Reference no: EM132300798
A person with a great idea for a startup business usually had limited options when it came to funding. They could borrow from friends and family, hope for an angel investor, or rely on their (hopefully vast) personal fortunes. That is, until Kickstarter came along. Founded in 2009, Kickstarter helps startups find funding through crowdfunding. Rather than taking out loans or hoping to meet billionaire investors, startup hopefuls can post a description of their dream project on Kickstarter, set a funding goal, and then ask visitors to the website to make contributions towards that goal.
The first Kickstarter campaign was launched by an artist, who asked for a grand total of $20 so that he could create some drawings. Since then, fundraising goals have been set significantly higher. For example, Pebble Technology used Kickstarter to raise $10 million to create its E-Paper Watch, while Ouya raised $8.5 million to launch its Android-powered video game machine. But regardless of the dollar amounts raised, most of the campaigns on Kickstarter feature small, independent companies or individuals that might otherwise be passed up by traditional avenues for investment.
More recently, however, Kickstarter users have seen a new type of project on the site, one driven by celebrities. Author and TV producer Rob Thomas used Kickstarter to raise more than $5 million to create a “Veronica Mars” movie. Zach Braff, star of the TV show “Scrubs” and director of several movies, raised $2 million to create a sequel to his movie Garden State. While these campaigns might help Kickstarter become a bigger name, they have elicited a great deal of criticism. The primary argument is that celebrities already have access to traditional sources of investment, as well as considerable personal fortunes, so they should leave Kickstarter to its original purpose—funding lesser known projects by entrepreneurs who without access to other funding sources. The big fear, of course, is that the more celebrities there are asking for money on Kickstarter, the less attention will be paid to independent artists and producers.
Zach Braff has responded to critics by saying that Kickstarter was the only way to fund his new film while still maintaining total creative control over his project. Meanwhile, one of the founders of Kickstarter, Yancey Stricklin, tried to reassure users that if Michael Bay, producer of blockbuster movies like Pain & Gain, The Transformers, and Armageddon, were to come to Kickstarter to ask for funds, he would ask him not to.
Still, Kickstarter must now deal with this proverbial can of worms—should it allow rich celebrities to use its services to raise funds and potentially overshadow small, struggling artists and producers?
You Decide
Identify the various stakeholders who are involved in the decision Kickstarter faces to allow celebrities to use its site. In your view, whose interest should be given the most weight as Kickstarter determines how it will handle celebrity campaigns?
Kickstarter charges a fee of 5 percent for every campaign. So, by hosting Zach Braff’s campaign, it made $100,000 relatively easily. Clearly, the return on hosting celebrity campaigns with large fundraising goals has lots of returns for Kickstarter. But, what are some of the risks that are involved?
As member of Kickstarter’s management team, how would you advise the company to handle the issue of celebrity campaigns?