What I Have Learned From Kickstarter

Today, Perry Chen announced on the Kickstarter blog that he’s moving up to Chairman and that his co-founder Yancey Strickler will step into the CEO role at the start of next year. Like all things that involve Kickstarter, this is a classic Perry move. Perry and Kickstarter have always done things their way, and today's news is another example of that.

As I reflected on this change, I started thinking about all the things that Perry and Kickstarter have taught me. I believe that entrepreneurs teach VCs and Kickstarter has been full of important lessons for me.

Maybe the most important lesson I have taken from Kickstarter is that you have to build your company in your own mold. There is no one right way to do it, as much as the advice giving pundits (me included) would tell you otherwise.

When Perry came to see me in 2009, just after they had launched the site, he said he was wary of taking money from VCs. He said he had no intention of taking the company public and no intention of selling it. He wanted to build a long lasting sustainable business that would always put creators first and serve as a resource for the creative community to get funding for their work. He saw the race for the big payday as orthogonal to his goals for the company and wanted no part of it. I understood the argument but wasn’t sure Perry really meant it. We invested anyway, because we believed that a network/market based approach to funding creators made sense and that it would be a good business. It does make sense and it is a very good business. And, as it turned out, Perry did mean it.

Kickstarter has been profitable from shortly after we invested. It has never needed to take outside money and it has not done much to optimize its profitability. The profits have been spent investing in the team and more recently in a new headquarters in Greenpoint, Brooklyn that will open next month. Instead of agreeing to pay sky high rents and sign a long term lease that the Company would quickly grow out of, Perry chose to buy an empty old Pencil factory on the waterfront in Greenpoint, Brooklyn and spend the Company’s profits fixing it up and making it into a physical instantiation of Kickstarter’s role as a resource for creators. They will be their own landlord.

I suspect that Perry could have bootstrapped Kickstarter without VC and maybe he should have. But I am sure glad he did not, as we feel incredibly fortunate to be along for this ride. Networks and markets are slowly changing the global economy and the creative sector is at the forefront of these changes. Instead of going to Hollywood studios for the funds to make their next movie, directors are choosing to harness the network of their fans. Instead of going to the publishing industry for their book advance, authors are choosing to harness the network of their fans. Instead of signing a deal with a record label, musicians are harnessing the network of their fans. The same thing is happening with comic books, video games, theater productions, and many other creative endeavors. Kickstarter has changed the way creative projects come to life.

Four and a half years after launch, Kickstarter is a very important and sustainable business. It will continue to grow, it will continue to fund creativity, and it will continue to do things its own way. Kickstarter was built in Perry’s mold and the unique culture and mission of the Company are derived from him. I suspect his decision to step up to Chairman and allow the team to run the business day to day is Perry’s way of saying to the team that they have his confidence to lead Kickstarter into the future. Kickstarter will always be Perry’s work and we are very happy to be a part of it and be inspired by it every day.


Comments (Archived):

  1. ErikSchwartz

    If a company does not sell and does not go public how does a VC return value to their LPs? Does it become some kind of annuity?

    1. fredwilson

      secondary transactions and cash payouts are two of the most obvious options. kickstarter is working on their plans and are figuring out their specific approach.

      1. DJoseph

        I’ve been curious about this too–are there other ways for investors to get paid besides exits. My startup, which has a non-traditional value proposition (mostly strategic and mission aligned), is planning to pay investors back on a dividend model, and assuming our projections are not way off, we think we’ll be paying out decent investor returns on this model. Is there some obvious reason why that won’t work?

        1. BillSeitz

          Because a VC model wants a 40% annual return, “typically”, so it’s hard to keep generating that in dividends.

      2. ShanaC

        could be interesting

      3. pointsnfigures

        There is a guy out of Lincoln, NE that has a thesis that they invest in startups-but will never sell. Sort of a Warren Buffett strategy. NebraskaGlobal.com Raised $60 Million I believe from local investors.

      4. Aaron Klein

        I’m very interested in the growing market for secondary transactions. That growth is correlated with the craziness of the IPO world.There is another way than flipping what you’ve built, and I’m excited to see that continue to develop.

      5. BillSeitz

        Secondary transactions just seem like “kicking the can down the road”. (How does the buyer in the secondary get *their* money out?) What am I missing?

        1. Kalen Stewart

          if the company is rolling over cash flow, recapping with debt is a reasonable way to take the VC out

          1. BillSeitz

            I threw together a crummy spreadsheet leading me to estimate that, to pay back $40M for the $10M funding, KS would need to be generating $6.5M/yr in (before-interest) profit.I’m sure there’s at least 1 gross misunderstanding, so feel free to correct:https://docs.google.com/spr

      6. Brandon Burns

        inspiring. i would love to not need to raise money, or very little of it. and an overhead-light marketplace model probably has the best chance of realizing that goal.

      7. leigh

        My company has a phrase we like to use sometimes — and there are the occasional day when I find myself faltering on it — but i always remind myself that if i can’t do the things i love then i can’t love what i do particularly as work is very all consuming as an entrepreneur– what makes cents doesn’t always make sense. a bit punny but it’s always had meaning for me. 🙂

    2. andyswan

      Rule #1: There’s always a market for everything.

    3. Aaron Klein

      They’re going to do a Kickstarter project to buy back the company from the VCs, of course… 😉

  2. Paul Sanwald

    I worked with Yancey when we were both at emusic and couldn’t be happier to see his, and kickstartr’s, success.

    1. fredwilson

      i like the use of the original URL

      1. Paul Sanwald

        I had no idea it changed!

  3. Clay Hebert

    Fred – It’s exactly this kind of vision and flexibility makes you top of mind when smart entrepreneurs are considering whether to take VC money (and from whom.)Kickstarter is like a mixing board for smart marketers. Where a music producer can use a mixing board to tweak the knobs of bass, treble, vocals, drums, etc., a smart marketer can use Kickstarter in a similar way, tweaking the knobs of storytelling (video), pricing, urgency, scarcity, copywriting, design, etc.I’ve been lucky enough to help 30 entrepreneurs raise ~$2.8M on Kickstarter and I’ve learned a bit more from each project.Even if Perry didn’t need you, thanks for believing in and backing such a game changing, gatekeeper-eliminating platform.

    1. awaldstein

      I’d be interested in any thoughts on this you’d care to share.Been involved with a few and getting my thoughts together for a post. [email protected] if inclined.

      1. Clay Hebert

        Just emailed you.

        1. kirsten

          Clay — I’d also be interested in the strategies you’ve used, what was successful what failed. If you’re inclined to share. [email protected]

  4. andyswan

    Excellent. I remember meeting Perry at betaworks demo day…In any event, I was impressed. He seemed a man on a mission, destined to create value. The first clue was that he had no use for my opinion and kept a smile while he told me why I was wrong, so I knew I was.I love that.Great eye, Fred.

  5. William Mougayar

    Kickstarter’s legacy is that they were among the first to legitimize crowdfunding’s credibility.I saw a recent study estimating the total crowdsourced funding market will reach $300B, as compared with $30B in VC and about $27B in angel funding, so it’s going to get BIGGER.There is a whole range of specialized crowdfunding marketplaces that are emerging, both with a specialized focus (e.g. AngelList, Microryza) or a product focus (See.me, Bountysource, etc.).This puts into question whether Kickstarter will diversify its offering, or potentially acquire other niche companies.

    1. JamesHRH

      Crowd funding is amazing, in that so little of it has a high need for returns.

    2. LaVonne Reimer

      I hope to see it eclipse small business lending (around $700B or so).

      1. William Mougayar

        Wow. I had no idea that seg was so huge. Prob banks fork it mostly, no?

        1. LaVonne Reimer

          Not sure I follow the question. Like fork open source code? FDIC has pretty good info on this btw. Big % of loans held by the few big banks and the rest distributed among the 99%. Yep, that’s a real 99% problem. Also most bankers say there’s another $600B+ in unregulated small business lending.

    3. Techman

      The increase in the crowdfunding in general makes me happy. It shows that (some) people really are willing to take risks and invest in things that they like and want to get their hands on. It’s like mini-VCs in a sense. Very interesting.

    4. vintermann

      >Kickstarter’s legacy is that they were among the first to legitimize crowdfunding’s credibility.Exactly. There were two crucial ingredients to this:* The threshold pledge model, also known as all-or-nothing.* That Kickstarter were very selective about what kind of projects they would permit, banning huge categories of projects that could make the site look bad (e.g. TV-shop like products) or distract from the threshold pledge model’s full potential (charity).Fundable by Pratt and Helms had threshold pledge in 2005, but they weren’t – couldn’t afford to be, very likely – selective. They permitted everything, meaning that they were flooded by begging and low-effort projects. Since that was 99% of what you would find there, creative people never caught on, even though from an economic point of view it had the same potential as Kickstarter.I don’t think Kickstarter will ever diversify into the new and upcoming crowdfunding sites. It wouldn’t be true to their vision – in fact, I think Yancey and Chen have a much better understanding of what crowdfunding is good at and what its limits are, than these startups.

  6. takingpitches

    A Kickstarter campaign for more 2 post AVC days. It’s like 2004 again!

    1. fredwilson


    2. William Mougayar

      Technically, he missed a day during 2013, so this sort of makes up for it 🙂

    3. Techman

      Would be cool, but you have to remember that @fredwilson:disqus has other things to do and might not always have time on his hands 🙂

  7. jason wright

    will he be sub letting in an angel sort of a way?

  8. awaldstein

    Few things create enormous value and change the lives of all those who labored to build them.Very few actually change the world for the better. Kickstarter is one of them.Well done!As a marketer, they amaze for two core reasons:-they touch me and everyone who contributes at their most core giving place. They just want to do this cause it feels right.-they are not a community in themselves but an aggregation point for existing networks and brand enthusiasts. The web itself is their community.

  9. reece

    my teammate literally just got some kickstarter project he funded in the mail… he doesn’t even know what it is, because he tends to fund a lot of ’emit’s an amazing platform and company, and even better that it was built that way by following their own unique path. that’s rare these daysit’s really easy to get caught up in what you “should be” doing vs. what you want to do, or just doing what comes naturally…i see lots of founders emulate what they see in the tech press and it’s just sad to see them waste their time that way (note: i’m just as guilty for making some of these mistakes here too)

    1. Vasudev Ram

      >i see lots of founders emulate what they see in the tech press and it’s just sad to see them waste their time that way+1. It’s a somewhat easy mistake to make, though.

  10. Anne Libby

    You can only behave to your own values — and there’s no point in creating organizational values that differ from a founder’s values.Bravo, Kickstarter.

  11. gregorylent

    the collective consciousness is a tool, and any company that taps into it is an investment that can only win

  12. ShanaC

    When is it worth it to bootstrap

    1. pointsnfigures

      I encourage firms to bootstrap as long as they can survive. There is probably a point when it makes sense to take outside capital to scale the company; but if you are good enough and big enough, the entrepreneur can really have leverage on the terms. Two companies I know bootstrapped and were persuaded to take outside money-Intuit and Braintree. Intuit’s story is well documented. They actually took a worse valuation from the VC they wanted to work with. Braintree bootstrapped for 4 years and were quite successful until they took money from NEA.Suppose you were a firm that had a social network/Crowdfunded component around it. Tick of the VCs you’d want to work with. It’s not a long list.Much better to do it yourself if you can.

      1. LE

        But using your own money doesn’t hedge the risk as well.I remember way back from business school the “control” issue that was always talked about with regard to VC’s. Lack of money is much worse than lack of control.Non tangibly people also make different decisions when they are playing with their own money (to their detriment) than when playing with investors money.

    2. Dave W Baldwin

      If you’re thinking of a fundraising goal that is pretty high, you need to bootstrap til you can offer the product to those thinking of your offer via kick starter. Besides the crappy video used by that startup (who was ripping me off) I shared with you this past summer, who did less than $8k on $300k goal, they didn’t offer the tangible. A project I am sending money to this week does offer the product depending on level of participation.

  13. FlavioGomes

    “see with your own eyes, feel with your own heart” love the kickstarter story

  14. jmcaddell

    I love Kickstarter…I published my book with funds raised thru a campaign!

  15. LD Eakman

    “I believe that entrepreneurs teach VCs and” I believe that LPs learn lessons from their GPs.

  16. BillMcNeely

    Will there be an opportunity to sell secondary services to Kickstarter project creators? Similar to offering PayPal on Ebay back in the day?I could see a revenue stream from logistics providers, email marketing, payment processing, video and music distribution channels etc.Some Logistics Options for Kickstarter Projects https://medium.com/on-start

  17. Mat Mullen

    I had a recent experience with Kickstarter that really shined a light on why it’s such a cool and powerful community. A friend who lives north of San Francisco decided that she finally wanted to turn her creativity into a business with a project called “Foodie Dice”.She had her “aha” moment and realized that in order to make her idea a reality, she needed to turn to a community of creative people who could get behind her idea. She avoided the traditional small business loan route and decided to launch a Kickstarter project with the goal of raising $7,500.Turns out that Kickstarter was the perfect market fit for her idea and after 30 days, her project has raised $140,000 from people all over the country. Not only did she raise a ton of money to build her business, but she also “pre-sold” her product which will, in turn help her sell even more once she launches.Without something like Kickstarter, I doubt she would have ever pursued her idea. I imagine there are a lot of people that are in the same situation.This is the project if anyone is curious – http://www.kickstarter.com/

    1. Techman

      You know, I almost thought that you could play that video directly from the comment. When I saw that it was just an image, I was like “awww…”.

      1. Mat Mullen

        You’ll like what we have cooking up in the next couple of weeks then.

        1. Techman

          Guess I’ll have something to look forward to.

  18. kirklove

    I <3 Kickstarter

  19. John Fazzolari

    Wow, such a great story + two AVC posts in one day + the Knicks season opener right now. If Boston loses today will definitely go down as a successful one. Let the petition for an AVC evening edition post every few weeks begin!

  20. Dave W Baldwin


  21. Ela Madej

    “You have to build your company in your own mold.”This so true. I respect Perry a lot for his guts to do that.

  22. Ela Madej

    I just read Perry’s open letter in full. I know that’s it’s not the best thing for the company (and investors) to happen. But provided that’s the objective reality and it was going to happen–I respect how unapologetic he/they all seem about that important life choice. And leadership (mis)performed by misplaced leaders has never done any company any good.

  23. Thomas K

    You provide one of the few voices of reason in a space that always seems dead set on defying logic (on the part of founders and investors alike). Thank you again for helping the rest of us stay grounded.

  24. Para Friv

    I worked with Yancey when we were both at emusic and couldn’t be happier to see his, and kickstartr’s, success. Thank you so much!

  25. Alex Feldman

    Kickstarter is a leading reward crowdfunding platform and they received great user reviews on my site. One area which I think they can improve is building a community for the artists. Currently all their campaigns are for one time projects. If a musician wants to raise money for a second CD after a successful first campaign they need to redo the work to bring in the crowd. A better way might be to have a permanent profile of the musician on the site and let them build their community so when they are ready to launch a new CD they will already have all their backers.

  26. panterosa,

    I LOVE Kickstarter. So much so, I put my first launch there. It’s live now.I AM GETTING MY ASS KICKED by Kickstarter – we are underfunded. Because we are a 1st project, and unestablished (just launching our entire brand).* We are at 40% and need to raise 18k and 6 days to go…. That will be tough.Why so hard?- bloggers who feature us decided to run things later, like after the campaign, or at the end. That really blew it.- a key team member got sick.- team members overestimated their own network pull- we haven’t been featured by KS as project of the day or staff pick- my category there is a lot of very niche stuff without a broad appeal but many backers- first timer means network is not primed and asks you about “why amazon payment” because they live abroad and have no account. many donors lost that way.There are times my stomach turns when I see what is ahead of us in the cue. Or I am happily finding things like Foodie Dice, mentioned in the comments which is so fun.I’m launching games to reinvent how we teach science to kids. Big mission. I’m not doing foodie dice. or leather cord wraps, small projects. They are getting over funded. I am not even half funded.It’s hard to reconcile being underfunded when you have a science mag editor tweeting you are the best taxonomy/evolution game she’s ever seen, and you knock the socks of a preschool director for having re-innovated animal learning. It doesn’t make sense, but it tells me I have a lot to learn to absorb that dichotomy.I want to thank the many donors from the AVC community who are backing us and there are many. @fredwilson:disqus @wmoug:disqus @ccrystle:disqus @awaldstein:disqus @aaronklein:disqus @JLM:disqus @donnabrewingtonwhite:disqus @LE:disqus @JimHirshfeld:disqus @rohanrajiv:disqus @cynthiaschames:disqus @bradfeld:disqus @gothamgal:disqus @albertwenger:disqus @avnerronen. Forgive me if I forgot someone. Seeing familiar faces pop in your email box really makes your day.* @awaldstein:disqus rightly told me what I knew – I will do Nothing else for 30 days, and cautioned launching a brand is not what KS is for. I didn’t have an option I liked except to launch on KS, and did so with heavy warnings. My app is in final coding and releases in December so backed us into a corner time-wise. Rolling out trans-media is a bitch, but they have to go together, and this one went first. Lesson learned.

    1. ShanaC

      This happens a lot. Even for stuff that makes “most popular” page.

  27. DC10

    I think it’s an interesting twist that a VC has funded a business that is essentially out to eliminate the need for VCs. Entertainment is a business that frequently involves funding highly at-risk equity into projects, not too dissimilar to how venture capital firms invest, but the entertainment industry is continually looked at as being greedy and oppressive to its investees (and of course there are examples where the stereotype holds true). There is risk in every single project, it’s just Kickstarter has created an environment where the downside is covered by fans who will never share in the upside. I’m not entirely sure how I feel about this (though my gut reaction is negative).

  28. Guest

    I like IndieGoGo better, simply because there’s not as much of “approval” process and they a have “fixed funding” option.Don’t get me wrong, Kickstarter is #1, but because of their flaws, a #2 is becoming more and more viable.Let’s see what happens when equity crowdfunding goes legal.Also, let’s see if the niche crowdfunders for video, music (Acousta Launch), gaming (Mana crowd) will be able to supersede (or become acquired by) their all-in-one counterparts.I’d like to see more successful companies boostrap their way to glory. The problem is that there’s not much fame to things outside of VC. Failed VC startups seem to gather more attention than successful bootstrap companies. Which is more American? (Don’t get me wrong, USV is my top firm, mainly because I’m fan of their portfolio companies).

  29. marketingthemuse

    I funded a novel on Kickstarter-successfully-can’t praise this site enough. Mr. Wilson, if you’re looking for investment ops, how about a little ‘angel $$’ to underwrite a book about IT aimed at girls. Your wife and daughters will dig it. My mantra? If you don’t ask…..following you on Twitter, too.

  30. sachmo

    Kickstarter has been a gamechanger for hardware projects. It’s amazing to think it did not exist 5 years ago.

  31. pointsnfigures

    Smart VC, dumb sports fan. Knicks, Mets, Jets.

  32. bsoist

    Hey, what?!

  33. panterosa,

    love is when you love who someone is, and support them in being that