The democratization of business

April 9, 2013 — by Devin Zhao and Nelson Wang

What do a silly web series called “The Cyanide and Happiness Show” and the Academy Award-nominated documentary, “Sun Come Up” have in common?

What do a silly web series called “The Cyanide and Happiness Show” and the Academy Award-nominated documentary, “Sun Come Up” have in common? They were both funded by their fans through Kickstarter, a website where fans of a project pledge money to reach its funding goal in return for exclusive benefits.

Since it started in 2009, Kickstarter has pledged over $500 million to over 35,000 projects, ranging from video games to films to comics to art. The question is, can Kickstarter-funded projects be more advantageous than companies supported with traditional funding systems?

Recently, Rob Thomas, director of the cut TV show “Veronica Mars,” created a Kickstarter project to fund a “Veronica Mars” movie after Warner Bros rejected the idea. So far, the project has over 60,000 supporters and has raised over $4 million, greatly exceeding its original goal of $2 million; thanks to the efforts of individual contributors, it is officially becoming a movie.

Generally, the budget for a film or movie is provided by either a studio, such as Hollywood Studios, or a production company, such as DreamWorks Animations or Paramount Pictures.

Now with fundraising websites such as Kickstarter, films and movies can now be funded out of personal interest, rather than simply profit. It’s a far more democratic process, with viewers voting with their wallets. The film is being funded by diehard fans, and in a broader sense, the people.

Kickstarter also helps the artists, as all staff members that had a role in the production of the movie get the full cut of the profits, instead of receiving the fraction of the profits that were left behind by the investors.

Kickstarter states that all project starters have complete control over their projects, and that the Kickstarter staff will not benefit in any way from the projects. Under the traditional method of film production, sponsors sometimes force staff to increase the pace of development in order to gain maximum profit, leading to flawed products, unworthy of customer satisfaction.

On the other hand, people who donate money for Kickstarter projects are merely funding the project for it to flourish, not to profit financially. Supporters of the project, according to Kickstarter, would only receive a reward for reaching a certain level of funding.

Supporters of the game “Torment: Tides of Numenera,” another Kickstarter project, can get bonuses in addition to the game, such as game manuals or CDs, depending on how much money they give to the developers.

For example, those who pledge $28 receive the game, a manual, a novel of the game and diaries by the developers. In comparison, those who pledge $10,000 receive all the possible prizes, including an invitation to the launch party, a hard copy of all the games released by the developer for the next 10 years, a personalized plaque and the contributor’s name in the opening credits. So far the game has raised a total of almost $4 million thanks to over 68,000 supporters.

Projects under conventional companies have to face unpredictable situations such as budget cuts, which may not provide the project with adequate funding.

However, Kickstarter’s philosophy is all-or-nothing funding, meaning that the project will either get fully funded by a deadline, or it will be scrapped. As a result, if people want a project to succeed, then they will do as much as possible to reach the goal, such as spreading the word to their friends and other people who share their interests.

Kickstarter heralds, perhaps, the beginning of a new era — the democratization of venture capital. In this age of hyperconnectivity, more and more ideas may be made into reality via the internet-ed masses.

“The desire to make art has always been inherently social,” writes Rob Trump of The New York Times. “Not economic, and now, even in a society defined by the free market, the means to produce art can come from an inherently social mechanism as well.”

Bonus Feature: Kickstarter by the Numbers from NYTimes

Total Projects Posted: 84,502

Total Projects Fully Financed: 35,405

Total Donations Since 2009: $470 million

Category With the Highest Success Rate: Dance (70.12%)

Lowest Success Rate: Fashion (27.42%)

Successfully Financed Projects That Raised More Than $1 Million: 20

Highest Total Amount Raised by One Project: $10,266,845 (Pebble E-Paper Watch)

Projects That Failed to Receive a Single Pledge: 9,265

Kickstarter-Financed Films That Appeared at the Sundance Film Festival in 2013: 17

Number That Won an Award: 5

(All statistics as of Jan. 29. From Kickstarter.com/help/stats.)
 

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