The $100M Deal for Kickstarter to use Blockchain

https://fortune.com/crypto/2024/03/11/kickstarter-blockchain-a16z-crypto-secret-investment-chris-dixon/

by bmm6o • 2 years ago

52 62 2 years ago

fortune.com

bmm6o• 2 years ago

Archive link: https://web.archive.org/web/20240311163832/https://fortune.c...

ceejayoz• 2 years ago

https://www.web3isgoinggreat.com/?id=kickstarter-continues-w...

Back in 2022:

Kickstarter's COO, Sean Leow, did an interview with The Beat to discuss the announcement. He seemed to be a little bit confused on the whole concept throughout, and seemed to believe that "open source" is some sort of competing idea to blockchains. At one point he stated, "We believe that that data can be structured in a way through a blockchain where it ... can move in a much more efficient and effective way between services ... in a way that open source doesn't allow". Later in the interview he spoke about governance, saying, "our understanding is that [governance] is done more effectively with blockchain then with open-source."

yieldcrv2• 2 years ago

the files are in the computer!?

so people are validating their own feelings on blockchain based on an incoherent ignorant executive trying to shoehorn blockchain into something to stay relevant? fascinating

addendum: its funny that the investors were trying to use this ignorance to shove Celo EVM down their throat, but even funnier that there are waaay more EVMs now, with another one launching every week

edent• 2 years ago

I think this is what a lot of people don't get about taking funding from a VC:

The grand but improbable plan called for shifting its entire platform onto a blockchain called Celo, another a16z portfolio company

(emphasis added)

I was at an advertising startup which got a massive investment from SoftBank. One of the people involved in signing the deal told me that the main benefit wasn't the $$$; it was that the other companies which were funded by SoftBank would be encouraged to use our services. And, of course, we in return would use our stablemates' services where we could.

Yes, money is nice. But becoming part of a mutually-reinforcing collective is the real prize.

In this case, it was obviously an attempt to stimulate a market into existence. We should all be grateful it failed!

lupire3• 2 years ago

It's a terrible idea (for the companies) that sounds clever.

It's one thing to offer your product to "friend" companies for dogfood feedback. But pressuring stablemates to use the product creates a fake product market for that distracts from building good product, and invites the investor to sacrifice your company to help a different one. But you don't have stock in that other company, do you? If you want the companies to share fate, merge companies.

rsynnott6• 2 years ago

The blockchain plan seemed impossible—and that would soon prove to be the case.

As is tradition.

(Did any company _ever_ launch anything borderline successful with The Almighty Blockchain(TM) that wasn't just some sort of token?)

pavlov• 2 years ago

"Did any company _ever_ launch anything borderline successful with The Almighty Blockchain(TM) that wasn't just some sort of token?"

No. But that only makes the goal more alluring:

"We could be the first company to make this work and unlock the untold riches of Blockchain as foretold by prophecy and the iron will of cryptographic destiny!"

Enough venture capitalists seem to have the faith too, to keep the money flowing despite lack of traction.

Blockchain is really the Philosopher's Stone for people who believe software is some kind of alchemy.

corytheboyd• 2 years ago

Enough venture capitalists seem to have the faith too, to keep the money flowing despite lack of traction.

They only need to win once. When you’re the chip leader, you can afford to throw down some big bets and lose.

wlll• 2 years ago

I knew a guy who was trying to launch a DAO backed space based solar company. I'm pretty sure it went absolutely no-where.

roomey• 2 years ago

That was a book as far as I know. Daniel Suarez's critical mass.

If it was done in real life too I'm actually at the point where I think that guy is a prophet ;)

yieldcrv2• 2 years ago

The answer to your question is yes, but you didn’t notice because there was no token, the answer to your next question is no, it probably doesn’t match your definition of success and it doesn’t matter that you weren’t the market for it

as the point is that tokens are very effective advertising engines

HideousKojima• 2 years ago

Silk Road? But as far as legal things go I'm drawing a blank.

rsynnott6• 2 years ago

That's more using cryptocurrency. It didn't run on a blockchain or anything.

hanniabu2• 2 years ago

Farcaster

rsynnott6• 2 years ago

Does anyone... use this? Is there even a clear description of what it _is_ anywhere? It looks like it's probably an alternative to ActivityPub or that Bluesky thing, but the descriptions all seem very... hype-y.

In any event, I'm not sure that I'd call this successful, precisely. Might be in the future, who knows, can't on a cursory look find anything concrete about usership. But isn't now.

(Also, personally I would not have named a social network thingy over a fake transport system run by evil computers, but that's just me.)

throw4847285• 2 years ago

I've never heard of it, but I love that there's another startup named after a malevolent technology from fantasy or science fiction.

kiicia• 2 years ago

Bloclchain is still an answer to question no one knows

samatman• 2 years ago

The purpose of a blockchain is digital scarcity. If the application doesn't need digital scarcity, it doesn't need a blockchain.

So yes, if you exclude the use case for a blockchain, there aren't a lot of blockchain use cases left. But what have you actually accomplished by structuring the question this way?

rsynnott6• 2 years ago

At one time, it was extremely fashionable to say "use a blockchain for [random thing]", and much VC funding was ploughed into it. As far as I can see, it all came to naught.

nicholasbraker• 2 years ago

Quant does. But next to that, anything blockchain is rife with scams and solutions searching for a problem..

CM304• 2 years ago

Ah Kickstarter. I see why they tried the blockchain thing, but it probably wasn't the best decision for that particular company given their audience's utter disdain for crypto and web 3 in general.

As for this:

The biggest problem for Kickstarter, though, may be that time has simply passed it by. “I feel like they just were left in the dust culturally"

I'm not sure that's really the whole story. The story (at least from what I can tell) is just that crowdfunding has developed a terrible reputation due to all the scams and failed promises from big name projects there, so people don't really take it seriously anymore. The rise in popularity for things like Patreon isn't a replacement for that, it's a move to a setup where creators are expected to show their work on a regular basis and provide an actual return on investment on a shorter timeframe than 'whenever it's ready'.

gafferongames• 2 years ago

"The story (at least from what I can tell) is just that crowdfunding has developed a terrible reputation due to all the scams and failed promises from big name projects there, so people don't really take it seriously anymore."

Sounds like a great fit for crypto!

rsynnott6• 2 years ago

I'm not sure they actually _had_ a critical problem, or at least didn't before the blockchain thing; it's just that it was a pretty limited market. AIUI they _were_ profitable, but they were never going to be a multi-billion dollar company. The blockchain thing did damage their reputation quite badly, while simultaneously showing that they weren't essential (big important creators were able to use something else.)

(It's _really_ weird that they gave up on attempting to compete with Patreon in a likely larger market, tho.)

jprete2• 2 years ago

I agree with you!

I have some visibility into this space through the lens of "high-end" boardgaming (big boxes, frequently lots of minis, very high production value, and usually high time commitment to learn and play).

Crowdfunding's first use case was speculative investment in projects that might not ever succeed. I think this space has a big inherent trust deficit and Kickstarter can never solve it because Kickstarter will always have strong local incentives to not kick sketchy founders off of the platform, but Kickstarter is absorbing some of the loss of trust there because it's their platform.

There is another use case for crowdfunding - coordinating preorders of products that need enough orders to be worth a production run, but that are otherwise low-risk. This model works pretty well but Kickstarter also has competition from Backerkit in the space. I think Backerkit is also more focused on the safer use case of preorder coordination and less on the "speculative product" case.

lupire3• 2 years ago

Incorrect. Crowdfunding's first use case was financing production of an invention.

The speculative investment stuff was the scam Kickstarter cultivated in the chase for infinite growth and VC returns. Crowdfunding from the general public for investment is generally illegal for exactly this rest.

acaloiar• 2 years ago

I think this space has a big inherent trust deficit and Kickstarter can never solve it because Kickstarter will always have strong local incentives to not kick sketchy founders off of the platform

I understand where you're coming from; I believe the premise is that because Kickstarter receive their fee whether projects deliver or not, that it's profitable to not remove any projects. That's of course true in the short term.

But the cumulative effect of that myopia is that the projects seeking funding on the platform has plateaued for years. The resulting lack of trust in the system has culminated in fewer projects using Kickstarter, because fewer users trust Kickstarter to adequately police projects. Robust project policing would lead to greater trust, a greater number of projects reaching funding goals, and ultimately more fees for the company. It's emphatically in their interest to remove unsavory projects, regardless of the immediate fee loss. The increase in trust is a multiplier that'll far exceed any immediate loss.

bcrosby952• 2 years ago

Crowdfunding is big in the table top rpg industry. Lots of small companies used it for new products and even reprints.

But for the past 6 months or so, they've been slowly moving to backerkit. Including a $4mil funding of one of them: https://www.backerkit.com/c/projects/mcdm-productions/mcdm-r...

CM304• 2 years ago

It's interesting many people mention crowdfunding as working for tabletop games. Seems like the setup lends itself better to those than video games, consumer products or traditional forms of media.

Are there any reasons that may be the case?

bmer2• 2 years ago

Although, even Patreon has this issue, since there is no hard requirement to be showing your work regularly; just more of an expectation due to the design of the system.

Part of this seems to be due to the reality of creative work: you need to be willing to fund failures as much as successes, or you'll end up getting more-of-the-same rather than something new. E.g. existing creators with well-established patron bases can feel pressured to make more-of-the-same, rather than experimenting, leading to their burnout.

The other part of it seems to honestly be gullibility (on the part of backers) and lack of focus on realistic, achievable goals ("go small, then incrementally bigger") from those seeking funding. The normalization/glorification of advertising culture (e.g. "fake it till you make it") is a non-trivial contributor to this issue, ultimately making it difficult to distinguish between grifters and people who drank the kool-aid.

michaelt2• 2 years ago

Although, even Patreon has this issue, since there is no hard requirement to be showing your work regularly

I'm sure different people use Patreon differently, but there's never really been a trust problem with Patreon for me because the sums are so small and I can stop paying whenever I like.

People on kickstarter are understandably salty when they pay $350 for a chair and it doesn't show up.

But if I pay someone $5/month for youtube videos and their output slows down or drops in quality, I can just stop paying, and keep getting the videos for free on youtube.

nicwolff• 2 years ago

Most Patreons also offer per-episode payment, which zeroes out the risk that you'll pay a non-producing creator anything at all.

CM304• 2 years ago

lack of focus on realistic, achievable goals ("go small, then incrementally bigger")

This is basically the problem with stretch goals in a nutshell. Once you get a lot of money and interest, it's easy to add more and more promises to keep people adding money to the pot.

The problem is that each of these things requires more time and effort (sometimes even exponentially more), so you end up stuck in a quagmire of 'fulfil a huge laundry list of promised features before you run out of money'.

I suspect Patreon has some of this for similar reasons. The more money you make, the higher people's expectations are, and the more insane your own promises will get to try and justify the amount of money you're bringing in.

rtkwe2• 2 years ago

Pure anecdata but I've backed ~180 projects on KS and I've only had <6 that have completely failed to deliver or have had huge issues with the delivered products. There's a lot of long delayed ones on that list but only a few that have truly felt like I didn't eventually get what I paid for or reasonably close to it.

If you're a bit choosier about the things you back you can get pretty good results from the site.

flir• 2 years ago

That's an insane number (to me). What do you consider to be your "best buy"?

manicennui• 2 years ago

Frankly, this is nonsense. Total funds going to projects has gone up over time. I support artists on Kickstarter frequently. What has likely happened is that Kickstarter's investors realized that it wasn't going to make them as much money as they'd like, nothing more.

hn_throwaway_99• 2 years ago

Kickstarter did have a ton of scams, but my favorite "rise from the ashes" story was the ZPM Espresso machine. ZPM promised a revolutionary espresso machine that used a precisely controlled thermoblock (instead of a boiler) to control temperatures accurately.

I don't think ZPM was an intentional scam, but the founders got in way over their heads, and when the popularity of the product exploded, they then had to figure out all these volume manufacturing problems as opposed to just building some prototypes for a small number of backers (there is a cautionary tale about startups taking too much VC money in here somewhere...) Anyway, ZPM crashed and burned, and as far as I know none of the backers got their money back. Again, I don't think it was really a scam, all that money was just spent on things for the project. I don't think anyone got their machine, but maybe a few folks did, not sure.

Anyway, another company, Decent Espresso, came along and bought out ZPM's patents (note, backers still received nothing afaik), but now the Decent machine is an absolute marvel, with temperature and pressure profiling capabilities that are nuts. The machine is also not cheap (the original promise of ZPM), but it's still cool that in the world of so much BS where scammers produce nothing of value (cough Theranos cough), that at least in this case something really cool came of it.

CM304• 2 years ago

That's a really cool story. Nice to see the ZPM Espresso machine actually got made.

And yeah, that's another good point there. At least half the time, the problem with these projects isn't that they're intentional scams. It's that they're run by people who've never had to launch a product/business before (especially not on a large scale) and severely underestimate the amount of work, time and money required to get it to market. Making say, $200K on a $50K campaign for a new indie game is great and all, except when you need to hire 20+ people to work on it, pay them salaries, pay for tools, potentially pay for office space, pay for certification for consoles/Steam, pay for the website and marketing and trailer production and voice acting and...

Suddenly, all that money lasts you maybe 3 months.

A lot of projects go that way.

paxys• 2 years ago

While I'm sure some percentage of Kickstarters were outright scams, in general it is always a bad idea to push "investments" on people who cannot grasp the fact that 90%+ of them will fail despite the best efforts of the founders. That's just how any new venture works.

Mistletoe• 2 years ago

When will Kickstarter pivot to AI?

rsynnott6• 2 years ago

When it wants to drive away the last three remaining users, I assume.

helsinkiandrew• 2 years ago

Didn't know that the original Fleabag Edinburgh show was funded on Kickstarter.

The video is worth watching if you've seen it/the TV adaptation: https://www.kickstarter.com/projects/drywrite/fleabag

eterm• 2 years ago

Over 10 years ago, back when Kickstarter was having it's moment.

lupire3• 2 years ago

Pre-profitability, in the charitable phase of VC startup, before it collapsed under the chase for return.

drdrek• 2 years ago

Years ago I backed two computer games. They both took about 5 years to be made and by the time they were ready I have already forgotten buying them. (They were good tho) Never felt the need to do that again.

Its a niche idea, unsuitable for VC money. On the other hand, non financial goals for companies almost always end badly. When you have more than one goal there is always an excuse for management to do what ever they want.

Want to do something for profits? we need this for the company survival. Want to do something financially irresponsible? Its aligned to our values. Unrelated to the core business? Social responsibility. Leave creative outlets to creative syndicates, leave charity work to non profits and leave money making to for profit companies... don't be another one of those that break the mold only to discover that people that came before you where not as dumb as you thought. Basically don't be Crypto.

nottorp3• 2 years ago

They both took about 5 years to be made and by the time they were ready I have already forgotten buying them. (They were good tho) Never felt the need to do that again.

What's wrong with that? I've backed more than two games. Some were good, some were bad, some failed completely. But I knew that from the beginning. And I just prepaid for the games at a discount, I didn't buy $5000 packages or anything like that.

I might do that again, but every game I picked was mentioned in the gaming press, so was promising enough to get their attention. I haven't seen that lately. No mention of kickstarter, indiegogo, gofundme or whatever else is out there.

Is it because game makers don't crowdfund any more, or because the press only covers AAAs now?

Goronmon• 2 years ago

What's wrong with that?

For me it comes down to numbers. I don't want for games to play. I already lack the time to play all the games I am interested in.

And that's for games that have been released that are a relatively known result.

What advantage is there for me to throw money at hypothetical games that in the future may result in something I am interested in playing? Especially when there is a decent chance nothing gets released at all?

baud147258• 2 years ago

Is it because game makers don't crowdfund any more, or because the press only covers AAAs now?

I took part in one campaign for a video game last year, but it's a niche game in a niche genre, so I don't think it's been covered anywhere. Though two video game projects I backed in 2020 & 2021 have likely been covered, though I haven't kept up with the news. And I agree that the gaming press have stopped covering crowdfunding, mostly I guess because all the failed projects and scams, not helped by the long delays.

nottorp3• 2 years ago

The article oozes an obsession with growth. Even before the blockchain incident. Which ruins any Kickstarter credibility btw.

Wouldn't Kickstarter have been fine if they just didn't take outside investment and just stayed a small entity bringing financing to some small projects and making some extra money in the process?

Why compete with Patreon? Personally I would and have thrown a one time few $ to computer game projects I was interested in on most crowdfunding platforms. But I'll never pay for a subscription.

nazca• 2 years ago

If I needed to launder money, I would think running crypto through a Kickstater project would be a good way to do it. At least below a certain threshold where you don't create significant scrutiny.

paulgerhardt3• 2 years ago

Kickstarter was and will always be beholden to their credit card processors and a painful lesson in picking one’s payment provider carefully. It’s your payment processors fraud risk department which dictates which products and services you offer not your own team. This decision is a 100% dictated by pigeonholing themselves here and losing out to gofundme.

After Philips caused a stink about LifX[1], it was the threat of losing their payment partners that caused Kickstarter to ban all sales of hardware [2]. They would later walk back that decision but not before we launched our own open source competitor that went on to do $100m, including Bitcoin support in 2012 [3].

Which is to say decentralized payment systems solve a lot of problems for crowdfunding platforms. Specifically Kickstarter missed out on the explosive growth that GoFundMe captured because Kickstarters payment processor said “no” and GoFundMe’s said “yes”.

But switching to Celo or some other platform in 2021+ feels too little too late for a platform whose culture has ossified.

[1] https://www.npr.org/sections/alltechconsidered/2012/09/03/16...

[2] https://techcrunch.com/2012/10/07/the-story-of-lockitron-cro...

[3] https://github.com/apigy/selfstarter/pull/22

mecredis• 2 years ago

You’re making a lot of assumptions about what was happening behind the scenes with a payment processor agreement you weren’t privy to. Kickstarter was always and devoutly uninterested in medical fundraising, so missing out on GoFundMe’s growth was a feature, not a bug.

paulgerhardt3• 2 years ago

I’m referring to the period between 2010 and 2013. I suspect we were both privy to a lot of conversations we can’t share here. I am familiar with those processor conversations. GoFundMe didn’t pivot to primarily medical fundraising until later.

But as this is all ancient history why did Kickstarter walk back their anti-tech / anti-hardware position? At the time it felt like they really wanted to double down on artistic creators.

lelanthran• 2 years ago

They would later walk back that decision but not before we launched our own open source competitor that went on to do $100m,

What does that mean? $100m revenue in a financial year? $100m since inception?

TBH, at those numbers you are self-sufficient and there are no upsides to taking VC money, only downsides.

paulgerhardt3• 2 years ago

It was an open source crowdfunding platform that raised $100m collectively for projects that used it.

Ie Lockitron raised $2.2m in presales with it. Tile raised $2.6m in presales with it. And so on.

Unlike Kickstarter it did not take a 8-10% fee of funds raised. It was not a primary business for us. Just something we casually maintained because we coincidentally had a bunch of payment processors in our YC batch that year so spinning it up was less than a weekend’s worth of work given our connections.

I am pretty indifferent now but at the time I was infuriated that Kickstarter drew an arbitrary line between a creative and a founder. It simultaneously marketed itself as the democratic fundraising platform for artists and was perfectly opaque (and self-contradictory) on which projects they would gatekeep from their platform once they started getting heat from places like NPR.

At the time I took a hardline approach that the way to do good was to give people access to tools not restrict them from a platform. Enough time has passed that I see that’s a bit reductive.

The $100M Deal for Kickstarter to use Blockchain

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