the world’s largest funding platform for creative projects, announced today that it has passed the $1 billion milestone in pledges. To date, projects have been backed by 5.7 million people in 224 countriesand all seven continents. More than half of that $1 billion has been pledged in the last year, although Kickstarter has been around since 2009.
Crowdfunding is now mainstream, but is Kickstarter’s model the best, and if not, is it sustainable? The traditional Kickstarter donor often receives some sort of tangible reward for their donation, but from a strictly financial point of view, it’s rarely a good investment. In 2009, when Kickstarter launched, the appeal made more sense because while donating to projects was perfectly legal, taking equity in projects in exchange for funding was not. Now, thanks to the JOBS Act, in a lot of ways, it is. Even donors who are passionate enough about projects to donate on Kickstarter would likely prefer a better return on their investment. (It is worth noting that Kickstarter investors include Union Square Ventures, Jack Dorsey, Chris Dixon, Peter Hershberg and others, meaning that if they believe in its continued growth, it’s worth considering why, and assuming that there is a reason.)
There are now several equity crowdfunding platforms popping up, trying to take advantage of the new rules. But as John Kuo pointed out in a Nerd Wallet post several months ago, it’s not quite as simple as it seems. As you’d expect, once several parties buy into a project rather than just donating to it, the amount of disclosures, record keeping, working with registered brokers and other regulatory measures might make you rethink the whole process.
So, does Kickstarter’s tremendous growth in the past 12 months better represent flawless execution on their part or the emergence of crowdfunding in general? Probably a combination of the two. Will donors become more interested in platforms that allow them to take ownership in projects, or will passion and support continue to outweigh financial gains? I guess we’ll just have to wait and see.
What do you think?