When Kickstarter launched in 2009, there was nothing quite like it: a platform where creators could launch a project with a funding goal and a time limit, and assign rewards to backers based on how much they donated. If the project hit its goal before deadline, the funds go to the creator, minus a small cut for Kickstarter and its payments processor. If the project failed to meet its mark within the time limit, no money was collected.
Two years later, the platform had attracted over 1 million backers pledging more than $100 million to support a wide array of creative projects. It wasn’t the first website to enable crowdfunding, but it became synonymous with the term; just as Google has become a verb, Kickstarter is now a noun. By 2012, it was distributing more money on an annual basis than the National Endowment for the Arts. To date, more than $3 billion has been pledged on the platform.
At the same time, crowdfunding platforms have proliferated. Indiegogo basically cloned Kickstarter, while GoFundMe expanded the options beyond creative projects, allowing backers to pledge money to things like retirement funds and medical bills. Services like Patreon pioneered a subscription model, which has seen surging in popularity. And even tech giants like Facebook got in on the act.
Over the last nine years, Kickstarter has remained largely the same
However, over the last nine years, Kickstarter has remained largely the same. It expanded to new countries; added the option for creators to live stream to backers; and launched an editorial resource, The Creative Independent. But its entire business was still predicated on the product it launched with: the Kickstarter.
Today, the company is launching its first new funding product since launch, Drip. Instead of supporting a specific project, subscribers can now make a recurring payment to a creator. A Drip can offer rewards to subscribers based on when they pledged, or how much they give. Kickstarter understands that a time limit is important for incentivizing pledges, so it lets creators pick a window, say 30 days, in which early supporters can become founding members who receive special rewards. After the founding member period, the Drip stays active, regardless of how much or how little is pledged.
The idea of subscription crowdfunding isn’t new. Companies like Flattr, Patreon, and Steady have been offering it for years. Kickstarter actually acquired a startup called Drip which predated Patreon, back in May 2016, and hosted the remnants of its business on its website. Its new product was born out of that team. Patreon, which launched in 2013, has become popular with vloggers and podcasters, and is reportedly on track to hand creators $150 million in subscription revenues this year.
Drip hopes to differentiate itself with its “founding member” approach. The other big difference is that Drip also aims to be more creator friendly, allowing creators to easily port subscribers to other crowdfunding platforms with this model. Focusing on building a product that can easily be transferred to a competitor may seem like an odd choice, but Kickstarter has a unique set of incentives. In 2015, it reincorporated a Public Benefit Corporation, or PBC. It vowed to never go public or sell the company, and it committed to putting the well-being of creators and employees above traditional metrics like revenue growth or profitability.
During a recent conversation, co-founder and chairman Perry Chen stressed over and over how important it was to him that Kickstarter not fall into the trap of following traditional models. “Think of the classic corporation as a legalized sociopath: complete and utter self-interest above the well-being of others,” he told me. “A PBC is more like a human. It’s still for profit, but you balance your material interests with your values.”
With its unique set of priorities, Kickstarter has became a grand experiment, an entity with billions of dollars flowing through its systems that wanted to act more like charity than a traditional corporation. But the launch of Drip comes amid a challenging period for Kickstarter. After seven years of explosive revenue growth, the amount of money pledged to Kickstarter has stagnated over the last two years. Kickstarter publishes a daily log of how much money is pledged, and how many projects are successful. The research firm ICO partners has been tracking those numbers, and reported that the number of dollars successfully pledged to the platform actually fell between 2015 and 2016. Through the first 10 months of 2017, according to data ICO Partners shared with The Verge, the amount has stayed roughly equal to the year before, still below its 2015 peak.
Along with a sudden loss of growth, Kickstarter has seen serious turbulence among its executive ranks. This past July, co-founder Yancey Strickler announced that he would be stepping down from the role of CEO, and that the company would be launching a search for a new leader. In the four months since, The Verge has learned that seven of the eight members of Strickler’s senior leadership team have left the company, including the general manager, SVP of operations, VP of product, and VP of engineering. All told, more than ten employees at the director level or higher have left or announced their intention to depart.
According to conversations with current and former employees, the executive exodus all comes back to one person: Chen. He was Kickstarter’s first CEO, and while he left that role four years ago to become chairman, he has always retained a controlling stake in the company and a strong influence on its direction. Speaking recently at the company’s headquarters in Greenpoint, Brooklyn, Chen seemed framed the departures as part of his effort to ensure Kickstarter remains a unique company.
“These operations can get really generic. If you look at a lot of companies, it’s COO, CMO, blah, blah, blah,” Chen said. “But look at a museum. You might have a CEO or director, but then you might have a curator. There is a very specific articulation of roles and lanes, and I think that’s really necessary for Kickstarter, trying to be a different kind of company over a long period of time. If you have operators coming with the classic business playbook, I don’t think we’ll be able to sustain our focus on our mission.”
Current employees say that Chen didn’t trust many of the senior staffers Strickler had hired, and as he reasserted control over operations, the majority of those employees decided to leave. Sources described the power-sharing relationship between Chen and Strickler, both of whom took a turn as CEO, as the strained relationship between two brothers: full of enmity, affection, and intense competition. Each naturally preferred to have their chosen deputies around them.
“We’re falling behind the competition, and we’re at risk of losing our lead in some key categories.”
When I asked Chen if he planned to stay on as the de facto CEO or if a search for a new leader was underway, he dismissed the idea of searching for an outside replacement. “Look at all these companies were people say, ‘I’m relieved the guy at the top sounds like a good guy.’ What are we saying there? Oh, things are good until that person quits, is fired, or gets hit by a truck. Then a person will step in and weaponize the thing. It’s a false hope. So it’s not just about, ‘Can we orient ourselves at this moment with a group of founders’ hands on the wheel?’ We have to say, ‘How does it have a shot to do that long-term?’”
For years, Chen and his co-founders tried to keep the company from scaling too quickly. “We always said we don’t want Kickstarter to be more than 50 people. We always had a sense that if we were able to stay small, to focus and make the thing we do better every day, that was something that will help us focus on the mission,” he said. “The bigger the scale gets, the more people, the more bureaucracy, the more things can get out of control. Where does that end?
Kickstarter’s hesitance to launch new products over the years gets back to this same apprehension. “Once you start to have some success, everyone, both inside and outside the company, starts asking, ‘Why don’t you try this or launch that?’ I’ve seen how that can be insatiable, and we’re always trying to watch out,” Chen explained. “Very quickly through inertia, you can end up at a place where you don’t have control.” For many employees, this restraint became a point of frustration. “We’re falling behind the competition, and we’re at risk of losing our lead in some key categories,” a current staffer told me.
Aside from allowing creators to designate “founding members,” Drip doesn’t really evolve on the idea of subscription crowdfunding already offered by companies like Patreon with a host of new features or technologies. But it does have a different set of values. Drip aims to be more creator-friendly by allowing creators to easily move their paying subscribers to other crowdfunding platforms.
“If we were in a revenue-maximizing situation, this would not be the smartest decision,” said Jamie Wilkinson, Kickstarter’s new chief product officer. “But from the perspective of supporting creators, it’s a no-brainer.” Wilkinson, who was previously CEO at VHX, says he took the job in large part because of how mission-centric Kickstarter is. “I know how to trick people into being daily active users. There is so much brain power in Silicon Valley being dedicated to juicing the numbers without creating real value in the world,” he told me. “Kickstarter has built a self-sustaining business and a household brand. What are we going to do with this? It’s a moral obligation to do more than just jack up revenue.”
According to current and former employees, the tension between running Kickstarter like a traditional business and public benefit corporation meant that the mission didn’t always match what backers and creators wanted most from the platform. Chen is very focused on ensuring that Kickstarter is used to support what the PBC charter calls “core cultural categories,” a designation that includes art, comics, crafts, dance, film and video, food, journalism, music, photography, publishing, and theater. But funding for categories like games, design, and technology were the ones that actually received the bulk of successful funding on the platform. To date, these three categories have taken in over 63 percent of the total pledges on Kickstarter.
“There are two distinct sides to Kickstarter. There are people raising lots of money for product-centric projects. Those represent the vast majority of what Kickstarter functions on. The arts are Kickstarter’s bread and butter in terms of its mission, but they don’t make a lot of money. Inside the company, those are perceived as the commercial and the non-commercial side, which is odd.” said a former executive. “The cognitive dissonance is you are doing the right thing and the company is doing well, but not by the metrics you’re using to measure success. It’s put a strain on the organization.”
According to employees, there are features that would be of great value to its product-centric categories, like tools to assist with managing shipping and delivery that Kickstarter never focused on because it didn’t serve the mission of bolstering its core cultural categories. “These things could be the difference between a successful product and a creator going bankrupt, but we haven’t been able to provide them,” a current employee told me. Drip’s launch reflects Chen’s ongoing emphasis on certain kinds of projects. For now Drip is available to creators by invitation only, and at launch the vast majority of available projects are from its core categories, with just one entry each from tech and gaming.
For some at Kickstarter, this is as it should be. “We are interested in maintaining a balance across categories,” said Sarah Hromack, formerly the director of the Digital Media Department at the Whitney Museum, who joined Kickstarter last week as its first chief culture officer, one of Chen’s new hires. “We honor and respect the strength of those communities, but we want to ensure parity across other categories as well.”
Kickstarter is operating from a position of relative strength. It has been profitable for eight years straight, and expanded to 16 countries. It’s no longer the biggest crowdfunding platform on the web — that honor belongs to GoFundMe — but it still has a massive cultural impact. Projects born on its platform are regularly featured at top film festivals and museum collections. Over the last two years, artists backed on Kickstarter have earned nominations for eight Grammys and five Oscars. Drip pointedly avoided having projects from any of its more commercial categories featured at launch, but it highlighted the fact that relatively well-known creators like Shantell Martin and Anita Sarkeesian will be there at launch.
“We’re not basing our success or failure primarily on growth.”
The success or failure of Drip will say a lot about the company’s ability to evolve and thrive in its second decade of existence. But when I asked Chen if he thought the product would help Kickstarter regain momentum, he dismissed the notion. “We’re not basing our success or failure primarily on growth. It’s about, are we succeeding in our mission? Are we helping creator projects come to life?” he told me. “Hey, we’re generally helping similar numbers of creator projects come to life over the last few years. So that’s pretty amazing.”
With Chen in charge, Kickstarter is first and foremost an attempt to prove a point: that a different kind of corporate structure is possible, and that it can thrive and endure in a free market. The company has always rejected the idea, Chen told me, that massive online platforms, American maximalist capitalism, and genuine good intent could ever exist naturally side by side. His return to Kickstarter is the next phase of this experiment to see how far a new kind of corporation can go in the internet age, and to show that a web platform can scale without becoming corrupted. “This stuff is inevitable until it’s proven not to be.”
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