![\"Exhibit](\"https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2015\/09\/Exhibit-for-Winners-and-Loser-blog-300x227.png\")
<\/p>\nEntrepreneurs have tons of ideas for the next great product. And until recently, if an entrepreneur wanted even a modest sum of $10k, she needed to convince her friends and family to chip in. If she wanted $100k, she needed an angel investor. And if she isn\u2019t connected to the right people, finding an angel investor is about as hard as finding an actual angel, as they are bombarded with a constant flow of \u201cbrilliant\u201d product ideas. Moreover, even if she found one that liked the idea \u2013 this angel investor tended to demand things like \u201cequity\u201d, \u201cliquidation preference\u201d and more. She\u2019s frustrated because she knows there are so many people out there who would believe in her product, if only she had 2 minutes of their time to explain.<\/p>\n
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Enter Kickstarter.<\/p>\n
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Kickstarter allows entrepreneurs to raise money from everyday people. Submit the proper forms online, upload your campaign\u2019s video, and voila \u2013 you\u2019re raising money. And the best thing? the money pledged comes with practically no strings attached \u2013\u00a0 your contributors get no equity (moreover, it\u2019s in fact unclear whether you even owe them the service\/product you offered in exchange for their contribution). With the alternative being and endless search for an investor, that\u2019s a lot of value created.<\/p>\n
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Kickstarter also creates value to consumers\/contributors. With a 5% fee taken for every successful campaign, you can bet Kickstarter will do their best to find the projects you\u2019ll find most appealing (read: you\u2019ll contribute the most to, in expectation). So rather than sifting through the thousands of campaigns happening simultaneously at any given moment, Kickstarter will do it\u2019s best to help you explore only the ones most relevant to you, sparing you the ones for products like \u201cLittle Eatz \u2013 treats that both you and your dog can eat\u201d. With so much data about the campaign (popularity, category etc.), and about you (e.g., campaigns you\u2019ve contributed to before, and if you\u2019re willing, data pulled from your Facebook account), they\u2019re very likely to do a good job.<\/p>\n
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This brings us to every investor\u2019s must-have these days \u2013 Network Effects. Contributors bring Campaigns and vice versa. It\u2019s easiest to see how contributors bring campaigners \u2013 the more dollars there are on a platform, the better your chances are to succeed, and therefore to upload your campaign to begin with. But also, as mentioned, campaigns bring contributors. With plenty of campaigns to choose from, Kickstarter can keep the contributors entertained for hours browsing the site, and more importantly, to always have a supply of interesting campaigns. Campaigners also help drive more contributors by taking charge of the marketing efforts, blasting their friends\u2019 social media feeds with links to their campaigns. And to top all of this off, with a growing crowd of both campaigns and contributors seeking a match, Kickstarter gets better and better at playing matchmaker.<\/p>\n
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And as mentioned, Kickstarter doesn\u2019t shy away from capturing some of the value it creates \u2013 charging 5% of the money raised in fees. With about half of the fees likely going to cover credit card companies\u2019 fees, Kickstarter is left with a hefty sum given its near-zero marginal cost. With $500M in money pledged (generating $25M in fees) this still doesn\u2019t give it \u201cUnicorn Status\u201d, but relative to the amount of capital invested ($10M), it\u2019s not too bad. And with new geographies constantly added, it is likely to grow even larger.<\/p>\n
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I think it\u2019s clear that Kickstarter is a winner. However, it\u2019s not too clear who is the loser. Two come to mind: angel investors, and all the companies producing products that compete with the products featured in the campaigns. Ryan Grepper, the creator of \u201cCoolest Cooler\u201d might have had to give up equity to raise the $50k he asked for his venture. Instead, he created a Kickstarter campaign, and raised $13M. Good chance some angel investor never got the chance to tag along for the ride. Maybe one day Coleman, a company that makes outdoor recreation products, will one day discover that Ryan Grepper is eating their lunch. Time will tell.<\/p>\n
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<\/p>\n","protected":false},"excerpt":{"rendered":"
Entrepreneurs raise funds via Kickstarter, and in doing so attract more contributors, who in turn make it an even more appealing platform<\/p>\n","protected":false},"author":51,"featured_media":0,"comment_status":"open","ping_status":"closed","template":"","categories":[45,44,47,46,7],"class_list":["post-219","hck-submission","type-hck-submission","status-publish","hentry","category-angel-investing","category-crowdfunding","category-entrepreneurship","category-venture-capital","category-winner"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/digital-winners-and-losers\/","yoast_head":"\n