Kickstarter: A scam?

Gerry Canavan points toward an account of why Kickstarter is a scam. As someone who has long suspected that Chicago’s great start-up, Groupon, may actually be a conscious scam to defraud investors — and I’m so dedicated to this view that I actually read a good chunk of their IPO prospectus — I was of course pleased to see yet another “cool” web service taken down.

The basic point is that Kickstarter amounts to a hugely expensive web-hosting service, which makes its money by skimming a percentage off the financial transactions it intermediates. Yet this is supposed to be okay, because they’re cool people:

People who think outside the box, creative types who don’t want to be told what to do, trailblazers and mavericks with new ideas. They’re rethinking everything, breaking down barriers, and bringing their fresh, youthful flair to overturn staid, conventional, old-fashioned paradigms. These people support lcoal artists, local musicians, local bakeries, local apps and locavorism; social enterprises, organic food, micro-breweries, open source software, peer-to-peer production, collaborative consumption, volunteering, making the world a better place, community-supported agriculture; simplicity, minimalism, spiritual but not religious, being a maker, not just a consumer; digital nomadism, owning less and experiencing more; being your own boss, being passionate, being connected, being involved; DIY and knowing exactly who the fuck you are on a Sunday morning.

Surely we’re all willing to pay a coolness premium.

13 thoughts on “Kickstarter: A scam?

  1. If kickstarter’s a scam, then what is Flattr? Taking money from the unpopular and needy (in a celebrity obsessed world) to pay the popular and successful? Be interested in Canavan or zunguzungu’s comments.

    Bless Hill’s cotton little socks, the economic analysis may or may not be pseudo precocious 10 year old bad but we’ll never know as he hasn’t provided any argumentative analysis as to why. Oh, well. I’ll carry on looking at the evidence that IS available to me.

  2. Scam is far too strong. Kickstartr offers two things more than web hosting:

    1. Insurance against projects without traction (ie., if amount x isn’t met by time y, nobody pays)
    2. Brand recognition (you don’t have to explain what the fuck a “kickstartr” project is as much as if you were rolling your own).

    That said, those two features will not be worth the price for some. But that’s not a scam, that’s simply a weighting of cost/benefit.

  3. We need a competitor that is non-profit and offers the same services for free.

    I’m about to launch a couple projects and I’m still debating between Kickstarter and IndiGoGo which also skims money but in a different way.

    Does anyone know of an alternative?

  4. Kickstarter’s name recognition is obviously quite valuable. Comparing what Kickstarter offers to generic web-hosting and then calling it a scam is frankly idiotic. Why is the success rate so high if it’s such a scam? Why has it been so successful? Why do these people, all of whom are presumably tech savvy and would know how to make a simple webpage, turn to Kickstarter? I mean… I don’t like capitalism either, but the argument that Kickstarter is a scam is a really dumb way to try to take down techno-hipsters, capitalism, or whatever.

  5. It’s like saying that hiring a very well-connected real estate agent is a scam because For Sale signs cost almost nothing. Usually when two parties are making non-trivial amounts of money without doing a whole lot, they aren’t the ones getting scammed.

  6. For me, the argument loses credibility with this sentence: “The reason [Kickstarter] ought to be put out of business is that it is overcharging its customers for the value it offers, i.e. it is a scam.” By that definition, isn’t almost any profitable company a scam?

    The way I would normally understand the term, “scam” implies some degree of fraud. If Kickstarter were materially misrepresenting the service they provide, then the label would be reasonable; but no such claim is made in the Mr. Teacup post. The value Kickstarter adds may not be sufficient to justify the price — although as one who’s tried to roll his own fundraising solution with embarrassing results, I think it’s easy to underestimate that value — but that seems like a choice that individual customers must (and will) make for themselves.

    Maybe people somewhere are actually being tricked into using Kickstarter against their own best interests, but if so, that needs to actually be documented.

  7. Brand recognition counts for a lot. Also there is the utility of people being able to browse the site in a centralised way to fund things they think might be cool. I do think you are broadly right about the cost, but I wouldn’t use the word scam. This said, I have considered using it simply for the latter two reasons.

    It does seem that the Kickstarter thing would be an awesome plugin for popular content management systems to let people escape them. Something I’ll put on the list of things that need coding.

    When we have a whip round on the blog it seems to work out. Funded some big things.

  8. Kickstarter is a scam, but for entirely different reasons to what you describe. I’ve been involved in the funding of over 30 projects, over the past two years. All have promised tangible rewards (merchandise, program licences, etc), many of the deadlines for delivery have come and gone without acknowledgement from the project initiators. A number of them refuse to respond to communications, others keep pushing the deadline for delivery out by “a few months” or “a year”. Kickstarter themselves refuse to answer questions relating to this, and CC companies refuse to reimburse because of the time between transaction and realization that you’ve been defrauded. These aren’t small projects either – many of them were in the $10k-$1m funding range.

    Obviously, once I realized the site was a scam, I stopped backing projects – that doesn’t help me recover the $3k-odd that I’ve already flushed supporting these con artists. I doubt that anyone who uses the site is actually legit, and neither Kickstarter nor Amazon gaf as they take their 5% off the top, so it’s just a cash cow for them. I’ve reported the site to the ACCC, but they have no power to investigate/help as the companies are American.

  9. Until Kickstarter has some sort of fund-gating system in place, such as an escrow account to provide installments to project authors on a milestone basis and a refund mechanism of monies remaining in escrow in case the project fails to deliver, I will back no projects. It is far, far too easy for a project to get overfunded (another problem they need to address by simply stopping the accepting of donations once the goal is reached) leading the authors to simply decide it is easier to skip town with the money than actually work toward delivery. If one asks for $100K in funding and gets $5 million instead, where is the motivation to do *anything* — you have already been “rewarded” and good faith is the first thing to go out the window when one gets buried under bags of cash.

    Until the system is fixed at the core level, it is one large and popular venue for parting fools and their money.

Comments are closed.