Posts from Kickstarter

When people ask me, "how do you know which companies and services are going to be the biggest successes?", I usually tell them to look for the companies and services that are mocked and misunderstood. For some reason, that correlates highly with the biggest breakout successes.

Twitter is a great example of this. For years, every post, column, or article written about Twitter would have comment after comment making fun of a service where people "told the world what they had for lunch." Of course, people were doing that on Twitter and people still do that on Twitter. But what those mocking Twitter were missing is that in between the tweets about pizza and pita were posts about politics and poetry. There was substance in the midst of nonsense.

And all the while that those mocking Twitter were obsessing about the nonsense, the substance was increasing and the usage was growing. Comscore has Twitter's monthly users at ~170mm people worldwide, up >60% in the past year. That makes Twitter one of the top twenty websites in the world and it is growing faster than most of those twenty websites. That is what I call "breakout success."

I woke up thinking about this because before I went to bed last night I watched last night's episode of Rock Center with Brian Williams. They had a piece on our portfolio company Kickstarter. The piece itself was pretty good. But at the end, Brian Williams discussed it with the Kate Snow (who did the piece), and he said something like "so this is like the guy on the street asking for a handout?".

Yeah, just like that Brian.

Kickstarter couldn't be farther from the "guy on the street asking for a handout" and yet that was Brian's takeaway after watching the piece (or maybe he didn't watch it). Either way he mocked Kickstarter and misunderstands it. And that is fine with me. Because its a signal that Kickstarter is on to something big.

I knew that already, but situations like this are reinforcing for me. They are the "tell". So when your company and services gets mocked and is misunderstood by most everyone, particularly the mainstream press and media, just smile and keep doing what you are doing. You are on to something big.

Image from StartupQuote.com

Since the early days of this blog, it has been filled with musings on how creativity will be rewarded in the internet age. It is a theme I've come back to again and again. These thoughts have worked their way into our investment thesis and our portfolio. Investments like Etsy, Kickstarter, SoundCloud, and many others have come from this line of thinking.

So when I saw what Lous CK did last week, I was so excited. For those who don't know, Louis CK is a comedian, a really funny comedian, who made a one hour comedy special and put it on the Internet for anyone to buy/stream for $5. You can "buy the thing" here.

This week, Louis shared the finacial details of his experiment with everyone. Here are some of the salient details:

First of all, this was a premium video production, shot with six cameras over two performances at the Beacon Theater, which is a high-priced elite Manhattan venue. I directed this video myself and the production of the video cost around $170,000. (This was largely paid for by the tickets bought by the audiences at both shows). The material in the video was developed over months on the road and has never been seen on my show (LOUIE) or on any other special. The risks were thus: every new generation of material I create is my income, it's like a farmer's annual crop. The time and effort on my part was far more than if I'd done it with a big company. If I'd done it with a big company, I would have a guarantee of a sizable fee, as opposed to this way, where I'm actually investing my own money.

The development of the website, which needed to be a very robust, reliable and carefully constructed website, was around $32,000. We worked for a number of weeks poring over the site to make sure every detail would give buyers a simple, optimal and humane experience for buying the video. I edited the video around the clock for the weeks between the show and the launch.

The show went on sale at noon on Saturday, December 10th. 12 hours later, we had over 50,000 purchases and had earned $250,000, breaking even on the cost of production and website. As of Today, we've sold over 110,000 copies for a total of over $500,000. Minus some money for PayPal charges etc, I have a profit around $200,000 (after taxes $75.58). This is less than I would have been paid by a large company to simply perform the show and let them sell it to you, but they would have charged you about $20 for the video. They would have given you an encrypted and regionally restricted video of limited value, and they would have owned your private information for their own use. They would have withheld international availability indefinitely. This way, you only paid $5, you can use the video any way you want, and you can watch it in Dublin, whatever the city is in Belgium, or Dubai. I got paid nice, and I still own the video (as do you). You never have to join anything, and you never have to hear from us again.

So Louis' experiment was a financial success. But more than that, it is a business model success. He has recouped his investment, is well into the black, and he owns the rights to his creativity without any limits on what he can do with it. He is able to sell it everywhere in the world at the same time without any DRM on it. And he will continue to make money from this content for many months (years?) to come.

Some will say that Louis can do this because he is a star. That is true. And I sure hope other stars will follow his lead and go direct to their fans. They can also go direct to their fans and raise the upfront production costs on Kickstarter. They can use any number of internet services to process the payments (paypal), host the video (vimeo), and get distribution (twitter). This is not that hard.

But this can also work for emerging artists. They won't make as much money as Louis CK, but they also don't need to make as large of an investment either. And over time, if their work is good, their audience will grow and the investments they can make and the profits they can make will increase.

The business model of going direct to the fans is powerful, it has none of the negative issues of the existing business model (like fucking with the architecture of the net in a naive attempt to quell piracy) and is going to work bigtime. Thanks Louis CK for shining on a huge bright light on that fact for the past couple weeks. And thanks for the laughs you gave me and the Gotham Gal on thursday night.

I backed a couple Kickstarter projects this week and I thought you ought to know about them.

The first is from Josh Harris. Yes, the Josh Harris who was one of NYC's most notable entrepreneurs in the mid and late 90s. The Josh Harris who threw killer parties, did the Quiet and We Live In Public projetcs, and the Josh Harris who was the first person I ever met who did podcasting and videocasting on the internet. Josh wants to build an Internet Television Network called The Wired City. Here's the video introducing the concept.

The Wired City is an extension of everything Josh has been working on over the past fifteen years and is exactly the kind of super creative project that Kickstarter is perfect for. If you'd like to back this project like I did, click here and go for it.

The second one is from Brian August. He wants to build an augemented reality app for the iPhone that will allow users to document their stories of the Twin Towers of the World Trade Center in NYC. Here's his video:

Brian's project has 17 days left and he's closing in on his target. If you'd like to insure this app becomes a reality, click here and back it.

Our best investments have emergent use cases that the founders never considered when they launched them. Kickstarter is showing that in spades right now. When Perry initially imagined Kickstarter almost ten years ago now as a way to raise money for a music festival, he certainly never thought a golf pro would use Kickstarter to raise the sponsorship money he needs to play a season on the pro tour. And yet that is exactly what is happening right now.

I just contributed to Mike D's campaign to raise enough money to spend a year playing professional golf (and make a documentary about it). The rewards are particularly interesting and include golf lessons, a round with Mike D, and even an entire corporate outing. In a sense, Mike is taking the classic big brand sponsorship model and crowdsourcing it with Kickstarter. Awesome.

We largely invest in consumer web services with a large number of engaged users where the users create the content. Services like this can become messy and hard to navigate. There is always a signal to noise issue.

I'm a big fan of curation in these services. Twitter has lists. Etsy has favorites. Tumblr has tag pages. These are all variations of curation in services that have a lot of noise in them.

Recently Kickstarter launched their own version of curation called Curated Pages. In the Kickstarter model, "Curated Pages are a way for organizations, institutions, and (soon) individuals to share projects they love on Kickstarter."

Here are some of my favorite Curated Pages:

The Magnum Foundation Emergency Fund – The Magnum Foundation Emergency Fund provides grants to photographers who are documenting social and political issues around the world. Now with Kickstarter, we can all help fund these important projects.

NYU's ITP Program – NYC's "media lab" and one of the most impactful and important pieces of NYC's tech community. They've curated a page of projects they like.

Creative Commons – The Creative Commons organization evangelizes for technology and legal frameworks that facilitate sharing and creativity.

The Sundance Institute – A curated page promoting Kickstarter projects from Sundance supported artists.

You can find all of the current curated pages at the bottom of the Kickstarter home page.

If you are interested in curating a page on Kickstarter, this feature will be made available to everyone soon.

If you are building a marketplace or a social platform, make sure to build curation into your model. It will make the service easier for everyone to navigate, particularly new users.

At Union Square Ventures, we pride ourselves on our transparency and openness. Wednesday's Airbnb post and Paul Graham's followup posting of our email thread on that opportunity is a good example of where being open benefits everyone involved, from Airbnb, to Y Combinator, to Union Square Ventures, and mostly to entrepreneurs out there who have always been curious what really goes on.

But there are plenty of times when we are not open. If an entrepreneur comes in and pitches us on an investment, we don't blog about it. We have all sorts of things going on in our portfolio right now that we'd love to talk about but obviously we can't and won't. And when we make an investment that the people involved decide should be kept quiet, we are fully capable of doing that.

Today, I wrote a short blog post on USV.com about our portfolio company Kickstarter. We've been an investor in Kickstarter since the fall of 2009 but are only talking about it now that everyone involved is comfortable with making the investment public.

We prefer to be open and transparent, but that is not always the appropriate or desired posture. And when we are expected to be discreet, we are fully able to do that.