F3 Ideas

Why Kickstarter is the future of Retail

Two days ago I had lunch with my good friend Dario Antonioni, who is a very talented designer and inventor. About 6 months ago Dario experimented with Kickstarter to see how it worked and ended up raising a substantial amount of money towards the production of a new bench. We had a very lively conversation about what Kickstarter represents in todays world in terms of both opportunity for and threats to existing models.

Having been somewhat involved in the strange world of fundraising for a minute or two myself, I was intrigued by the Kickstarter model that rewards backers with products, posters or other memorabilia instead of equity or future earnings. In fact, when I contributed to Dario’s project at a certain amount ($299 or above), I actually received one of the first benches produced, complete with a commemorative medallion. It is awesome and sits in my dining room.

In my filing cabinet, itself a relic of another age, sit several folders of worthless stock certificates received as payment for services rendered as a consultant, or in one case, as an employee. Taking equity as payment can be a fantastic trade-off (ask David Choe) but as a rule it’s risky, complex and somewhat unavailable to the general public. It’s also time shifted in a way that moves the potential reward (financial windfall) into the distant future. 

This is where the genius of Kickstarter begins to show itself. By “investing” in an idea I am doing several things which in our social world have lots of value:

1. I’m validating the idea from an interest + from a financial worth perspective which implicitly reduces the risk for subsequent backers and explicitly recommends the product to all of my friends.  
2. I’m defining the reward for my investment based on the level of my investment. Most projects provide levels of reward, the highest of which is usually the product itself, at a significantly discounted rate. 

So not only do I get something really cool that I like, I get it at a discount. And by the nature of the platform, it’s also something new and cool.  Indeed, the Pebble watch has raised over $7.6 million in less than a month. 

In one elegant platform Kickstarter is addressing: How to raise money for an idea without losing control of the company; How to socially validate, receive feedback and market the idea; How to sell the first batch of inventory; How to provide a discount on a product without getting screwed (ahem, Groupon); and How to avoid retail altogether. 

I know this oversimplifies things a bit, but it’s worth thinking about. I’m sure all of us have ideas of inventions that we think would be awesome if we could only find the  money to see it realized. In an attempt to provide an answer to how to get the money Kickstarter is providing answers to so much more. 

Good article from Ryan Kim @ GigaOM summarizing Kickstarter co-founder Yancey Strickler’s talk at the Wired Business Conference today.