Kickstarter

Bringing creativity to life

Monday 3 June 2013, by Gerard

A. The main facts about the activities of the company.

Kickstarter is an online platform where people upload projects for being financed. The financing process consists of what we know as crowd funding. Crowd funding is a system through which different people all around the world can finance different projects with their donations. It is basically seen as a collective effort of individuals who network and collect their money to support projects initiated by other people or organizations, usually via online. The basic crowd funding categories are: medical expenses, start creative projects (the one Kickstarter is carrying out) and business, sports, volunteer trips, and animals foundation.
As for Kickstater, it is a funding platform for creative projects. Everything from films, games, and music to art, design, and technology can be financed. Kickstarter doesn’t engage any kind of financing activity. What the company does is to provide the platform to introduce the creator of the projects to the backers, who are the ones that make donations. Kickstarter acts as an intermediary, creators independently create their project and upload it with all the information on the online platform, and backers are the ones who have the task of donating money and believing in the projects. Therefore, as an intermediary, Kickstarter does not have any kind of responsibility on the problems that may arise from the projects.
Funding on Kickstarter is all-or-nothing, that means that creator sets a funding goal and a deadline, so whoever that pledges on this project will be charged by the pledged amount only if the goal is accomplished before the deadline. Otherwise, if the money donated does not achieve the minimum established at the beginning, there will be no money transference. The all-or-nothing method will motivate backers that want the project to be successful to spread the word. This turns out to be quite useful: of the projects that have reached 60% of their funding goal, 98% were successfully funded. So in some sense we could establish that projects either find little support or make their goal.
As an intermediary, Kickstarter will charge a fee of 5% from all the money pledged. As the financing transaction only exists if the goal of pledges is achieved, the company will only charge the fee if the project is successfully financed. On the other hand, backers don’t get any equity from the project funded. They are rewarded from the creators, but not in economic terms. For instance, if the project consists of making a music album, a reward may be the CD signed.
In this company money is secondary and entrepreneurship through other people help is primary. It is much more than a business.
→In addition…
-  In the website, creators have the “Kickstarter School” available, which is a page that gives tips in order to help them (how to keep backers informed, how to make your project more appealing, how to gain their trust…)
-  Mozart, Beethoven, Whitman, Twain, and other artists funded works in similar ways — not just with help from large patrons, but by soliciting money from smaller patrons, often called subscribers.
-  Important projects financed in Kickstarter: Six Kickstarter-funded films have been nominated for Academy Awards. One of them, Inocente, came away with an Oscar in 2013, and at least a dozen projects have launched objects into space.
-  Kickstarter from outsider’s eyes:
· “Paradigm shifting”: by CNN.
· “Pioneering”: by The New York Times.
· “Kickstarter funds the future”: by Rolling Stone.

B. The Ethical challenges this company is addressing.

In this world exist a big deal of good ideas which have not the possibility to become a reality because a lack of funds for them. This people trust in the economic system, banks and other financial institutions trying to raise their funds in order to achieve their ideas. But nowadays, crisis make the banks unconvinced to fund people projects, so if you don’t have a non-risky project or some kind of convincing endorsement you are not able to start new projects.
These people exist, their projects exist in their minds, and maybe some of them are useful for the society in terms of necessities, entertainment or inspiration. Why doesn’t society promote these ideas to come true? Why investors promote and fund projects but only if they are profit oriented and near to zero risk?
All this makes us wonder about the ethicality of this financing world. It is understandable not to finance projects that might be very risky. But nowadays the financing system rejects projects too easily, just because people do not have any endorsement, or if the project is peculiar and different from the most common ones. That is where Kickstarter appears and faces this ethical challenging, by opening the doors both to the creator to receive funds and the society by supplying an opportunity to choose the projects they want to be launched. As it has been explained in the previous point all interested people who has been inspired by some others ideas and project can contribute to make the project came true.
After the huge crisis we are living, structural changes in the banking system must be done, and we consider crowd funding as a good step for starting this shift. No more powerful investors and banks are need to raise the needed capital at exchange of equity and inculcating their own ideas maybe not aligned with the creators ones.
This renewed concept of creators and backers can allow society to play its own rules in order to convert their ideas. The biggest ethical challenge that Kickstarter is addressing is to create a people to people relation that could be considered as ethical banking, where risk premiums, interest, or endorsements would decrease their importance in favor of trust, hard work, and risky but innovative ideas supported by other people in the world.

C. What makes you believe this company is really ethical and why you trust it?

We decided Kickstarter because is a company that helps to meet one of the most important and demanded necessities in the world (the necessity of being financed) in a completely different way compared with the traditional financial system. What makes the company different is how they handle the financial process: they put in contact people who need to be financed with people willing to help them not because of profit aims but because many other reasons (they believe in the project, they are passionate about it, they are interested in it despite not receiving money rewards, they are inspired by the new idea…).
It inspires us in the sense that we look at it as a very attractive alternative to the shareholder-centric model. Kickstarter could be situated extremely far away from the money-focused system that leads the financial world, because its non lucrative perspective allows many projects that would be rejected within the traditional model to take off and even to succeed. Therefore, it provides a “second opportunity” to those projects not considered by the traditional banks. The company provides an opportunity to open the door to a much wider variety of ideas and allow everyone to decide what they wanted to see exist in the world. Therefore we can consider it as a way for the society to start deciding the projects they would rather see to be launched. The fact that Kickstarter allows creators to take risks and attempt to create something new is a feature, not a bug.
One of the main issues that also inspire us is the fact that the company helps financing projects that must be creative, and more important, that will not be used to buy any kind of material object, but for finance projects that consists of engaging different kind of activities. That is to say, projects that have the possibility to innovate, create something new and different, and that may involve positive consequences for the creator or even the society. Therefore, the company does not allow charity, cause, or “fund my life” projects. In our opinion, Kickstarter supplies a very useful alternative, giving the opportunity to create your own job or project rather than having to look for one. And it is extremely useful given the times we are living now.

D.The possible challenges facing the company in the future and how you think this company may improve.

We think that the main challenges that Kickstarter has to face have to do with publicity and with acquiring more responsibility with the backers, to get involved a little bit more. As it is something quite new and is still growing, Kickstarter and the concept crowd funding are not very famous, so in our opinion the company should make an effort to make a name of itself in the financial world. And as it starts growing and dealing with more important projects, it is important to improve the accountability and fulfillment.

As we have already said, Kickstarter is just the provider of the connection, but the company does not assume any responsibility. From an ethical point of view, it may be seen as quite selfish. If they provide an online platform for creators to upload the project, the company should also face more strict guidelines and requirements to increase the security: provide information about the creators’ backgrounds and experience, more specific plans… to make sure the backers have sufficient information when deciding whether to back these projects. It is quite clear that as its importance in the society increases, the more responsibility the company has.
These efforts must be focused on making sure creators do not fraud, but it does not have anything to do with the creator’s ability to complete a project and fulfill. On Kickstarter, backers ultimately decide the validity and worthiness of a project by whether they decide to fund it. So the company may face the challenge of assuring that everything that is uploaded in the website is real, but we think they cannot be obligated to “rate” each creator with his or her capacity to fulfill the project, this study must be carried out or analyzed by the backers.

Bibliography

http://www.kickstarter.com/

Location: New York City (USA)

Sector: Manufacturing, Financial and insurance activities, Professional, scientific and technical activities, Arts, entertainment and recreation

Official website: http://www.kickstarter.com/

Key figures:

Employees:57
Countries: World

Nbr. visits: 473