Oh, that's what happened to Kickstarter

Tuesday, March 12, 2024

Comments: 11 (plus live)   (latest 1 day later)

Tagged: kickstarter, blockchain, bite me

A couple of years ago I wrote about "That Kickstarter news". The "news" was blockchain crap.

I pointed out that an open-source protocol for crowdfunding project tracking was a pretty neat idea, but blockchain doesn't make it happen. To make it happen, you need a bunch of people of good will to sit down together and work out details. Then you need a trusted organization to run it. Kickstarter was well-situated to get that process started.

They didn't, though. Everybody yelled that blockchain was crap -- it wasn't just me. The company flailed for a while and then seemed to back off on their plan. Although they never disclaimed it completely.

So what was that all about? We now know, or have a good notion anyway, thanks to an article that appeared yesterday.

The stealth round totaled $100 million, according to people familiar with the deal. It was led by a16z crypto and included a handful of other smaller investors [...]

In return for the a16z largesse, Kickstarter would take its own crack at becoming a Web3 company. The grand but improbable plan called for shifting its entire platform onto a blockchain called Celo, another a16z portfolio company, where it would operate as an open-source protocol – akin to http or Bitcoin – rather than rely on the proprietary code model used by most tech firms.

-- "The untold story of Kickstarter’s crypto Hail Mary – and the secret $100 million a16z-led investment to save its fading brand", Leo Schwartz and Jessica Matthew, Fortune

So that's a simple story. Some finance bro from the blockchain department of Andreessen Horowitz turned up with a suitcase full of cash and said "Here, we'll pay you to become a Web3 company. It'll be great. PS: Use our blockchain."

Now it's not really that simple. The article notes that the funding round was in the form of a "tender offer", meaning the money went to shareholders -- including employees -- rather than to Kickstarter as a company. As a public benefit corporation, Kickstarter had pledged to never IPO or seek acquisition, leaving employee stock options as ghost paper. This was an offer to cash some of them out on the spot.

Also, the plan wasn't a commitment to go blockchain. Nonetheless, it was pretty clear that management had bought in. It was also clear that nobody else had.

Most of the community outrage fell upon employees, who expressed their disbelief in group chats and swapped sardonic jokes about Kickstarter NFTs. Meanwhile, the company’s decision to use an outside consultant to announce the blockchain news meant that many staffers were ill-prepared for the sudden torrent of vitriol from users. And given Kickstarter’s checkered history of launching new initiatives, doubt spread about its capacity to pull off a major technology pivot. “It was inconceivable,” said one employee.

The blockchain plan seemed impossible – and that would soon prove to be the case. Within months, executives stopped bringing it up at all, and no section of the platform was ever converted to run on a blockchain. “It felt like Drip,” said one former employee, referring to the ill-fated Patreon competitor. “Announcing this thing, and then just abandoning it.”

-- ibid.

You can say "Well, great -- the employees got cash and the company never went Web3 at all. Win/win!" Or win/status-quo, I suppose.

But then there's the reputational hit. Big projects started shying away from Kickstarter and going to BackerKit or other competitors. I, personally, never backed another Kickstarter after the blockchain announcement. We all have the sense that Kickstarter is in the doldrums. None of this is really news.

The interesting angle is that, from the company's point of view, they were already in the doldrums. Thus the title of the Fortune article: "Kickstarter’s crypto Hail Mary".

But a dozen years after its launch, Kickstarter had lost its cachet of cool and churned through CEOs. The Kickstarter of 2021 had little to offer would-be investors but headaches. Growth had flatlined at the startup, which made its money by taking a small cut when a project on its platform met a funding threshold, and its onetime feel-good culture had become toxic in the wake of a bitter unionization drive. New shareholders would be inheriting ownership of a brand that many felt had turned stale.


Even though Kickstarter figured out early on how to make a profit, the company could never seem to take off. The number of projects plateaued in 2016 at around 19,000 per year – with no signs of growth. Dollars raised on the platform, where Kickstarter got its cut, would fluctuate year-to-year and peaked during the pandemic at nearly $814 million.

An early investor told Fortune that Kickstarter was never able to find an equilibrium between growth and staying true to its new charter, which committed it to socially worthy but expensive or difficult obligations. Despite the noble mission, employees struggled to find paths for career growth or advance their own initiatives as the company’s competing priorities bred dysfunction.

Growth! The assumption is as invisible as air -- at least, if you're reading a magazine called Fortune. Does Kickstarter have to grow? Or can it just keep supporting 19,000 projects a year, making enough profit to pay its employees and its social pledges? That's a social benefit, right? Nothing in the charter says Kickstarter has to be the biggest crowdfunding platform, or the hottest.

I don't know the whole story. The article talks about "dysfunction". There was the whole unionization mess. I can easily believe that morale was lousy, that people felt the company was in a rut.

I just wish they could have asked: what does success look like when it's not the divine windstorm of venture capital? Can we just do a good job? I miss when companies did a good job.

I am not deep enough in the business to know what Kickstarter "really needs". The open-source information-sharing protocol still sounds nifty! A nonprofit organization connecting information Kickstarter, BackerKit, IndieGogo and other platforms. Would it be useful? I don't know, geez, but people like data.

(If that open-source data stream existed, Microsoft would be using it to train LLMs. I can't keep up with the enshittification cycle, either.)

Then there's the Patreon-style model: supporting lots of creators with small consistent payments, rather than per-project bursts of cash. You can tell that's a tough nut. Patreon has been thrashing for years to try to keep it working. Kickstarter tried to enter that race in 2017 with Drip; it failed. Twice. I doubt they're eager to take another run at it, but the problem still needs solving.

Well, I went over this stuff in my original post. Civic infrastructure. Emergency aid. Effective altruism charity management. There's room for new models. What we know, for sure, is that venture capital is unable to solve these problems. "Investment" means you are not acting for the public benefit; you are not solving anything except maybe unprofitability. That's the unspoken message behind the entire Kickstarter article, although the authors may not be able to see it.

(Do I even need to point out OpenAI, that attempted compromise between the non-profit and tech-capital world? Spoiler: the non-profit got junked as soon as it interfered with profit.)

But there should still be a way to employ people to act for the common good. To build valuable tools. To leave value "on the table", that is -- where the table is society.

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