Crowd funding began as a way to support the arts on the Internet. Artists could go online to pitch a new album, for example, in the hope that thousands would give small amounts. But now it’s expanded to entrepreneurs, and the rules aren’t quite as clear.
On Kickstarter, the largest crowd-funding site, a handful of entrepreneurs have raised millions of dollars more than they’d expected, by selling the concept of products they have yet to make. But financial backers have no clear way of getting a refund if the young businesses fail to deliver.
Making A Successful Pitch On Kickstarter
Julie Uhrman loves playing video games the old-fashioned way — in front of the TV. While sales of consoles like the Nintendo Wii are down, Uhrman believes TV games are not some retro thing of the past. She cites her 4-year-old as proof. One day a controller was lying on the table, she says.
“And then to see my daughter pick up the controller and say, ‘Show me how to do this,’ ” she says, “it just meant that this is something that’s going to be around for a really long time.”
Uhrman admits that she got a little excited when she saw that her daughter was glued to the TV screen — although, she adds, “I’m sure my daughter’s preschool won’t like that.”
Kickstarter liked it, a lot.
In July, Uhrman released her online video promo for a game console she calls Ouya. The first letter stands for open source. Unlike the Nintendo Wii, it’s open for developers in the Android operating system to make games.
“It’s open for hackers that want to tweak the box and make it their own,” Uhrman says in Ouya’s Kickstarter video.
Uhrman raises an eyebrow and flashes a mischievous smile about this big undertaking.
“Effectively, we’re trying to disrupt an established industry,” she says in the video. “It takes a lot of guts and courage. If I wasn’t a female, I’d say, ‘big balls.’ ”
Uhrman asked for $950,000 — much more than the average project. A month later, her Kickstarter campaign closed with pledges worth $8.6 million. About 57,000 backers expect an Ouya console by next March.
The ‘Doing-The-Right-Thing’ Perspective
I visit Uhrman in San Francisco, where she’s meeting with a dozen designers to hash out Ouya’s boomerang-shaped controller.
During a break from the meetings, I ask her, “Would you have to give money back to your backers if you weren’t able to deliver?”
She takes a deep breath and pauses before answering.
“Technically, from the Kickstarter perspective, I actually don’t know the answer to that,” she says. “But from a doing-the-right-thing perspective, we will treat our backers the best possible way.”
Ouya public relations agent Tiffany Spencer adds, “That’s a Kickstarter policy question.”
So I call Kickstarter co-founder Yancey Strickler, and ask: What if Uhrman isn’t able to deliver the consoles? Would Kickstarter get involved?
“You know, that would be new ground,” he says. “I don’t know. I mean, no, I don’t think that we would. But certainly, the kind of thing you’re talking about is not a bridge that has been crossed yet. Someday it will. And you know, I think if something did go awry, it would be — it wouldn’t be my favorite day.”
When Kickstarter launched three years back, it was primarily fans giving money to little-known artists. Today, the most lucrative projects are goods that customers pre-order from would-be merchants.
Comments on Kickstarter campaign pages indicate that backers expect product delays.
“By creating a system where it’s just a series of open and direct exchanges between people with ideas and projects, and people interested in supporting them,” Strickler says, “you have everyone on the same page, and everyone understanding what’s going on.”
Almost everyone, that is.