Former Reason Editor in Chief Virginia Postrel (Reason archive here) has a great piece up at Bloomberg View. It's about how "crowdfunding sites such as Kickstarter and Indiegogo represent a classic entrepreneurial phenomenon: Once you roll out your great idea, customers use it in ways you didn't imagine, and you wind up in a different business than you expected."
Postrel argues that "neither intended their site to act as a test market. But, as the rags-to-riches story of virtual-reality firm Oculus shows, that's what they have become." When Oculus put its virtual reality headset on Kickstarter, it ended up with 9,500 people shelling out well over $2 million to make it happen.
Now that Facebook has bought Oculus for $2 billion, critics (including another Bloomberg View writer) are calling Kickstarter a scam that cuts early investors out of the proceeds that go to venture capitalists.
The backlash is largely Kickstarter's fault. It may not be running a scam, but it definitely sends mixed messages. Unlike Indiegogo, which prides itself on operating a neutral platform giving anybody's idea a market test, Kickstarter hasn't embraced its de facto transformation. It strictly curates the campaigns it hosts and, although it makes its biggest profits on technology products, it still exudes an artistic sensibility that isn't entirely comfortable with disruptive technology or large enterprises. It still talks as though it's PBS. "Kickstarter is not a store," it declares.
Indiegogo, by contrast, proudly touts itself as testing platform. "We allow entrepreneurs to prove themselves in a merit-based way," by discovering whether a venture can in fact attract interest and money from potential customers, said [Indiegogo founder Danae] Ringelmann. The site even allows campaigns to swap in new perks or change the required giving levels. "You can test your pricing. You can test your features," she said. That kind of blunt sales-oriented language would be unheard of on Kickstarter.