One of the most interesting comments at last week’s RoadMap event came when Om Malik compared Kickstarter to YouTube and Twitter, and asked Kickstarter CEO Perry Chen how the company reconciles the user experience and design given its many constituencies.
“Those companies you mentioned, they’re at kind of a utility stage, people know how YouTube works, they know how Twitter works, and they’re interacting with it and knowing how it works. And we’re hopefully on that journey to also where people really fundamentally understand how Kickstarter works.”
Chen’s words get at the core of how early leaders often define the market. For many people, Kickstarter has represented the crowdfunding market and the movement, from its community guidelines to the specific life cycle it defines for campaigns to the “all or nothing” funding model.
But even as Kickstarter has come to represent crowdfunding to the masses, the question remains as to whether it will maintain the utility status of YouTube or Twitter over time, representing crowdfunding to the broader market as it matures and starts to diversify.
Is Kickstarter self-limiting its potential?
I believe it can maintain its status, despite the restrictions it has put on itself. What restrictions are those? In his talk, Chen expressed both the company’s wish to avoid an IPO and how it doesn’t plan to get into equity crowdfunding.
Being public isn’t required to maintain an early leader’s relevance over time (Twitter is a good example). But it is worth examining if staying out of equity crowdfunding provides an opening for another player to insert itself into the market as leader.
Other firms sure think so. Indiegogo, for one, is planning on entering the equity crowdfunding market, and others like Earlyshares are raising funding rounds to enter the equity crowdfunding market in 2013.
Crowdfunding needs a crowd
All that said, just as YouTube has continued to become the go-to site for nonpremium content nearly a decade into its existence, Kickstarter can, despite foregoing the equity crowdfunding market, remain relevant exactly because it will remain focused on creative projects.
This is in large part due to the SEC’s forthcoming tight restrictions on both those looking to offer equity and those looking to buy into these firms. The end result of a much more regulated market means the volume of actual activity will no doubt be much smaller.
Kickstarter, like YouTube, has thrived and become so well-known due to the size of its user base — aka the “crowd.” And while there might be a small-time gold rush to enter the equity crowdfunding market, ultimately those companies looking to get in on the action face two difficulties: They will either be turned away due to not meeting the up-front requirements or have many would-be investors without the financial wherewithal to participate.
And, in the end, crowdfunding leaders need a crowd. Kickstarter’s may just be enough to sustain its relevance going forward.