The Fallacy Of Zero Sum Game Thinking

We invest in a lot of marketplaces. When they scale, we often hear complaints from early adopters, amplified by the media, that the early adopters are getting hurt by the "mainstreaming" of the marketplace. You hear that kind of argument with other kinds of networks as well. When Twitter went mainstream, a lot of the early adopters complained that it had lost its soul.

I think most of this thinking is emotional, but not rational. A rising tide lifts all boats, or at least most of them. Kickstarter has published some data on this issue. I like this part from that post:

Spike Lee brought three decades of fans to Kickstarter when he launched his project. He introduced many of them to this new way of funding creative works, and to the thousands of other projects that are funding on Kickstarter. Of Spike’s backers, 47% had never backed a Kickstarter project before.

The Veronica Mars and Zach Braff film projects were similarly criticized for hurting other projects, but in reality were a windfall for creators. Those projects brought thousands of new people to Kickstarter who have since pledged more than $1 million to 6,000 other projects (film projects have received most of those pledges).

In the past 90 days alone, more than $21 million has been pledged to filmmakers on Kickstarter not named Rob Thomas, Zach Braff, or Spike Lee. Even without counting these projects, it’s been the biggest three months for film ever on Kickstarter!

Almost five million people have backed a project on Kickstarter, and more than a million have backed two or more projects. These repeat backers are responsible for 59% of the total money pledged to Kickstarter projects — a whopping $444 million. On average, 2,130 people a dayhave become new repeat backers this year. This is huge! Future creators will benefit from more and more people using Kickstarter.

We have seen a similar effect at Etsy. When a wave of new sellers came to Etsy as it became a mainstream marketplace a few years ago, the early sellers were concerned about the competition these new sellers would create for them. But Etsy has grown its gross transactions at between 70-100% per year for the past five years, a rate that is roughly the same as the rate of new sellers joining the service. For every new seller that joins Etsy, it seems that there is  a new buyer waiting to consider buying from them.

The cool thing about these marketplaces is that the sellers (or project creators in Kickstarter's case) are the primary marketing engine. Sellers bring the first time buyers. And then many of them stick around and transact again and again, often with sellers other than the one that brought them in the first place. It is a commons where everyone (or most everyone) benefits from the expansion of the marketplace.

I felt like explaining this because I read this opinion piece in the NY Times today about Kickstarter. While the title of the piece is awful (nobody has their "hands out" on Kickstarter), I like how they ended it:

The gentrification of Kickstarter doesn’t seem to be hurting its original inhabitants. It may even be helping them.

The only quibble I have with that line is the use of the word "may". I am certain it is helping them.

#crowdfunding#Web/Tech

Comments (Archived):

  1. awaldstein

    I’m with you on this as well.The community for marketplaces is the web itself not within the confines of their site. They get better for everyone the broader the population that uses them.The marketplace model is in many ways the paradigm for community on the web, built around each offering and cross every network that touches it. I touched on this in my post yesterday http://awe.sm/p3SazI wouldn’t intermingle Twitter though with a marketplace model. Different to me.

    1. Ana Milicevic

      But if we think of Kickstarter more as a marketing platform and less as a marketplace, isn’t it similar to Twitter? Is that what you have in mind when you say that Twitter shouldn’t intermingle with the marketplace model (but neither should Kickstarter)?

      1. awaldstein

        I do think of Kickstarter as a marketplace but one whose market and community is everywhere on the web.There are many shades of grey for certain.Kickstarter at its core is a transactional platform that let’s you load up your product (your project), provides some tools to help you sell it out to your nets.Twitter is a media platform. Nary a transaction to be seen and certainly none that are native to the platform itself.

        1. Ana Milicevic

          Fair enough. I tend to think of both as tools to mobilize tribes/fans/supporters/sympathizers since to me that’s the biggest value of both.

    2. Dave Pinsen

      Agreed on your last point. And I generally agree with Fred’s post. But I think Fred elides a couple of salient points about this new trend of the rich & famous raising money on Kickstarter.The first is that this is a continuation of a social media trend, where those who are famous in RL dominate online. Nothing surprising about that really, but in the past Fred and others have overstated the democratic impact of the web, IMO (I’m thinking in particular about Fred’s post about Gretchen Rubin promoting her book by blogging, when the more salient fact about Rubin was probably that she was wealthy and well-connected in RL).The second is that this represents an accelaration of the winner-take- all aspect of our economy (or, to be more accurate, winner-take-most). Yeah, Zach Braff may bring some new contributors to Kickstarter. But he’s still raising millions while Joe Nobody, if he’s lucky, raises thousands.Not that there’s anything new about the rich getting richer. It’s the way of the world. But appearances matter, and when the already rich & famous are the ones making the most from crowd funding it can seem a bit churlish, particularly when so many Americans are struggling.

      1. awaldstein

        Yes and no.Yes, that the rich get richer. Yes, that reputation drives everything and its easier to leverage than start from zilch.The web doesn’t make things easier for everyone it makes things possible.That is a key distinction for me.Does it make it easier for you or me or anyone to create the next Twitter. Nope not at all.But it does make it possible for anyone to do that without connections, without being rich and connected to start.That is huge. That is the democracy of the web to me.The fact that Kickstarter can support both the celebs and the very very long tail is its magic. As long that is true, I stand by my position.When Kickstarter just becomes the Studio System in new clothes, i’m out.Great comment Dave.

  2. laurie kalmanson

    Nobody goes there anymore. It’s too crowded

    1. awaldstein

      Don’t agree.On my blog a commentor said that it Kickstarter was unfriendly to the small project. Not my experience. I helped a friend raise about $15 K for a book on the Jura of all things. Oversubscribed.

      1. laurie kalmanson

        i agree with you. it’s awesome.”nobody goes there anymore, it’s too crowded” is always what the people who were there first (early adopters) say when more people come (early majority) and it’s not the first people’s secret clubhouse anymoreback when seth did a huge kickstarter project, there was backlash from people about a “name” using the platform — his simple answer was that if you want to be successful on kickstarter, you bring a list or you build a list and one person having a list doesn’t do anything to prevent others from having one and in fact encourages it if people who hadn’t heard about it before find out about it (fred’s point in his post)”nobody goes there anymore, it’s too crowded” is the lament of those who prefer obscurity to successit’s the equivalent of the hipster line, “i listen to ___ but you probably haven’t heard of them”more channels and more venues is betterdoes it mean more medium successes and fewer bigger ones as audiences gather into more places? unclear

      2. Cam MacRae

        Mr. Literal today, eh?I enjoyed the gag, @lauriekalmanson:disqus 🙂

        1. awaldstein

          Cranky I think as this is a work day and honestly, just want to play.

          1. Cam MacRae

            The sun will be over the yard arm soon enough. I promise.

        2. laurie kalmanson

          Thnx this unicorn chaser is 4 u

          1. ShanaC

            is that tasty?

    2. Anne Libby

      +1 for the Yogi Berra quote.

      1. laurie kalmanson

        It’s like deja vu all over again

        1. Anne Libby

          90% of short putts don’t go in.

          1. laurie kalmanson

            What about the other 50 perent

  3. Rohan

    In 2 words – network effects?

  4. PhilipSugar

    Its great to see real data proving this thesis. I for a long time have said life is not a zero sum game. You can say the same thing for giving STEM graduates green cards (sorry to put a political spin on this)

  5. Barry Nolan

    When normals invade, the geeks go wild.

    1. awaldstein

      I wonder whether the geek/normal dichotomy holds any longer.Society has been geekified with unfettered access to everything and infinite groupings of people around every interest.The Revenge of the Nerds is still funny but in a time capsule.

      1. ErikSchwartz

        It absolutely does. There are just a lot of non geeks who think it’s hip to to be a geek now. In 5 years they’ll be into something else. This happened in the last bubble too.

        1. awaldstein

          We disagree on this one.Geek is not a tech term to me it is about finding a doorway for a deep dive into interests and connecting with other enthusiasts. You with archery maybe, me with wine, someone with raw food, another with nutrition, another with LES street artists, another with whatever.We are the most informed, most connected, most self collectively affirmed population there ever has been.

          1. ErikSchwartz

            We merely had a semantic disagreement then.

          2. John Fazzolari

            This is spot-on & I couldn’t agree more. In the information age everybody has the opportunity to learn more about their interests than ever before. It can be wine, music, food, art, travel or even sports. It’s not about people thinking it’s hip to be a geek, it’s about taking a deeper dive into general interests/hobbies that are intellectually stimulating. Geek is commonly misused as a tech term, but in my opinion anybody that reads for a few hours each day is a geek on some level. And everybody else is unfortunately just ignorant.

          3. awaldstein

            Nicely said.It rolls downhill to being uninformed pre a meeting–unacceptable and moreso changed how I hire especially for marketing as w/o some rich presence somewhere something is wrong.

          4. LE

            Geek is one of those words that non geeks throw around in more or less a jealous way with a little silly laugh attached.You know there is jealousy because if there wasn’t they would feel the need to use the term that way. Sort of quasi pejorative.It’s like they will say “oh that Arnold he’s totally obsessed with wine it’s all he thinks about”. But then when they are traveling and meet some wine expert they will bring up that their friend Arnold is a big wine expert in order to elevate themselves.Origins of geek though are more with respect to “pale get no sun individuals with skin problems” that would spend time indoors because they were socially inept or not good looking enough to be popular in a mass way.Also with being obsessive about something to the point of almost annoying others (until of course they need to know the answer to a question the geek has the answer to).

          5. awaldstein

            Interesting people carry their interests and obsessions on their sleeves.The world has changed with unfettered access to info and likeminded people.Those with no overt interests honestly stand out. And when you market you market to those interests just below the surface but close to the heart.

      2. ShanaC

        totally does. You go to some areas and being a geek is still not cool.

        1. awaldstein

          Don’t go where you are not wanted is my advice.

    2. JamesHRH

      This is also true for the ‘too cool for school crowd’.Lots of music mavens love a band until everyone else does too.

  6. Mike Geer (MG)

    Thanks for this post, Fred. I guess it may be a bit inside baseball for everyone to understand how these systems work, but I was quite annoyed that Kevin Smith and others were lauded for their criticism of Braff, who, as you illustrate above, did a great thing for the system by running his campaign.My comment at the time (back in May):”Having Braff’s movie campaign on Kickstarter brought more mainstream film lovers to Kickstarter, which in turn will mean more people getting pushed kickstarter emails to “invest” in other films. This is a good thing. I am always annoyed when people, Smith in this case (huge fan by the way), are applauded for not understanding how the system works.”

  7. andyswan

    Whiners gonna whine. Some people want to keep the pond small so they can keep pretending to be sharks.

    1. Brandon Burns

      lol

  8. LIAD

    new sellers may not directly negatively affect existing ones in terms of stealing potential customers but they can indirectly in terms of putting existing marketplace resources under strain. customer support/curation/upholding quality policies etc can suffer whilst the marketplace scrambles to keep up with the new volumes they’re working with.A subset of our sellers on Shoply are definitely disgruntled Etsy ones.

    1. awaldstein

      Amazon has broken the mold for getting better as they get bigger.From day one they had phone support. They have quite astounding customer service directly and the ease of their online fixes get better and better.Apple is cracking under this. For years I applauded their phone support. Lately the quality of support has just fallen off a cliff, maybe scale, maybe too many skus, maybe just a really bad new OS.

      1. LE

        Amazon has broken the mold for getting betterThe amount of expertise required to handle a typical customer service call to Amazon pales in comparison to what it takes to support a computer or other actual product. Amazon support doesn’t help with product support. They efficiently handle returns, credits, complaints things like that. They don’t offer support to get the VCR programmed.Apple is cracking under this. For years I applauded their phone support. Lately the quality of support has just fallen off a cliff, maybe scale, maybe too many skus, maybe just a really bad new OS.A few things are going on (perhaps):1) They probably aren’t able to hire fast enough and train to support the growing customer base. Which has gone consumer and is different than the past customer base. When people have computer problems you have to start at square one and it’s very time consuming. Plus you have to wait while they do stuff. We don’t even go there over the phone. It’s a clusterfuck.2) The friction is a part of the system since you don’t want to give service so good that people fail to try anything else before calling you. [1] For many of the things that I would imagine people call Apple for there is an answer to the question that they could get by simply googling and/or taking the time to figure it out on their own. But that would take the customer’s time and they’d rather just not RTFM. They want the easiest thing which is to ask someone.3) They are using technology to identify pains in the assess and somehow trying to put friction to slow down those people who keep calling for any little problem. This is not to say they are doing that with you at all. But it is something that is definitely possible. Just like it’s possible that they might prioritize calls from certain customers (by caller id or customer number) or even parts of the country. Midwest= slow. East coast=fast. Which would be a smart thing to do. Nobody likes to be a business customer and wait behind the little old lady (with all this time on her hands) while the bank clerk takes all the time in the world to attend to her every need.Apple of course has shown (if you visit their retail stores) that they overstaff if anything. You get assaulted when you go into those stores. There is no comparison to anything else I’ve seen in retail. But it’s tough to get people to sit in a cubicle and answer calls about stupid user problems vs. work in a cool retail store. Perhaps the answer to to take some of the store people and rotate them to a small cubicle center in the back of the store to answer calls during down times or just as rotation. But I would imagine that wouldn’t scale well either.[1] Here is an example of that. If you call here and ask a question sometimes (emphasis on “sometimes”) we will put you on hold for a brief amount of time and then pickup to give you the answer even though we know the answer right away. Why? Because we want the service to be good but not so good that you will call us the minute something doesn’t work (which by the way you’d be surprised at how many calls we get that have nothing at all to do with something we can fix). So if we are to helpful we will get to many support calls and costs will go up. Same goes with email replies. Giving someone an immediate reply raises the bar that they will expect that reply frequently and then fail to try the simple things that they should try before asking for help.

        1. awaldstein

          Really good stuff in here but two things I just disagree with flat out.1 Marketplaces and broadbased catalogues don’t provide product support by definition. The goal of Kickstarter, Etsy, Amazon is customer service.Apple and oranges to Apple or any product site or company.2 I’ve built now 3 call centers from the ground up. I’ve never built in poor service to discourage calling. You build in all sorts of mechanisms to encourage self serve. Annoying the customer is really wacky. Some may do it, I would fire you immediately;)

          1. LE

            Re: #2 It’s a balance so it really depends on the circumstances and products.Will defer to you on the call center issue but I’m curious and wonder if the call centers you built had a product that was comparable in scope and complexity (and importantly with the same customer base) as Apple selling computers and ipod nano’s to a wide range of customers in different markets? And during that time period were people’s expectations the same as they are now?”Annoying the customer is really wacky.”Not saying in any way the idea is to “annoy__ the customer”. This is a balance as everything. I said “be good but not so good that they use it as a crutch”. A nuance. Like with kids doing homework. You want to help but not enable an undesirable behavior that will cause costs to get out of hand.Things like this are a part of the way things work everywhere. Fred replies to comments but you will notice it is rare that he will tell someone they are wrong or give negative feedback. Because to do so is to encourage further interactions which he doesn’t have the time or need for (Godin does the same here he makes his statement but rarely replies to a reply). That’s not to say that Fred doesn’t reply or engage but it’s an acknowledgement that he can’t operate and do what you or I do (which as you know is already time consuming but at least enjoyable).

          2. awaldstein

            OKMaybe I”m a very limited designer of human systems but when you put 100 people in a room or three remote locations with 100 each, phones lighting up, the only motivation for behavior that works is excellence.Call centers judge themselves on satisfaction and the time/cost on creating it. Other teams are judged on customer satisfaction without ever making the call. Inbetween them is perfection.

  9. Todd Schnick

    Count me in with those who love backing the Zach Braff’s of the world. Wy should they be forbidden from playing in this sandbox?

    1. Tracey Jackson

      In the absolute a Zach Braff would prefer the days of yore when a Sony Classics or Fox 2000 would give him 15 to 20 million to make a “Zach Braff” film. They would then promote his film, never to any small filmmakers satisfaction but it’s easier than paying for promotion yourself. And he would be assured of some distribution. While doing it all on your own gives you artistic control, it does not mean you will be seen. The theaters are still a giant monopoly. So if he’s lucky a Weinstein picks him up at Toronto or Sundance and he ends up selling his soul to the devil anyway, only just a little further down the line.

      1. Todd Schnick

        well, perhaps. i love and push the independent, self-published author. but would play ball if simon + shuster came calling, no doubt. but also depends on goal… to get wide distribution? or make art meant for a tight, niche audience who values and treasures it?

        1. Tracey Jackson

          “Tight niche audience hard to find if you get two days in Angelika and they toss you out. Remember when a studio let a small film sit and find their way. Go back in film history, big hits sometimes took months to catch on. Bonnie and Clyde for one. The list is endless. They found their niche. But that takes time – you can’t do it in a weekend. The stakes now say make money by Monday or you are a failure. I’ve done it both ways. Niche literally takes years. Monsoon Wedding was a hit, because they let it sit at the Paris for nine months!

          1. Todd Schnick

            yeah, great points…not arguing with you. i wonder if zach tried and failed to get studio financing? curious as to the back story there, and what lead to his kickstarter decision…

          2. Tracey Jackson

            I’m sure he could not get anyone to make it. Filmmakers yell and scream they hate the studios, as they tell them what to do and are run by idiots for the most part.Yet, they pay the bills and make sure they have a home.It’s like living with your parents. You like the free rent but don’t want to be told to clean your room.If he had studio money it would be easier on all fronts.He has to go promote it once he makes it. That costs as much as the film.Then he might not get distribution. It is like self publishing in one way. The publishers take more, but they promote you and get you in the stores at least for awhile. You can’t get national press with self-published.It’s hard as there is such a tiny middle market.They( the big companies) be they studios or publishers like a sure thing.But a Random House can buy a first novel and take a chance for 5,000. Can’t make a film for that. So they would rather spend 75,000 on Tyler Perry then 20,000 on Spike Lee.Sad but true.

          3. ShanaC

            really? and you were involved in Monsoon Wedding?

      2. ErikSchwartz

        Down the line with much better leverage and likely for a better price. For established players this is cheap early money.

      3. LE

        “never to any small filmmakers satisfaction”People are always good with spending other people’s money. Artists have a hard time understanding business, money and risk taking. As the line (by Burt Reynolds “Jack Horner”) went in “Bogie Nights” I think it was with regards to the financier “he provides the money, it’s an important part of the process”.By the way this scene from Boogie Nights is a good example of creative disruption. Flyod Gondoli wants to get ahead of the curve and Horner doesn’t want to help and speed things up.http://www.youtube.com/watc

  10. Seth Godin

    Kickstarter isn’t what most people (even most project launchers) believe it is. It’s a tribal amplifier, not a marketplace.http://www.thedominoproject…If you haven’t done the work to earn the attention and respect of your tribe, then succeeding on Kickstarter is basically a crapshoot. Someone needs to get lucky and it might be you.For those that don’t get lucky, though, for those that aren’t successful in spamming strangers with their idea, it helps to have someone to blame.The blaming isn’t based on an understanding of zero sum games or the parallel nature of the marketplace (it’s not like real shelf space, where one product takes the place of another).Alas, as democratic as Kickstarter is, it’s easy to assume it’s not, and that like all the places that didn’t work before it, this one must also be rigged.

    1. awaldstein

      I don’t know.Kickstarter doesn’t provide the market for your project, simply the marketing platform (and a good one) and a stamp of cred by being involved.If it’s not a marketplace its because they indeed, unlike Etsy, doesn’t provide the buyers.

    2. Kirsten Lambertsen

      Yup. Whenever someone tells me, “I’m thinking of doing a Kickstarter,” I ask, “How big is your email list?”

      1. laurie kalmanson

        We have a winner

    3. William Mougayar

      But the repeat buyers make up 59% of the money pledged. So, I think what you said is perhaps 41% correct.

      1. Ana Milicevic

        I was just about to ask if anyone has an off-the-top-of-the-head breakdown b/w repeat buyers and newbies.

        1. William Mougayar

          The Kickstarter blog does a great job with their stats. They are very good at it.

          1. awaldstein

            They do a great job on their stats for users.In the projects I’ve been involved with and have seen the stats personally, little has come from the site itself.

      2. laurie kalmanson

        Aaah repeat customers are the best customers after you convert them into a first time customer

      3. Tyler Hayes

        Being a repeat buyer is not mutually exclusive to being in a tribe or Kickstarter being a tribal amplifier. Can you expand more?

        1. FAKE GRIMLOCK

          COME TO KS BECAUSE PROJECT TRIBE.NOW YOU IN KS TRIBE.

        2. William Mougayar

          I meant that the regulars will find deals that they knew nothing about, and they participate because they like it, so they don’t belong to any particular tribe. They are tribless.This was a counter point to Seth’s comment that you need to have your own tribe to succeed.

          1. Tyler Hayes

            Regulars != dealfinders. On what are you drawing the conclusion that repeat buyers on Kickstarter are dealfinders?For example, I’ve contributed to >10 Kickstarters but never once have I opened kickstarter.com just to go shopping.I’m not saying dealfinders don’t exist on Kickstarter.

          2. William Mougayar

            ok. I shouldn’t have said “find”. Replace by “get”, where you go browsing or it comes to you via email notifications or friends. I have a friend who browses for stuff to find what they like. they do 5 per month.

    4. falicon

      This line of thinking & explanation is why I’m happily a member of your tribe! +100

    5. laurie kalmanson

      Build a list, build an audience, take it to Kickstarter: success on Kickstarter is part of the payoff for all the work of building an audience and building a list.The complaints from people who see big names on Kickstarter are misunderstanding two things — where success comes from and that the bigger the platform the more people know about it and might find something else when they come there looking for what they already know.Related: people who prefer things to be obscure; I like _____ you probably haven’t heard of it; see hipster Ariel attached.Btw seth your Kickstarter big bundle was awesome — everyone i gave away a book too either said thanks i’m already a fan and i can’t to wait to read this one, or thanks, this one looks great, now i’m going to read the rest

    6. ShanaC

      there is a certain truth to this – but most people belong to more than one tribe – it is the amount and interconnectedness of your tribes that tend to make a kickstarter campaign successful

    7. FAKE GRIMLOCK

      THIS TIME ME AGREE WITH SETH.

    8. Kevin Yien

      Wonderful point. I’d be interested to see the stats on how many backers of a project have existing awareness.Related, how do you view the value in being exposed to related projects or ideas? This would be a crucial aspect to the discovery function within Kickstarter and other creators in the same category, but may be ill-received by the original creators.

  11. Tracey Jackson

    As someone who has written big hollywood films for decades and then had to raise the money and make my own I can say Kickstarter is a god send for the people who want to make films that don’t cost 200 million dollars.The middle and and indie part of the market has all but dried up in this country. When a Spike Lee or Zach Braff have to turn to a Kickstarter it’s a sad comment on the studios, but the studios do not exist for those people anymore and they are pathetic. Lee Daniels and Tyler Perry are today’s Spike Lee and John Singleton.So thank heavens it exists and having well known people use it only ups its rep.Sure most people would rather invest in something with a big name attached. Many would rather say I invested in a Spike Lee Film than a film by Skiippy McGrath. Can you blame them?And most people for some reason want to be attached to the film business in some way. If it gives them pleasure helping people get smaller films made that would otherwise never have a shot – then BRAVO.PS – At the end of his career Kurosawa walked around Hollywood with storyboards trying to raise money for his next film. He failed. Had there been a Kickstarter then the world might have had another film from that great director.

    1. awaldstein

      Well said and I’m with you.Thanks for the very sad Kurosawa anecdote. Huge fan. rewatched one of his most obscure and most wonderful films recently, Dodeskaden http://www.imdb.com/title/t

    2. Kirsten Lambertsen

      Thank you for the explanation. I was one of those people who wondered why guys like Lee and Braff needed to go on Kickstarter. Now I know, and of course, it makes perfect sense. Hopefully those guys are paying it forward and investing in smaller, no-name projects on Kickstarter.

    3. Richard

      As creative as hollywood is… it seems only a matter of time before a more creative local film funding model take shape in the LA area.

      1. Tracey Jackson

        All American films are Hollywood at the end of the day. It’s the brand really.

        1. Richard

          Yes, I agree.. I wasn’t thinking of Hollywood in terms of its geography. But as an industry, Hollywood has features and nuances. These particulars seem still to be overlooked in most funding models.

          1. Tracey Jackson

            That might be a good thing. 🙂

      2. Alex Feldman

        There are a number of crowdfunding platforms that focus on film like http://mobcaster.com – for tv shows, http://www.slated.com, http://www.filmangel.tv/, http://www.filmbreak.com/, https://chill.com, http://filmfunder.com/ – equity site, and NY based http://www.seedandspark.com/ which provides additional services like distributing film from their website. These niche sites provide specialize support and features for the film projects that more generic sites like KickStarter doesn’t. At this time they can’t match the sheer size of KickStarter network and the value it brings to the projects by having strangers fund their projects. Interesting to see how these niche sites develop over time compared to the large generic sites.

        1. Kevin Yien

          Interesting point. How do you think the niche aspect of these will match up against the inertia of Kickstarter moving forward? As a content creator, how would you weigh the benefits of size to targeted support?

          1. Alex Feldman

            That is something that each project needs to decide on their own. You need to compare the generic platforms to the niche ones and see how similar projects to yours did. Compare the different fee structures, reviews, and additional service the niche site provides. That is why I started http://www.crowdsunite.com which has user reviews and lets you to compare different funding websites.

    4. LE

      When a Spike Lee or Zach Braff have to turn to a Kickstarter it’s a sad comment on the studios, but the studios do not exist for those people anymore and they are pathetic.Why is it sad?The studios exist to make money. If there were enough people in the market that liked Zach or Spike then the studios would fund them. It’s about numbers and return on investment. It’s not about helping filmakers or creativity.The movie business isn’t a patron business like Opera or Art. Doesn’t work that way. My brother in law (as mentioned) is an Opera singer. When he does a gig somewhere he tells me he stays at the home of some “rich person” who is a patron and wants to feel connected to the Opera world. Obviously there isn’t a mass of people that like opera (as opposed to Dire Straits). And lest someone thinks that it takes a higher level of intelligence to enjoy something like Opera (or an arts film) that’s not true. Hey Christie likes Springsteen, right?The movie business is about entertainment. The other night I watched an action flick with Jason Statham on netflix and I was really entertained. More than I was entertained by watching Garden State.I also watched Prozac Nation (which didn’t hit big) which I really liked. Started watching it again with my wife who said “meh” and thought I had hyped it to much to her.Explain to me how the Hollywood system could make money and do what you think it should do (if I understand what you are saying)?

      1. ShanaC

        it is like venture capital, 10x returns or else. 1x type movies while interesting artistically aren’t necessarily made.

        1. Tracey Jackson

          True.

        2. Tracey Jackson

          Somewhere you asked if I was involved in Monsoon Wedding, but I can’t find it in here. No. A few other Indian films. But it was a case of letting it find its audience. Just keeping it in a few theaters for almost a year.

      2. FAKE GRIMLOCK

        VC FOR MOVIES.

        1. LE

          Both deal with dreamers but only in the movie business do you deal with telephone screamers (Free Man in Paris, Joni Mitchell, about David Geffen)Both pyramids like drug dealing where you hear about the success not the majority living at home with their mothers.http://articles.latimes.com

      3. Tracey Jackson

        I don’t think they can anymore. I think that ship has sailed. It’s an old formula that does not fit into the present day scenarioThe stakes are now too high. Like with a company. The more invested the bigger return you want to see. Right? They are huge businesses not little nuggets of pleasure.It’s not that people don’t want to see those movies they do. Look at what you just listed you watched on Netflix. Netflix being the operative word. Movies, like music, books and all other forms of entertainment, with the exception of opera, ballet and classical music have changed the way they are experienced.80% of studios make their money on foreign now. Number one being China and it will only grow. They want 3d. They want action or tent pole. They don’t want Little Miss Sunshine. Kung Foo Panda 12 is what they want.Once upon a time, when I wrote films and the Zachs and Spikes and Richard Curtis’ etc, got to make the mid-level adult films people liked, they were studio movies. The Tootsies, Rainmans, Jerry McGuires. Very hard to make those today. TomCruise in Mission Impossible 6 yes. Tom Cruise in Rainman no. No foreign there.People also stay home and watch on Netflix or they watch cable where the better content seems to live. The average grown up does not run to an opening weekend. Movies base their potential on Friday night, by midnight Friday they think they know if it will work or not. So that’s what 12 hours??? Grown ups tend to wait a week or two to see a film. And now by the time they have waited a week or two they go hell with it I will watch it on Netflix in a few months. Save the parking and the dinner and the babysitter. Because of this movies have stopped being a part of the cultural dialogue. When was the last time you and a couple friends discussed the latest film over a drink or dinner? We all used to watch the same stuff around the same time. No more. You are home watching Prozac Nation. Your best friend is home watching Homeland. Someone else is home watching The Hangover 2.My husband and I wanted to go to a film last night. We ended up at a film called Adore. Great. Would never get made here.It was made by the French.

        1. LE

          It’s not that people don’t want to see those movies they do. Look at what you just listed you watched on Netflix. Netflix being the operative word.The reason that netflix works is it allows infinite iteration and the ability to not spend any dollars to see if you like something. No waste. People hate waste makes them feel stupid. So I can start a movie (which I haven’t paid for) and if I don’t like it in the first few minutes I can try something else. [1] So I can be more fickle. Remember the video store? You would rent two in case the first one sucked. And you would at least sit through more than 10 minutes of it unless it really sucked and give it a chance. So the start of a feature on Netflix is not the same as a movie theater where you have people essentially trapped because they have paid or with a rental video.he average grown up does not run to an opening weekend. Well there is getting the babysitter but more importantly all of that started back when there wasn’t really that much to do at home. Now you can get takeout (which can be quite good or you will just go to dinner first) and have unlimitted media you can watch. And it’s not on a black and white wooden tv set either. So sitting with strangers is a bit less attractive. Even kids and dating is much different.There was a place in New Jersey called the “Latin Casino” people used to go there and say “I’m going to the Latin” but when real casinos came along (1977 in NJ – Latin Casino was a night club) the “Latin” folded. Same with the Catskills. The venue changed people still needed entertainment.And the entertainment (as Clayton C might say) had to be good enough not better. Good enough to change behavior and appeal to the masses.Even socializing has changed. If people have online relationships they are less likely to have a need for real relationships. Not everyone but many.When I was single for a bit (after divorce) I used to spend time at Starbucks and had what I called my “starbucks” friends. After I got married again I no longer had that need to fill so I don’t do that anymore.I guess part of what Fred does is trying to predict how changes in behavior that are so subtle will lead to some type of shift where you go below the tipping point and something is no longer relevant that was.[1] Which by the way all those pre rolls of credits etc with all the production people is really a dinosaur based on the fact that you needed that because not everybody in the “theater” was quiet and had taken their seats or gotten comfortable with the popcorn. It’s totally out of place on online watching. It’s like the annoying plastic theft control on CD’s back in the day. But at least they don’t have the FBI warnings like on DVD.

          1. Tracey Jackson

            “Even kids and dating is much different”I have two kids. Neither one goes to the movies with friends or boyfriends. The older one, 22 goes to comedy clubs Louis CK or The New Yorker Festival, things like that. Never a movie and dinner date. They come home watch on Netflix on the bed…..!!The 13 year old goes to maybe 2 movies a year. She watches Sex in the City 95 times in one year.it used to be the major part of our social lives.

          2. ShanaC

            so expensive, the new yorker festival….

        2. LE

          When was the last time you and a couple friends discussed the latest film over a drink or dinner?One thing about living in the suburbs is that people are not into any type of deep conversation which is why it’s rare for us to go out. If we did it would essentially end up with the couple you are with talking about the trip they took or the places they ate or some other non stimulating conversation. And I’m talking about “educated” people that are professionals. But they are either all spent out on work or they simply aren’t curious about anything. And you have to worry about offending them. Etc.

          1. ShanaC

            urg

    5. Dave W Baldwin

      They’ve just started filming a movie here. The word is being put out to cooperate and not get in the way. I hope over the next couple of months everyone adheres. So far so good.

    6. FAKE GRIMLOCK

      POOR SKIPPY. HIM NO GET ANY RESPECT.

      1. Tracey Jackson

        Not till he makes The Avengers 5

    7. laurie kalmanson

      Better storytelling than any Hollywood blockbusterhttp://gawker.com/this-thre…

  12. kidmercury

    Will gladly beef with this.The qualm is that the platform cannot provide sufficient governance once it scales. There may be other perks, but the inability to provide sufficient governance is huge. Governance does not scale. I believe it is what customers want most, and if they don’t get it from a startup, they will just go to Google. That is why it seems like there is one platform to rule them all.and why Google.is.so.intimidating..governance.is.the enabling.technology thst disrupts.Google, but if.companies take the conventional pth of.scaling, they sill sacrifice that enabling technology.

    1. Brandon Burns

      Governance scales if its not entirely human, but instead is powered by a simple system (tagging, filters, algorithms, etc). The trick is finding out how to give the illusion of human-quality curation without using humans. Which is what we’ve done (and explained in the comment to @pointsnfigures:disqus and won’t re-type here).But, yeah, there will never be one platform to rule them all, but that’s more because people always want options when they shop. Commerce is not social media; networks effect can give you a moat, but it will never be as strong as Facebook’s or Twitter’s because no one wants to have to worry about communicating on dozens of platforms, but people will always want to shop in dozens of places.

  13. Rick

    The discovery and transparency benefits of marketplaces tend to dramatically increase market size. When we invested in StubHub we thought the total gross market for secondary tickets was ~$2BN. Today only StubHub’s gross volume is multiples of that size.

    1. fredwilson

      stubhub is one of my all time favorite internet businesses. such a great investment. well played!!!!

  14. pointsnfigures

    Many of the debates that are taking place today can be distilled to fixed pie versus growing pie. Income inequality is one. Taxes is another.One of the things that I notice when people grouse is that they really don’t like the extra competition. As platforms grow, the user base becomes noisier and things become harder to find or stand out.When I traded, it always amazed me when a big influential trader quit. The market didn’t have a ripple. Others filled the gap and the market kept growing.It doesn’t surprise me that Spike Lee would try and raise money on Kickstarter. Transaction costs for him are lower, and Bayesian probability takes over. I think that the success or failure of crowdfunding will turn on Bayes Probability Theory.For example, if we were all on a crowdfunded platform, if Fred were to invest, would you follow? Bet a high percentage of everyone would and a round would get closed very quickly. If a no name invested, it probably wouldn’t affect your decision. But, if the no name invested and had a transparent track record that was close to Fred’s, you might invest.No one is bigger than a market. No one is smarter than a market. Markets are extremely powerful forces that are integrated into humanity. Adam Smith knew that, and so did Ronald Coase.

    1. awaldstein

      The market is the only thing that matters for certain.

    2. Brandon Burns

      Part of the strategy of my soon-to-launch marketplace, http://www.localsandvoyeurs.com, is to make sure sellers always have less competition.By presenting “local products from around the world,” no matter how many, say, lamps eventually end up on the platform, for a customer who’s looking for, say, a Southwest aesthetic, they will gravitate to the Southwest section, shop local vendors from there, and never see the other 90% of lamps from other places on the platform (unless they choose to see “all lamps” instead). So when I’m pitching the lamp guy in Mesa, AZ, I’ve got a pretty good argument for him. And I’ll hopefully make him very happy long term.This also helps the user experience because no one likes endless options. We need to figure out ways to present the allure of curation to users in a way that’s not done by-hand, but with tagging or algorithms or other tech tools, like we’ve done with with simple location filtering, to ensure that the business can scale efficiently.

      1. pointsnfigures

        But you won’t limit the amount of Southwestern lamps that are on the platform I assume. Even better, allow anyone in the world to upload their Southwestern lamp store to your site-allowing more choice. As long as everything is transparent, information is free and easy to get, and people are free to choose-the market will allocate resources to the best ones. Some Southwestern stores will survive, and some die.You are competing against other marketplaces. The best designed marketplaces win against other ones. Marketplaces that can design network effects into themselves become stickier and win.

        1. Brandon Burns

          “Even better, allow anyone in the world to upload their Southwestern lamp store to your site-allowing more choice. As long as everything is transparent, information is free and easy to get, and people are free to choose-the market will allocate resources to the best ones.”That’s exactly the plan (with the addition of editor’s picks).We will mechanical turk the feature of letting anyone add their store/products at launch (to limit how much tech we build, be hands on with makers and retailers to figure out the best process, to figure out quality control filters, etc.) but this is exactly what will happen.Though I predict our network effect will come from “curators” who can sign up, suggest products to us and, if they connect us to the powers that be and they end up selling with us, those curators will get a commission (among other perks).

          1. awaldstein

            I signed up and interested.The curator model to build networks has been tried and beaten to death in the fashion startups.Maybe its how it was done. Maybe it is what they are selling but selling on the trends is betting on attention and feels hard even if you are spreading it amongst a bunch of curators.

          2. Brandon Burns

            We’re calling them curators, but they’re really a decentralized sales force — a group of people on the ground who can bring leads back to us. And this has worked for decades, from Mary Kay in the 50s to http://www.chloeandisabel.com today.That said, I’m not sure how it will work out for us. It’s been more than difficult to figure out and, what we’ve found, is that most people who are helping us connect to retailers are more than happy to do it for free. Maybe it becomes little more than a glorified tips box (which still has a network effect because the more tips we get, the more retailers we’ll bring on). So, yeah, who knows. We’re toying with the model while we put more focus on simply launching a great store with great products that communicate the vision.

          3. awaldstein

            Wish you the very best with this!And that clarifies as traditionally at least curators are layers of brand and Mary Kay type of thing more distribution.Fun project with not a model to follow except your gut.

          4. LE

            most people who are helping us connect to retailers are more than happy to do it for free.Famous thinking and experiments in this area. People will do for free what they will actually do less for if not paid market rate for their time.Example might be an attorney who will do work pro bono but not if only paid $75 per hour. Bottom line is if you can’t afford to compensate (monetarily) correctly, go for the free. Otherwise people have a unit of measure that they can relate to “my time is worth more that $5 per hour!!” and they will do nothing.Mary Kay of course gave out Pink Cadillacs didn’t she?Might be a good idea to come up with a word to describe them rather than “curators”. Something unique that can be identified with what you do when people write about you. Same as they call those people at Wikipedia “wikipedians” etc.

          5. Brandon Burns

            “Might be a good idea to come up with a word to describe them rather than “curators”. Something unique that can be identified with what you do when people write about you.”Good tip.I sent an email out with the subject line “Help me support your favorite local products.” The open rate was about 80%, with a response rate around 30%, which is clearly astronomical. But also underscores how the people who are helping us are doing it mostly to be good people and in support of the local goods movement.Maybe I shouldn’t even offer monetary incentives…In other news, the AVC comments section has once again been helpful for thinking through things!

          6. Brandon Burns

            great tip. many thanks.i wrote a longer response, but Disqus ate it and I’m too lazy to retype.which reminds me, Disqus seems to get buggier and buggier…

          7. Brandon Burns

            Also, thanks for the signup and interest!

          8. ShanaC

            choose your curators wisely. Those that have a network attached to them will bring an audience with them…

    3. LE

      For example, if we were all on a crowdfunded platform, if Fred were to invest, would you follow? Bet a high percentage of everyone would and a round would get closed very quickly. If a no name invested, it probably wouldn’t affect your decision. But, if the no name invested and had a transparent track record that was close to Fred’s, you might invest.”transparent track record” – I think the halo effect with Fred trumps a transparent track record of “investor x” unless the transparent track record was able to be transformed into a halo in people’s eyes.Fred’s actually got an advantage because he’s got the halo which is smoothing out any bumps that would be revealed by transparency.So for example nobody really thinks that much about day to day the actual value of Harvard it doesn’t even really matter where they fall on US News (and in fact Harvard could be a way to judge the accuracy of US News). But a lesser known school (where things are transparent) will live or die by those rankings until they have their own halo which could be never. [1] (Because they don’t have the powerful legacy halo that Harvard and the rest of the Ivies have).The halo is important. It’s why Seinfeld got out and Dexter is ending this season.[1] Stanford has acquired a halo as a result of Silicon Valley perhaps is another example.

      1. LE

        Wanted to add to my comment that if anyone starts a ranking site of anything (restaurants, best movies etc.) make sure you put the usual suspects with a halo at or near the top or nobody will take the rest of the list seriously. As time goes on you can stop doing that but at the start it’s super critical for legitimacy since people who know nothing will look to that to see if it’s legitimate according to their thinking.

        1. pointsnfigures

          Semantics. It’s Bayes to me. If Fred invests, because of his reputation there is a higher probability more people will invest. What would be interesting is if Fred invested and someone with as good a track record, Alan Andreeson said he wasn’t investing in the same company-then the market would have more info and you could make a better decision. Knowing who is in and who passed is like a price signal.

    4. fredwilson

      this is an argument for angel list

  15. Brian Manning

    The zero sum game theory is really just a misunderstanding of how good marketplaces drive traffic and acquire new users.If most of Etsy’s traffic came from them buying SEM or running TV ads, then yes, there is a fixed amount of traffic that sellers are competing for. But I’d bet that the vast majority of Etsy’s new buyers come to them organically. That is, a buyer has a good experience on Etsy, then tells a friend, and that friend tells a friend, and that friend tells a friend, and on and on.More sellers >> more good buying experiences >> more buyers.The beautiful thing about marketplaces where traffic is driven by a quality buying experience (and word of mouth) is that instead of sellers competing with one another for traffic, they actually rely on one another for traffic.

    1. laurie kalmanson

      Etsy is where the Google said i could find birthday party minecraft cupcake toppers; when i got there i found lots of other cool stuff i wasn’t even looking forRelated– Etsy would work even better with more discoverability, both curated and indexed

      1. ShanaC

        pictures? and etsy has had that problem for the long term…so does ebay…

        1. laurie kalmanson

          eBay redesigns are better than before but there’s still work to do.I like this bbc example a lot; expandable into subs easily.Content strategy first structure second

        2. laurie kalmanson

          Google image search is great for images

    2. Cynthia Schames

      Fantastic point, @bcmanning:disqus. We’re seeing this bear out in the marketplace we’re building. We simply don’t have the budget to buy traffic, so we rely entirely on organic at the moment. In our case, our sellers (who are often also well known bloggers in their niche) promote their own items to their own networks. It’s been good enough to get us a pretty decent Alexa ranking in less than 8 months, and growing revenues, so I’d say you’re right on.

  16. Brandon Burns

    Kickstarter and Etsy are both heavily curated, both by the guidelines for what kind of entity can sell on the platforms, and by the in-house staff that cherry picks which projects/products get promoted on the homepage and in other avenues and, in turn, represent their brand. Both are a good thing.The old sellers are always going to worry that the platform they’re on gets too big, too “not like them” and pushes them out, both via competition and reputation. But staying true to their ethos is why Kickstarter and Etsy have grown, and old sellers have not abandoned them — they still stand for the same principles.In contrast, Fab (which I know you wouldn’t call a marketplace, but it is) is not staying true to its ethos, at least not for sellers. While the consumers still get the same design aesthetic Fab has always had, the kinds of sellers on the platform has changed drastically — for one, they’re a lot bigger. The kinds of companies that originally sold on Fab can’t afford it anymore, as Fab has gotten too greedy with their cut of the profit and processes. As I’ve been traveling pitching sellers for my own marketplace (www.localsandvoyeurs.com), I’ve heard over and over again how Fab is raping people, how they’re not really a sales channel for them but really more of a place to get exposure (often times at a loss of revenue) and how Fab, basically, is the new Groupon as far as seller relations go. I predict that this is entirely unsustainable and, even more so than their unruly growth trajectory, this is what will kill Fab in the end.It seems, to me, that staying true to your original vision — for both buyers and sellers — is the best way to grow your marketplace so that your early supporters don’t dump you. Basically, don’t act too big for your britches and turn into an asshole.*I know I’ve previously supported Fab here on AVC, to Fred’s dismay. Live and learn, I suppose. 🙂

    1. LE

      It seems, to me, that staying true to your original vision — for both buyers and sellers — is the best way to grow your marketplace so that your early supporters don’t dump you. Basically, don’t act too big for your britches and turn into an asshole.I think that if you are in business you make decisions that are good for business. [1]So if you are right as far as killing the goose that laid the golden egg then you are right.But that’s the reason to do it.Not (if you are a business person) because you have some higher calling to do the right thing and not be an asshole. Of course if you aren’t a business person and simply want to feel good then that of course is fine. But you won’t make as much money in the end.[1] Just like in sports the idea is to win the game not to help out the other team by lending them your star players if one of their players gets banged up.

      1. Brandon Burns

        I should clarify: don’t be an asshole to the people who are making your business run.One may claim that Fab is right to kill the goose that laid their golden egg so that they can focus on their larger retailer / in-house branded products that they think will lay an even bigger egg. But the opportunity they missed out on is this: they could have been the first really big drop shipper [1] to change the face of e-commerce by partnering with smaller designers, not holding inventory (like the used to focus on) and, in turn, taking a smaller cut — making it more attractive for more small businesses to join, and much easier to operate. Instead, they’re taking increasing larger cuts from vendors who drop ship, and they’re doubling down on the existing wholesale / retail pricing model and inventory structure because it’s more lucrative in the short term, when it won’t be more lucrative long term — you can’t even broach the subject of pricing and inventory with smaller designers and manufacturers without them huffing and puffing and talking about how they’re all trying to build their own websites so they can distribute themselves so they don’t bleed money to retail operations buying up their stuff at crap wholesale margins. There has to be a middle ground where folks get distribution, and the distributors get a reasonable cut — that’s the goose that will continue to lay golden eggs; the goose that Fab killed by being greedy assholes.[1] http://www.shopify.com/blog

      2. Matt A. Myers

        Actually, you’ll possibly make more money in the end – the reverse being making more in the short-term, sacrificing potential higher long-term profits in total.By going for the short-term though you don’t have to worry about competition as much, however you’re also allowing competition to exist, and indirectly causing them to be created – because your business model has become been possible to disrupt.

    2. Matt A. Myers

      Well if someone truly has a good quality product it will sell itself – and then those won’t be available on Fab.

    3. fredwilson

      it is easier to stay true to your vision if you are a marketplacewhen you are a retailer, you play a different gameFab is a retailer

  17. William Mougayar

    Money raised on Kickstarter comes with no strings attached, and it’s that degree of freedom that’s attractive to those asking to get funded.You’re only accountable to your donors and nobody else.

    1. ShanaC

      nope, you still have to pay your taxes 😀

      1. William Mougayar

        I meant on how you can use it.

  18. kenberger

    Early adopters throughout history often feel a hipster sense of entitlement from their discovery.Police fans in 1980, U2 fans in 1983, Radiohead fans in 1997 all screamed betrayal when these beloved products went mainstream. I know I did in all 3 cases. And I got over it.

    1. laurie kalmanson

      Tween girls disowning Justin Bieber …

      1. Drew Meyers

        I get annoyed every time I see his name online. i just don’t get why so many people care to give him the time of day..

        1. laurie kalmanson

          This year, he’s over. Last year, the girls were bitterly divided on the topic. Related, taylor swift

          1. Drew Meyers

            In general, society would be a lot better off if people spent their time talking about ideas as opposed to caring what every celebrity on the planet is doing every single day of the year. Seriously, such a waste of society’s resources.”Great minds discuss ideas; average minds discuss events; small minds discuss people.” – Eleanor Roosevelt

    2. LE

      “Early adopters throughout history often feel a hipster sense of entitlement”There is a saying for this (which oddly I can’t find any reference to) which is “last man over the bridge” which relates to development on islands.

      1. Andrew Kennedy

        something like closing the door after you walk in would also make sense to me.

    3. fredwilson

      i still haven’t gotten over Kings Of Leon going mainstream. they had this raw bluesy sound in their first three records. that’s all gone now.

  19. jason wright

    Hollywood created the economics of film making as a defense strategy to stop ankle biters gaining a foothold in ‘their’ industry. The cost bar was set so super crazy high to thwart competition. Now the paradigm is changing. The old guard will live on for some time on the back of their legacy inventory, and if they have the wit they might try to reinvent themselves.

    1. laurie kalmanson

      Related: music

  20. BillMcNeely

    One of your last paragraphs contains this quote:” nobody has their “hands out” on Kickstarter”When I explain crowdfunding to my Mom she immediately thinks it’s begging for money online.I explained to her this is not the case project supporters get something that exceptional in return for their early support.This may be a concept that still has to be overcome.

    1. LE

      That’s interesting. Particularly the “immediately thinks” part of it. Assuming that you did a reasonable job of explaining it so as not to bias her I wonder if your race played into her interpretation?My dad used to say that if he told the same story to two of our neighbors when growing up one would think that he was really smart and the other would think that he was a thief. The religions of the two neighbors were different.I’ve seen this happen frequently.Would be interesting if you questioned your mother more on why she thought of it that way.

      1. BillMcNeely

        Do you think socio-economic /religious beliefs have more do with it then race?She is a pretty fervent independent Christian fundamentalist and loves Fox News.

    2. fredwilson

      very true

  21. William Mougayar

    I am friends with 2 people that are regular backers on Kickstarter. It’s mind-boggling to see the frequency of their backings via the email notifications, and some of it isn’t made public.

    1. ErikSchwartz

      I gave a lot first the first year. Probably 15 projects for $1000. But the lesson I learned was that very few projects were as good as their videos.Now I am much more skeptical and selective.

      1. awaldstein

        Had a bunch of prospective clients plan on Kickstarter as their potential seed round.Most I discouraged away from that as in over 50% of the cases, they could just as easily and faster do a f & f round.

        1. LE

          Well with friends and family though the following exists:1) You have now obligated yourself to do something for them in return (reciprocity). So now you owe a favor to someone.2) You could lose their money and have to deal with the consequences of that and might hear about it for the next “n” Thanksgiving dinners.3) You have to be comfortable soliciting friends. Some people are good at this (people who sell life insurance). Many people are not though because the sting of rejection is pretty intense.

          1. awaldstein

            True enough but in many worlds f & f is simply an extended network as I Kickstarter actually at times.

          2. Matt A. Myers

            Indeed, they’re just giving less or more likely with less risk, at least less perceived risk – and get something tangible and/or qualitative value from it.

        2. FAKE GRIMLOCK

          UNLESS FRIENDS AND FAMILY HAVE LESS MONEY THAN EVERYONE ON KICKSTARTER.

          1. awaldstein

            True and ostensibly Kickstarter creates market as it raises funds. Does happen at times and its powerful.

        3. William Mougayar

          Actually it’s the 3 F’s that go first.Friends, Family & Fools.

          1. andyidsinga

            i wish I could find some fools for my ideas 🙂 very rich fools only though ..and they have to be good partiers. and a pony, they’d have to agree to the pony. i got kids man!

          2. William Mougayar

            Ha. lol.

      2. LE

        I learned was that very few projects were as good as their videos.I posed the theoretical question above as to to what extent people would support a celebrity project that was completed vs. not completed.What your experience seems to indicate is that by not showing the actual project and simply selling the dream people do much better.Importantly you totally remove any negative reviews of the project and if it doesn’t hit the tipping point of “like” it ends up dying and being dragged down by gravity.Because people can skip right to your experience and know that “Braffs Garden State Sequel isn’t good so no need to support Braff and buy something I know isn’t worth the money”.

        1. FAKE GRIMLOCK

          PRODUCT IN IMAGINATION ALWAYS BETTER THAN ONE IN HAND.EXCEPT IF BY ME, GRIMLOCK.

          1. LE

            Same concept that makes porn attractive. The fantasy is much better than the reality. [1]I once dated a girl who I was “fantasy grade” in her appearance. Except that actual sex with her wasn’t nearly as good as the fantasy of sex with someone who was “fantasy grade” like her. It wasn’t anything that she did wrong and it wasn’t because she wasn’t “good” and all of that. Just that the fantasy was so much better than the reality.Fantasy is a “built in” to human nature necessary for survival. It’s hope for the future.[1] When I got my first boat I remember taking it for a drive and finding that the experience fell short of what I had imagined it would be like to own a boat. I was quite dissapointed. I got over it though and learned to enjoy it. But staring at the boats that others had “the porn” was so much fun.

          2. andyidsinga

            what do they say about boats ..the two best days are the day you bought it and the day you sold it? 🙂

      3. Matt A. Myers

        The problem is they’re asking for retail or near-retail prices, when they haven’t even created the product yet. Most of these projects, unless created by product development teams, don’t know the costs and/or can’t absorb the costs of outsourcing development themselves.

        1. Drew Meyers

          Yup…there was a recent app project that asked for X…and I know for a fact that a “great” app with the features outlined couldn’t be built for that amount of money. Maybe a really crappy outsourced version, but not a real awesome product. It ended up raising more than requested, so maybe they’ll get it done and it will be great. But I’m skeptical. People who put up dev projects, but don’t have real teams behind them or prior product development background — are more likely than not going to fail (or get done, but really low quality).

          1. Matt A. Myers

            People just have to assume higher risk in most cases.

      4. ShanaC

        smart man.

        1. ErikSchwartz

          I learn.

      5. andyidsinga

        true, but @fakegrimlock:disqus ‘s campaign returned a sweet result:) see also https://twitter.com/andyids

        1. ErikSchwartz

          No doubt. I backed GRIM with $1 to get the e-book. I need his words more than his wall art.

          1. andyidsinga

            i only wish he had a pledge level for : “i will put up some graffiti in your neighborhood while you stand lookout”streetart #becauseawesome

    2. LE

      “I am friends with 2 people that are regular backers on Kickstarter.”Sounds like it triggered the addiction nerve then. What did that behavior replace?

      1. Brandon Burns

        I know a lot of successful entrepreneurs and tech people who are addicted to Kickstarter. It replaced more time consuming ways of giving back to the community. When you habitually give $25 to a new company you like, you don’t feel bad about not taking 30 minutes out of your day to meet with someone in person to give advice.

        1. LE

          “you don’t feel bad about not taking 30 minutes out of your day”Fits with my theory about tipping in certain situations to avoid a negative as opposed to feeling a positive.An example is when you tip the maid at a hotel that you never see and will never see again. [1]You tip the maid because it’s been socially defined as something you should do and if you don’t you feel bad.So you tip to avoid that negative feeling. [2][1] As opposed to the guy who did a great job schlepping in the big furniture who you truly appreciate.[2] Not saying there aren’t people who tip for other reasons but you don’t see them leaving money for the front desk clerk or the guy who keeps the HVAC running do you?

        2. ShanaC

          its a problem. I sometimes feel like among my own age group, I’m the only person I know with a desire to join the musuem or donate regularly to a dance company. I’m nervous when kickstarter replaces some of these institutions…(lets put it this way, I don’t think Sufjan Stevens could go and fund a ballet so easily)

      2. William Mougayar

        Not sure. It satisfies their curiosity I think. I don’t think it replaces another one. Disposable income + curiosity + likes to help = Kickstarter galore

  22. Adrian Sanders

    A store is a business with one front door.A marketplace is a business with a million front doors.Merchants will always see the marketplace as having one front door: Theirs.So long as there is more money to be made tomorrow than there was yesterday, things will be fine.

  23. BillSeitz

    In case of Etsy, it would be interesting if they did some sort of long-term analysis of sales by seller. I wouldn’t be surprised if there were some sellers that increased sales as the market grew (the sticky part of the A-list), and some who lost because of increased competition. Means and medians don’t tell you anything interesting.I don’t think they even publish a frequency distribution of *current* sales per seller.

    1. Matt A. Myers

      I don’t know if it’d be in most platforms’ best interests to not publish these details as then you could see the patterns of what works and what doesn’t. This could mean people gear their creation towards what sells – which then saturates the marketplace. I imagine it is more important early on when a platform still hasn’t stabilized to keep it more of a free-for-all, otherwise the slowdown might stop the scaling and virility.It’s always the platform in the end that gains long-term of course, sustainable network of people gathering around a specific context and use – which is as it should go – like planet Earth as a platform for life, it’s part of the cycle of life.

    2. ShanaC

      difficult to do, but I can name some sellers that did grow a tad too big for etsy. their outside of etsy network mattered in that growth.

  24. Bill

    Interesting, the headline seems to address a different point than the article. Agree that open marketplaces are better than solo marketplaces. There is something about more traffic and selection that builds on itself in a virtuous cycle.Isn’t the zero sum game point typically made about not changing the aggregate dollars spent on X, whatever X is? A new marketplace can typically re-direct where the spend goes but rarely changes overall spend in a given segment (clothes, food, electronics, etc.) across the economy. The changes can be massive and hugely influential, whether it is Costco or Wal-Mart in physical stores, Amazon for online retain, eBay, Etsy or others for online marketplaces, but they do not typically change American’s overall spending by category (other than in the case of retailers that bring costs way down and potentially free up dollars for spending in other categories).

  25. panterosa,

    As someone editing a Kickstarter campaign this very minute, I feel the many comments here blend. Part project person’s tribe, part platform tribe, part curation by KS editors.I watched Spike Lee and @sethgodin:disqus’s videos among many preparations for our own. I don’t see the disadvantage of being on a platform that offers them, the well known, a voice, as well as the woman raising $300 to make an open library in Canada. Isn’t that the fun of it?

    1. andyidsinga

      can you share more about the open library ..links?thanks 🙂

      1. panterosa,

        Andy, here it is. Was the featured project of the day, on the day I “went”.http://www.kickstarter.com/

        1. andyidsinga

          thats right on! – we have some of those in Portland – really neat.

  26. MikeSchinkel

    Hi Fred,In general I too am usually frustrated by “Zero Sum Game Thinking.”That said, I think you missed something in your analysis. When newer sellers flooded into Etsy, or newer projects came to KickStarter they both added to the pool of available funders but I’m almost certain that your “rising tide floats all boats” is a mismatched metaphor here. The reason is that the new funders don’t fund all existing sellers equally; the more sellers there are the more likely there is for a few sellers to execute muCH better than the incumbents and they will get the lion’s share of the benefit of all funders.It’s really as simple as “Survival of the Fittest.” In the early days the competition is slim and the number of competitors who can execute really well is small. But as the marketplace grows there is a greater absolute number of competitors that can execute really well, and they mostly displace the early less sophisticated sellers.But I’m not arguing against the growth of the marketplaces, I’m just pointing out that many who grumble do have a legitimate concern for their own personal best interests. The reality is that they either need to learn to execute better or they will be left behind. But the vast majority of them will be in the long tail; it’s just how the free enterprise system works.

    1. Matt A. Myers

      “Survival of the Fittest” which means quality and relationship / connection over merely coincidence and quantitative values – on this ultimate-lovely competitive platform called the internet.

    2. FAKE GRIMLOCK

      ALL ROADS TO TOMORROW PAVED WITH BONES OF THE PAST.

  27. LE

    While the title of the piece is awful (nobody has their “hands out” on Kickstarter),If you define “hands out” as “begging” then you are probably right. Or if you define it as wanting “a hand out” (or something for nothing) true also.But I don’t think it’s a stretch to use the title “Celebrities with their hands out” since they are in a sense soliciting something that will bring them great gain (by tapping into the masses) [1]. The masses in return get some token of appreciation in addition to feeling good because they think they have connected with a celebrity. [2][1] Remember that celebrities need everybody [3] but yet they need nobody. They don’t care about you in particular and while they might give you the time of day, in your time of need they wouldn’t go out of their way to help you or anybody in particular. They are interested in the mass of people not individuals.[2] Would be an interesting experiment for a celebrity to complete a project and see how many people would buy the finished project in advance once they know how good it really is in order to support the celebrity. Instead of prior to the completion of the project where it’s more “door number two”.[3] Same with bloggers, newspaper reporters, tv news anchors etc.

  28. David Landsman

    Marketplaces are how I have made my living for the last 11+ years. I started at First Index in 2002 before anyone really understood what a web marketplace was, spent 8 years at MFG driving the message that a marketplace could drive balance into the manufacturing industry. Now I reside happily at Ariba Discovery, helping companies understand that their spend and teams are substantially more efficient if they allow the power of the marketplace to respond to their demand, rather than spend incredible amounts of time searching for optimal supply situations.Fred said it best when he explained, “A rising tide lifts all boats.” Russell Crowe made it slightly more amusing in A Beautiful Mind: (https://www.youtube.com/wat…Nash : Adam Smith needs revision.Hansen : What are you talking about?Nash : If we all go for the blonde…we block each other. Not a single one of us is gonna get her. So then we go for her friends, but they will all give us the cold shoulder because nobody likes to be second choice. Well, what if no one goes for the blonde?We don’t get in each other’s way, and we don’t insult the other girls.That’s the only way we win.(Laughs)Adam Smith said the best result comes from everyone in the group doing what’s best for himself, right? That’s what he said, right?Others : Right.Nash : Incomplete.Incomplete, okay?Because the best result will come…from everyone in the group doing what’s best for himself…and the group.Marketplaces can ONLY exist if the ecosystems are balanced. Each marketplace is different and the success factors that go into them are completely variable based on the community they drive, so while Seth Godin is correct in assessing Kickstarter as a tribal amplifier he is mistaken in saying it isn’t a marketplace. The two are not mutually exclusive.If Kickstarter slips out of balance it ceases to exist. High profile projects like Zach Braff’s (South Orange, NJ represent!!) bring in the new capital required to fund the expanding ecosystem of projects. William Mougayar quoted a stat that @ 60% of money pledged is pledged by repeat users, so an influx of users becomes (should become) a sustained influx of capital in the marketplace. Without regular infusions like the one described, the scalability of Kickstarter might be in question.Growing the “investor” base is the key driver for the Kickstarter marketplace, but every marketplace is different and when evaluating a marketplace it is critical to understand what the key driver of the individual marketplace is.In my experience the key marketplace driver has been the “supply follows the buy.” Any B2B marketplace runs this way because this drives efficiency into the process. The more buyers use the marketplace, the more suppliers want to.However, if you don’t watch the balance of the marketplace carefully and make sure both sides are satisfied, the end will come swiftly and without mercy.

    1. ShanaC

      if these are growing marketplaces, then the nash equilibrium would fail, no? so the hipster type could be leaving…

    2. awaldstein

      Ariba was actually one of the first ones or maybe just the first one I knew of. I spent a few years in the late 90s selling auction technology into marketplaces and spent forever trying to close them.

    3. fredwilson

      great comment

  29. reece

    100%you see this in every industry and every fearful founder, VC, etc… it’s backwardsrising tide FTW

  30. Matt A. Myers

    I was always wonder about the terminology of when using ‘pledged’ – does that mean that it was successful, and money was given?Millions of dollars can be pledged, but if the minimums aren’t reached – then those pledge amounts aren’t paid.

  31. Matt A. Myers

    The tide rises because of the people the newcomers bring. The larger concern should be focused on is if the value the individual brings to the table is equal or greater to the value the platform will bring. General theory says that smaller networks benefit from smaller ones, though that would have some nuanced parts to it – whereby the quality and other values are synchronized.Does Kickstarter guarantee any minimal exposure or give free advertising to projects (within the network)?If it’s solely a one-way relationship or more one-sided, where the platform is providing a service to host something, and that’s the value they’re paying in return – then you have to take into consideration the additional value they gain from your marketing efforts, and from the % of revenues they take from overall successful pledge amounts.

    1. laurie kalmanson

      The old phone company network didn’t care what people said, just that we’re talking more and more to more people in more places http://www.shorpy.com/node/

      1. Matt A. Myers

        Do you know if the phone company back then was government controlled and/or funded or demand/supply driven?

        1. laurie kalmanson

          Internally cross subsidized per regulations so that universal local service was relatively inexpensive vs long distance and business useRural last miles were subsidized by urban volume and by business long distance

          1. Matt A. Myers

            Got it – thanks.

          2. laurie kalmanson

            telephone wires and radio unite to make neighbors of nations — lobby mural, 32 ave of the americasat&t / downtown digital was where i started doing web stuff way back in the 20th century; they had a crazy skunkworks in the old building in tribeca; wild things were going on there.

          3. Matt A. Myers

            It would have been fascinating and exciting to be part of such a new communication and connectivity tool. Much like it is for the internet I suppose, though we were already spoiled first with the telephone and instant communication for anywhere in the world.

          4. Matt A. Myers

            Love it! :)”Mommy – the telephone man is here”

          5. laurie kalmanson

            Probably was a whole genre of plots for stage and screen that is no more.Related: all of 19th century epistolary literature where everything turned on the posting — over

          6. Matt A. Myers

            A lot could be we just expect things to happen now and so there’s not as much excitement when they do happen – and we already can see things to experience them through video, so a major factor of what gives us an experience is fulfilled before it happens in reality.

  32. sigmaalgebra

    That early on you saw the promise of Twitter, Etsy, and Kickstarteris just astounding.

    1. laurie kalmanson

      Fred says it out loud all the time: networks and platforms

      1. sigmaalgebra

        I get that point, but there’s more that’scrucial to seeing those particular successes.

        1. laurie kalmanson

          Yes just add awesome

  33. ShanaC

    So yes, there are more transactions, but early adopters feel pushed out. The nature of the community changes, and the transaction dollars no longer head that way as they aren’t appealing enough necessarily to beyond the bleeding edge.Such has been the nature of both culture and commerce for a while. Van Gogh type stories are not the usual…

  34. Tyler Hayes

    Alternative post title: The Starbucks Effect.(Great thoughts. Thanks for sharing as usual.)

  35. george

    I’m not sure why people have to knock any form of funding; having options is good for everyone. From my point of view, it’s an exchange; you have public or private money, that’s the pricing model. Not every project has to have the same level of return or success – Kickstarter allows more than just financial considerations to guide decision-making.

  36. FAKE GRIMLOCK

    FUTURE ALWAYS BORN FROM CORPSE OF PAST.IT NO FUN WHEN YOU ONE BEING CORPSED.

    1. Matt A. Myers

      So poetic..

  37. FAKE GRIMLOCK

    PIONEER MAKES NEW PLACES SAFE FOR EVERYONE ELSE TO RUIN.IT ONLY PROBLEM WHEN RUN OUT OF NEW PLACES.

    1. laurie kalmanson

      “When you come to a fork in the road, take it.”

  38. Michael Frank

    Given that these branded artists drive new customers to Kickstarter who end up continuing to give, do the Spike Lees of the world get much better terms from Kickstarter than the general public?

    1. fredwilson

      no

  39. JamesHRH

    Fred, its a quibble, but the headline is fair game.Spike does not play with his own money – in the traditional funding market, nor on Kickstarter.It is a little unfair if they don’t explicitly point out that Kickstarter is no different a funding structure than a studio.

    1. fredwilson

      everyone who gives on kickstarter gets a reward, which is often the product that they are funding the creation of. it is a futures market, not a charity

      1. JamesHRH

        I was looking at it differently.If you and I run a studio, or finance films, we could look at artists as ‘coming to us with their hand out’.They don’t self-finance, at all.I am a little surprised that Kickstarter has not figured out a way to standardize profit sharing.I don’t see how it is a futures market – I can make money on futures.

  40. Matt A. Myers

    “The gentrification of Kickstarter doesn’t seem to be hurting its original inhabitants. It may even be helping them.”For sake of argument, there are no permanent inhabitants of Kickstarter. A resident is technically a project being on there.I’m not sure how many people have created multiple crowdfunding campaigns for different projects, though I don’t imagine many – and they could maybe be considered an inhabitant..

  41. jonathanmendez

    In the paid search marketplace that thinking was not only rational, it happened. Brands came in and the small companies that seeded the marketplace could not compete for the best placements on the best words. It would be interesting to see KS data as to avg contribution size and dollar scale in the name projects vs others. That might be a good way to foretell what will happen as more big names come into the kickstarter marketplace.

  42. Joseph Valente

    Another big application of zero-sum thinking is in the ongoing debate around whether technology creates or destroys jobs.Often we hear stories about how Uber has put so many taxi drivers out of work, without any talk of the many more private drivers who now have a platform with which they can make an easy living. Similarly with Airbnb the talk is always about lost jobs in the hotel industry and never about the even larger number of people who will make a living from renting their spare rooms and homes.It is a huge error in people’s thinking all over the technology game and a vestige of eras past in which a hierarchy dictated set positions (a job for life, a monopoly over an idea or a work, a position of power) rather than a network which is in constant flux yet always growing over time.

  43. Yepi 2

    The competition in the market is inevitable, instead of attacking it, we should join and it’s more than appropriate. That is how to develop

  44. Jeff 'SKI' Kinsey

    Once again, a great post. This time helping to dispel the fallacy of Zero sum game thinking in crowdfunding.

  45. Ema Hussain

    A lot of the media around this topic is emotional, but there is a mathematical aspect important for companies to understand and measure.The early adopters are essentially the root of a network with influencers and communities.Marketplaces can measure how their changes affects the strength of their network, based on the activity of core influencers and communities.The marketplaces that thrive seem to have a good grasp on their unique identity (defined by their early adopters) and use that as a guide to build towards their endgame.eBay and Digg are two examples of companies who lost their identities -> alienated their audience -> were left with a shell. I’m sure there are plenty of other examples.In my opinion, questions that should always be asked should be stuff like – What adverse affects do decisions around key things like pricing or features have on these core influencers and communities? If key influencers and communities start leaving, how does that affect the rest of my network? etc.

  46. DarkWandering85

    From the perspective of game design, imagine what we would have missed if the xbox live marketplace were restricted to independent studios and no bigger name companies had dived into releasing side projects through it.

  47. Prokofy

    Fred, when you prove that those influx of people who joined Kickstarter actually fund other non-celebrity projects, then I’ll believe you. With numbers. Until then, I don’t. Kickstarter is merely an elite Silicon Valley foundation posing as a crowd-source. I went to Indiegogo instead. But I’ve come to re-think the whole crowd-sourcing thing completely after I had to seriously go out and try to raise money for my son’s physical therapy after his serious motorcycle accident. Crowd-sourcing is a mask we wear to approach our old friends whom we might have been too bashful to just ask outright like the old days.

    1. DarkWandering85

      “Crowd-sourcing is a mask we wear to approach our old friends whom we might have been too bashful to just ask outright like the old days.”You should not use the royal we in this sentence. Just because that’s how it feels to you (and probably only because of the nature of your cause) does not invalidate it’s usefulness in a whole slew of other purposes.

  48. Jan-Willem Bode

    One of the interesting things you indicate is that indeed sellers are the primary marketing engine. We see the same at our community-organised market place for free lancers (where we combine on- and offline community building). However, having a bunch of high-quality people available is also a pull for people posting jobs. The initial liquidity comes from having great jobs on the platform though.