Crowdfunding : The Kickstarter Phenomenon

by Bharathkumar Gunasekaran, Divya Anand, Eungchan Kim

Kickstarter is the world’s largest crowdfunding platform for funding creative projects. It was launched in 2009 and has gained a lot of traction since then. Given the amount of media and user attention this website has been garnering, we believe that it would be interesting to look at this crowdfunding phenomenon through the lens of E.Roger’s ‘Diffusion of Innovation’ theory. The key elements of this analysis include an overview of: (i) The innovation (ii) Communication Channels (iii) Time and (iv) Social System

When Kickstarter was launched, it was a new concept and allowed creative people access to an alternate channel to help fund their ideas. This NY Times article explains the ‘gift giving logic’ that makes Kickstarter different and has also contributed in a way to the adoption of the service. By creating a platform where users could put up videos of their creative expressions, Kickstarter gave these artists a global reach that they did not have access to earlier. It allowed them to get funding on a wider scale than was possible ever before, a relative advantage over the traditional funding sources. The backers were given the option to view a wide range of projects and ideas that they may not have otherwise been able to invest in, thereby allowing them the advantage of investing in potentially huge ideas.

The other strong factor influencing the adoption of this innovation was its simplicity. The Internet already was seen as a mode of creative expression (with sites like YouTube creating pop sensations), and so this concept acts as a more targeted way to allow an artist to share their ideas. When Kicksatarter first began, it was not spoken of much. But then, some of the early projects, like Design Obama gained traction. The concept lent itself to an easy trial cycle and this further helped cement the spread of the innovation. Finally, the more projects that get funded through Kickstarter, the more the concept spreads. Today we see many successful Kickstarter funded projects in various places ranging from the MakeyMakey to independent movies that are featured at the Sundance film festival.

As with any internet technology, the adoption of the site was slow as people were skeptical initially.  But Kickstarter has since grown from a small company used by small upstart bands and theater companies to raise a few thousand dollars to a site that even well known artists have started using to raise money. As the New York times put it “Along with a rise in the site’s public profile, the media narrative about Kickstarter has changed from one of astonishment (“So, people will just give you money?”) to one of skepticism (“All right, who’s getting hosed here?”) to the current uneasy middle ground — optimistic but ready to jettison the whole thing as soon as some opportunist abuses it to abscond with a bunch of cash”.

It is hard to distinguish between the adoption of Kickstarter itself from the adoption of projects that are actuated through the site. If Inter-personal systems ( friends of the project owner ) are the predominant reason why projects posted on Kickstarter gain traction, Kickstarter the site itself gained that number of people as clients, who by themselves become word-of-mouth marketing. By E.Roger’s wording, they are the homophiles,the initial adopters, who enable Kickstarter, the technology to diffuse. Professor Ethan Mollick of The Wharton School of the University of Pennsylvania analysed the data and found that, projects have a greater chance of succeeding if one builds a community before one starts crowdfunding. He even found that, for every order of magnitude increase in Facebook friends: from 10 to 100 and from 100 to 1,000, the chance of a project succeeding increases hugely .Artists use Kickstarter to promote their undertakings, and Kickstarter gets more popular if the project succeeds. There is a symbiotic relationship here.

The rate of adoption of Kickstarter closely resembles E.Roger’s S-shaped curve. The below metric (Fig 1 – Kickstarter’s Alexa Metrics)is a clear indication of the site diligently going through all the phases of Innovation-decision process. The early adopters gained knowledge of the site  and persuaded their friends also to get on the site. The site has since exploded into one of the very easily available sources of funding. The numbers suggest that it is a technology that has diffused into society. It would be interesting to see, if Kickstarter is here to stay.


Fig 1

The Kickstarter itself can be viewed as a social system. The Kickstarter facilitates innovation diffusion by picking interesting projects people would like to donate, showing local projects near visitors, and displaying how much each project gets funded and how long the project lasts for donations. The Kickstarter also impedes projects which doesn’t meet the minimum threshold.

Artists or project creators post their creative projects on the Kickstarter in order to raise money for scaling up their products or sustaining their artistic activities. They sometimes decide to post their product due to the opportunities Kickstarter gives entrepreneurs to solicit input and test demand for a product at an early stage. These artists groups are connected to either domestic manufacturers or overseas manufacturers who enable to scale up their products.

The last but most important relevant social groups are “backers” who support the projects through the Kickstarter in exchange for a tangible rewards or one-of-a-kind experience, like a personal note of thanks, custom T-shirts, or initial production run of a new product.  ‘Backers’ are divided into several segments according to the amount of money they donate on the project and/or the time they joined the backers group. For example, if a consumer decides to support a project early enough, he/she can get a tad extra benefits such as more price discounts, special offers of limited editions, etc. The backers, thus, function as ‘opinion leaders’.

As we mentioned above, it is no doubt that Kickstarter is a new phenomenon and an innovative crowd funding platform that facilitates the diffusion of innovative ideas and projects among visitors. Also, it has served as a new meeting place for entrepreneurs or project creators and donors for their projects since it launched. Apart from sharp adoption rate of Kickstarter, on the other hand, it entails potential risks –such as reliability of each project, legal issues (e.g. patent), and potential competitors (e.g. — which can slow or deter its diffusion. It will be interesting to see how Kickstarter deals with these risks and how it will evolve in the next couple of years.



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