The Kickstarter Fulfillment Report
Our portfolio company Kickstarter released a report yesterday that was published by a Professor at the University Of Pennsylvania named Ethan Mollick. Ethan and his colleagues at Penn surveyed nearly 500,000 backers to look at failure rates across the entire Kickstarter marketplace. They did not survey other crowdfunding services so this data is solely about Kickstarter projects.
Here is what Ethan found:
- 9% of Kickstarter projects ultimately fail to deliver
- 65% of rewards are delivered “on time”
- failure rates are fairly consistent across categories
Here’s a chart of failure rates by category from the report
I really like what Kickstarter had to say about this report:
Is a 9% failure rate reasonable for a community of people trying to bring creative projects to life? We think so, but we also understand that the risk of failure may deter some people from participating. We respect that. We want everyone to understand exactly how Kickstarter works — that it’s not a store, and that amid creativity and innovation there is risk and failure.
Failure is to be expected in a marketplace. But we should also measure it and understand it so funders can “price the risk”. Right now, it seems that roughly one in ten Kickstarter projects fail. We should all understand that when we back a project. Doing so will be good for everyone.
.A NINE PERCENT “failure rate” is superb. The reciprocal — a 91% success rate — is so high as to be suspect. Not suggesting for a second that it is suspect, mind you.I personally would have expected a 50% failure rate in such creative endeavors.This effort at accountability is the essential ingredient in building trust in the crowdfunding space. It is, frankly, quite surprising to me and it makes me want to do business with Kickstarter.JLMwww.themusingsofthebigredca…
I agree Jeff. But it is also true that only 65% deliver on time. That does create some indigestion as well.
.Failure/success is a binary outcome.Time is a “waiter, my soup is not hot enough” outcome. You get no credit for being early and there are degrees of lateness.I doubt anyone is too concerned about the time issue but everyone is focused on the failure/success outcome.Stop beating yourself up. That’s my job.JLMwww.themusingsofthebigredca…
time issue is a killer.Prime and same-day/next-day delivery hasn’t taken off like wildfire for nothing.we are living in a world of instant gratification. longer the lead time for delivery demand falls off a cliff.ongoing delays and lack of transparency could even be worse than an outright fail
.Fair play to you though I do think there is an enormous difference between commodity delivery expectations and investment expectations.Investors, sooner or later, have to grapple with the reality that it always costs twice as much as initially expected and takes twice as long.An education, messaging issue?JLMwww.themusingsofthebigredca…
expectations sure. but next-day delivery is table stakes now.people happily buying stuff 6months+ in advance of receiving it is testament to Kickstarters smart messaging and positioning
.Agree more with you than you do with yourself as it relates to Amazon and buying “stuff.”Not so much on investments. Different game.Soccer v football.JLMwww.themusingsofthebigredca…
I went on my evening stroll and I have to admit I convinced myself that I was wrong.If you are trying to sell somebody on a hard concept or work with them to deliver a hard project where there are many risks and dependencies they do exactly what you are saying.I think projects would not get funded if they were conservative in their time estimates. Everyone expects they are aggressive and therefore you are doing a huge penalty to yourself if you put out a date you know you can make.I’ll give an example.We release software about six times a year. People ask us when the next release is coming out.Brutally honest: No idea there are a ton of things we are looking at and we are dependent on. Response: “OMG!! it’s never coming out!!”Conservative: 12 weeks longer than the usual 8 week because its a tough release: “That is just not acceptable it can’t work, let me call every day and slow things down”Don’t care: 8 weeks what it always does: “Great” When it comes out in 10 people have forgotten.
I agree with you more than you do yourself 🙂
If I was on Kickstarter team, I’d create a time KPI model that was tied to reputation of the team raising the $$$.10 credits = more than 30 days ahead of schedule8 credits = 15-30 days ahead of scheduleetc.There’d also be a time penalties model, e.g. Kickstarter gets a bigger slice of amount raised to cover their reputational risks.
.Any fair measure of reputation management is a huge driver. I buy used books on Amazon from whoever is in Texas but always the highest rated vendor. Never do anything different.JLMwww.themusingsofthebigredca…
“Stop beating yourself up. That’s my job.”I’m going to re-use that one. So, when is the book of JLM-isms coming-up?
He should beat himself up. The data is selective and doesn’t go into anywhere near enough detail to make decisions or changes that might be helpful for kickstarter.  It’s the type of gross overview that big picture thinkers use who don’t want to or can’t delve into details and just manage by numbers (something that I absolutely hate when dealing with big companies who do those surveys). It’s “nothing to see here, move along” type data.
.Careful, you are wandering into micro-aggression territory, no?Retreat to your safe zone and reconsider the harshness of your critique.JLMwww.themusingsofthebigredca…
True. I fully understand that it’s an investors job to worry about other things and not sweat the details. Henry Kravis and his two shirts a day would agree.Otoh in order for a business to stand the test of time having a 65% “on time” rate, while ok in the short term, isn’t a good thing unless you have some monopoly. Even Comcast probably does better than that.
.Consider also the possibility that Henry is just a short little sweaty guy and is playing defense v unpleasant body odor rather than a guy “sweating the details”, no?JLMwww.themusingsofthebigredca…
For your machatanim , knowledge of the yiddish world “schvitzer” may be helpful:http://www.bookwormroom.com…“Schvitzer” is a wonderful Yiddish word. Its literal meaning, derived from German, is “to sweat.” Yiddish, however, has layered something entirely different on top of it: a Schvitzer is an empty boaster, one who doesn’t actually do anything, but who presents himself at the end of the project covered with righteous perspiration.Perhaps a better way to put it might be that a schvitzer “talks a good game”. (This word doesn’t describe Henry of course..but applies to most if not all politicians. )Because of your new connection to the tribe you can now use pejorative words like schvitzer on an occasional basis the same way blacks use that word that only they can say with each other. Inlaws.
Agree. The time issue is big. The time it takes to get something is already long and becomes the opposite of what people are conditioned to expect. I can order things from amazon.com and get them overnight (even when it’s 2 day). That immediate gratification is a big deal. Kickstarter doesn’t provide that and the fact that even the promised date is suspect (for repeat backers who would know this) is a problem that almost certainly impacts how people back things.
not for me le.kickstarter is not an investment nor mentorship, it’s a gesture of support.their model works well cause i believe the majority of people who support projects view it as such.its kinda perfect for what it is.to me.dunno how many or what kinds of things you support here but sounds like you’ve done a few and feel like you’ve been burned.I don’t feel that way
The only things that I have backed at Kickstarter are things that Fred has suggested. In one case recently I didn’t get notification of the item that I was supposed to receive. I wrote to the person doing the project and they apologized and told me I could choose any reward even if it exceeded what I was entitled to. I haven’t done that so far. I was actually trying to figure out a way that I could get others to take advantage of the better options since I don’t see it as something that I need or want.It sounds like you do KS because it makes you feel good to help people or projects in this way. Not the same with me for this type of thing. I do have other things that I do that would fall into that category. I haven’t been burned in the sense that I care that much about this actually. I don’t even remember what I backed.One thing that is unfortunate about Kickstarter is that it appears that the presentation or the credentials of the creator are important in terms of what can be funded. This reminds me a bit (although not exactly) about watching a show like Shark Tank. It’s not just about the idea it’s about the pitch and how well you know your shit and how confident you come across. While there is no question that is important  I would guess that there are tons of people that can and do worthwhile things that don’t have the abilities to put together a cute video. (I am speaking strictly about videos that I have seen I have no data on the correlation between “act together” and funding of course). Everyday selling in business is not like taking a fundraising test and being grilled. Sales ability is important but it’s like comparing being good with pickup lines to being good as an actual spouse.
Thanks.We are different on that one that’s all.
Give the kickstarter donors some credit, that’s less digestion than many angel investors have.
a 91% success rate — is so high as to be suspect. Not suggesting for a second that it is suspect, mind you.Well it all goes by the definition of failure. According to one of the charts (attached) look at what people who had failed projects said. Even with a “failed” project many were happy with the outcome of the project and in some cases would back another project by the same creator. That shows a nice correlation between expectations as well as the temperament of the type of people that put money into these things. I would also imagine that there is some nice data around age of the person and income level, occupation that could also be mined and would be quite interesting.. Not enough is here unfortunately.There are at least a few phenomena going on here.One important one is that there is a great distance between when someone determines that a project has failed (months or years later) and when they actually parted with their money. If you give money back in January and it takes you 15 months to realize you aren’t going to get something you have been gently given hints along the way so it comes as no big surprise and the head of steam you might have had earlier is greatly diminished. Time helps in other words.We’ve all had this happen. Have a bad stay at a hotel and complain. As long as the hotel acts like they will give you something (or does give you something) you are cool. If later (say 1 week) you find out that you are only getting a small discount off the next stay you’ve already moved on to other things in your life and don’t care like you would way back when you departed the hotel….
I am the author of the report, there is a lot more data in the academic paper (http://papers.ssrn.com/sol3…, plus, as you suggest, I am working on a number of more in-depth studies. However, to answer part of your question, and quote from the paper:”Given that one effect of crowdfunding is to increase the diversity of people who can get access to funds, there was also a notable non-finding in the analysis of failures – the characteristics of the project creator were not significantly related to failure. There was no significant difference in failure rates between women and men, between highly educated and less educated creators, between teams and individual projects, between single or partnered creators, or between creators with children and those without.”
Thanks. Note the link has a stray “)” so you should remove that. (Try clicking and you will see).This is the correct link:http://papers.ssrn.com/sol3…This I actually find very very interesting and unexpected: There was no significant difference in failure rates between women and men, between highly educated and less educated creators, between teams and individual projects, between single or partnered creators, or between creators with children and those without.”That finding doesn’t make intuitive sense to me hard to wrap my head around that actually!
That is failure to deliver, not of campaigns themselves.
I’m with @JLM:disqus that this is excellent.I think a great job of curating honestly.Compared to the what 80% failure rate of venture funded companies quoted yesterday. That’s a scary number.
Transparency will increase throughput. Good on them.
there’s fail to deliver and there’s fail to deliver. not all are created equal.1/Scale of Project.a blowout from a small art project run by volunteers raising a couple of thousand is very different from a mega $3.5m blowout from a full corporate entity like we had last month with the Zano drone.2/ Honest Intentshit happens. things go wrong. we in startup land know that and are accepting of it more than most. as long as there was always honest intent to deliver and no deliberate funny business, we can take a loss on the chin. it’s part of the cost of being a patron/early adopter. but if there was deliberate deceit…different case entirely
Yup. You are 100% right and Kickstarter understands this issue better than any of us because they get the emails from the furious backers. They are working on some things that I expect will see the light of day next year to assist with so!e of the issues you raise
a consistent % rate of failure across all categories.is there a % breakdown of the reasons for failure?
Kids should be taught about risk in school. Know what it is and why they need to be able to deal with it.
Do these numbers cause any concern that Kickstarter is failing to attract (or is rejecting) truly ambitious projects?
Great question but I don’t think so from my experience.Buddy has done three massive raises around classic video games. Very ambitious but built against an existing community of support. That is key to Kickstarter in my experience.
do you think Kickstarter has created an algorithm that describes/ identifies ‘truly ambitious’?
It is interesting to note from that report that smaller projects (under $1K) had the highest failure rate. Larger dollar projects didn’t have the highest % of failure necessarily (Finding #3).
That’s what I would expect. Projects with more money committed to them are likely higher quality, definitely better capitalized projects
there are quite a few projects oversubscribed, at pretty high consumer prices (several hundred dollars), and in my opinion are pretty ambitious. if you look around i think you will find many projects that most would regard as impressive and ambitious.i never back kickstarters (except once for a friend) because i’d rather just wait for the kinks to get ironed out and get it on amazon and am not motivated by the charity/feel good component of kickstarter. but i’m impressed with a lot of stuff on there.
I don’t disagree. I was trying to keep my “data” blinders on and that question jumped out.
I’ve only backed things that Fred has recommended never anything else. To me I just look at it as supporting AVC. I agree with your view “kinks get worked out”. Ultimately if you see a neat gadget (the thing I would be likely to back) you want it now not have to wait for it.
A good chunk of the gap between Kickstarter and regular entrepreneurship failure rates I suspect comes from all the design and team-collection work that gets done before the crowdfunding.
such a provocateur.
Great word. Accurate!
Given my paticipation in a project raising over $150,000 that proceeded to implode, I think the performance is quite acceptable. In my project’s case the “head wearing the crown” was a true first time entrepreneur that was cavalier and made too many rash judgments. The kickstarter community would be well advised to understand more duebdiligence wise if delivery is truly very important and the money cannot be lost… As in our case a >$100 childrens learn to bicycle ride aid, Jyrobike.Additionally, it should be easier for people to recover their money, especially the ount over the goal. This would make kickstarter a fairer marketplace.
We need more analysis on failures, like this report. There isn’t enough of it, and it would be useful. The transparency demonstrated by Kickstarter is commanding and they set a standard for that industry.
yupbeing transparent about failure is something a lot of lip service is given to and neither easy to do nor done very often in a useful way.
The transparency demonstrated by Kickstarter is commanding and they set a standard for that industry.Key to this is the following:In March 2015, we invited a scholar from the Wharton School of the University of Pennsylvania to help answer this question.You know the saying. A good lawyer doesn’t ask a question if he doesn’t know the answer in advance. No surprises.I would guess that Kickstarter knew approximately where the results would fall prior to commissioning this “invited scholar”.  Which is smart and if they hadn’t known and invited him that would be stupid. Really stupid. So what they needed was someone that would lend legitimacy to a report that they could have easily created themselves. Smart thing to do. Watch and learn. Note referring to him as “invited scholar” and how important and authentic that sounds.
well, it’s better than no data, no? and i’m sure there were some insights that maybe weren’t shared, but were useful to them. why not.
Better in what way though? If data released is not accurate enough to present a fair and complete picture then it could also be misleading (note we don’t know what we don’t know that would change our minds).If you go out and poll potential voters but don’t qualify and say who the voters are how helpful is that? It could be of a group of college students and in no way represent everyone who will vote in an election but only a small slice. And even if they are college students they could be a student who is not voting or can’t vote (from another state).Let me ask you this. If you were thinking of investing in a business you would almost certainly want more granularity before making an investment decision (I know that I would).Not trying to rain on a parade just presenting a more skeptical view because to me, and I always say this, details matter.
The converse to the Law of Large Numbers, hm?Edit: actually, that was probably needlessly cryptic. Also, there are multiple possible converses, so here’s the one I meant. The Law of Large Numbers (for those unwilling to look it up) is just that taking enough samples at random eventually gets you a decent approximation of the whole picture; the catch is that “at random” is trickier than it sounds when it comes to people, as you mentioned: the odds of a fair coin versus the odds the coin is fair.
Yup > Without studying mechanisms of failure, we cannot understand the potential for success; and the opposite is not true. — The entrepreneurs that I have worked with often avoid this logic, becoming deterred by failure info-overload. This is often a first sign that the entrepreneur is not ready to take the reigns, emotionally. Thoughts?
what % of submissions to Kickstarter have been rejected over the lifetime of the company, does anyone know?
We’ve turned down about 30%, lifetime.
were any of those then successfully taken to competing crowdfunding sites?
When is the USV Fulfillment Report being issued?Is a 9% failure rate reasonable? 😉
and what of AVC? what % of posts are a failure, if any?
No way to measure that…it doesn’t monetize.
views? comments? votes? satoshi subscriptions?In The $5 Computer post Fred referenced the 21 Bitcoin Computer.Satoshi payments will revolutionise webonomics. everything will have the potential to be measured and monetized.a few months ago i suggested that advertising is not native to the internet. i believe that. content will rise up and advertising will fall away.
Alternatively, advertising will merely stop being treated differently from other content: it will become “art that makes you want to buy something”, and be judged on similar grounds to other art. Some ads are there already, at that.
And while it would be interesting to see the other end of the distribution too – the broad/middle/narrow soaraway “successes”, the real stuff is the 80% of strugglers in the middle. Just what are these people learning along their roads? When the world departs from their pre-analysis, what do they do then? Stay up all night to get it done on time? Change the spec here to make it deliverable there? These are the lessons. Making a success of a brilliant idea is often so much about opportunity and timing. Making a success of a partially-formed or more difficult idea is the world as it is. And can they pick themselves up to try to do it better next time?And what about the community support aspect of it – the kickstart to the kickstart perhaps. Well, that is a weakness rather than a strength. KS has to do more – and I know it tries – to showcase and present. Hey, if it wasn’t hard, everyone would be doing it.
Kickstarter’s mission is to help bring creative projects to life. Creative projects are notoriously resistant to optimization and instrumentation (Astra Taylor has a great discussion of this in The People’s Platform). This is the beginning of analytic understanding of creative production, which will help us succeed more in our creative projects in line with Kickstarter’s mission. Its important to understand the financial risk/reward when we fund or create a project, but the return on investment of a culture project is more than a financial return.
Could a side kick product like “Backer Insurance” work for a 10% premium on contribution?9% seems like it will go down over time and theres an actuarian bet to be had there I think.
Very happy as well to see Kickstarter making these statements. It is indeed important since KS founders often do not know enough at the time of the campaign to always hit the target. When even large companies with lots of experience have often significant delays in product launches, the 9% figure does not seem high at all. As well, this is a risk based operation and since in hardware NPD success if often under 50% then the 65% delivery rate is also very good. What is great is to see KS telling the truth. It is not a store, as it is not offering finished goods or services. Informed supporters should be better supporters and this is my hope. Thanks Fred.
Def of Project Failure: ” Projects were deemed failures if backers answered that they never expect to get the promised reward, or that they did receive a reward but it wasn’t what they were promised.”Why is an expectation of failure considered a failure? Shouldn’t the def of failure, first and foremost, be a non-raise, while receiving an inferior reward means the project was funded, yet with sub-par gratification.
~10% failure is consistent with my experience.65% “on time” is not at all consistent with my experience. I see maybe 20% are delivered in the promised month. Perhaps that is why the phrase “on time” is in quotes.
I agree. The number of KS projects I’ve backed is quickly approaching triple digits and it’s been my experience that most items are delivered well after the creator’s initial estimates.Maybe most people have a completely different experience and that’s why I see them losing their mind in the comments section when their reward is late. I always just assumed they were just fools.
It not if you fail, it’s how you fail. There is failure in secrecy and failure in sunshine.
One in ten fail to deliver rewards…failure rate of campaigns is around 60%, no? The challenge with the failure-to-deliver rate in my opinion is that contributors are not investors. They are reward-based backers, not risk-takers. The whole reason they can give without any securities law considerations is that there should not be a risk of loss. Ten percent is pretty high in that regard. Personally, I’ve backed more projects that didn’t deliver rewards than those that have – fortunately, it wasn’t a big deal. Not sure of the methods Kickstater used, but maybe people don’t want to report badly on their friends. Any way it goes, it makes non-securities crowd-funding look bad and has affected the reputation of reward-based crowdfunding overall.
I guess that most crowdfounder/backers have some notion about the risk involved in backing a project, but they somehow expect that the crowdfunding platform provider act as a shield in the case of failure. Now that JOBS Act III is almost ready to go, it will be interesting to see how equity based crowdfunding will interact with reward based crowdfunding, specially considering that small investors will be let into the game. How will backer/investor risk compare?Interesting times for small investors and startup founders.
I wonder if there is any data about failure vs. price point? I know most projects have multiple donation levels so it might be tricky to calculate, but whatever the price point is to get one of the things that is being pitched? That would be more valuable as a backer in terms of where I put my money. Is the failure rate higher if I’m spending $350 vs. $50? That sort of thing.
They should take into account the cost of the rewards. As someone who has pledged to almost 200 projects I’ve realized some of the largest rewards are the ones that disappear or don’t deliver.
The great thing about Kickstarter, those donating feel the benefit before the project/product even delivers. For most, I believe the reward is a chance to give, inspire and participate in the creative process.
Touched on the subject 2 years ago some of the failure lateness is due to bad logistics https://medium.com/the-crow…
I think the graph is purposly misleading in that it should show the failure rates as a stacked column. Right now it seams the failure rate is somewhere at 10 %, when it is actually at about 30 %.
I hardly believe that 65% of projects are delivered on time, at least based on my experience. I backed a dozen projects in the last three years (mostly hardware tech), and all but one have been delayed, often by several months. This is the main reason why I stopped backing stuff on Kickstarter.
I agree that the failure rate is more than reasonable. I love Kickstarter and have been parts of good and bad projects, both on the backer end and also on the campaigning side. However I do wish that Kickstarter would be more clear about risks associated and be more transparent. Under the current format, it’s also very reasonable for a new buyer to assume that supporting a campaign is no different than buying something on Amazon.