Kickstarter and the wisdom of crowdfunders

FT.com

August 16, 2013 3:28 pm

Gillian TettBy Gillian Tett

People who donate to Kickstarter are affirming their values, identity and sense of community

Earlier this summer, Jennifer Siebel Newsom, an Oscar-nominated documentary film-maker, decided she needed $80,000 to finance her next project. Once, she might have tapped up movie studios, private equity firms or rich investors. But in fact the California-based Newsom did something else: she dispatched emails to everyone she knew via the social media website Kickstarter, appealing for donations. “I am currently directing my new documentary feature, The Mask You Live In, our next film in the trilogy on gender stereotypes and equality and justice for all,” declared an email that pinged into my inbox. “Please check out the trailer and, if you feel compelled, please DONATE!!!”

Welcome to a curious new twist in the internet revolution that reveals the contradictory nature of social trends in today’s cyberspace. In the past couple of years, numerous areas of business life and social interaction have been transformed by the internet. And movies are no exception: if we watch a film these days, we read reviews over the internet, discuss it on Twitter, buy cinema tickets online or download it.

Now the cyber revolution is changing not just the consumption of film but production too. Most notably, four years ago, a group of entrepreneurs established Kickstarter to enable creative types who are making films, video games, music or almost anything else, to post a target sum, and appeal to supporters for aid. If the target is hit, then the pledged money is collected and Kickstarter takes a 5 per cent fee; if not, no one receives any money.

Viewed through a hard-nosed prism of rational economic theory and individual incentives, this concept might look odd. The people choosing to “invest” in Kickstarter projects, after all, do not get any financial return; instead they merely enjoy a warm philanthropic glow and a few perks such as free tickets or signed letters. “This is about people supporting projects that people want to live,” Perry Chen, the charming co-founder of Kickstarter explains. “We don’t want people looking at projects and saying: ‘Is this going to make money?’ But, rather: ‘Is this something that I want to see now?’”

In spite of this lack of any economic incentive, Kickstarter has proved wildly popular, supporting thousands of films and other creative enterprises. According to figures from its website, on average some $5,000 is raised for each project – with an average pledge of $71. And while these are mostly focused on “indie” projects, the site is now being used by famous directors such as Spike Lee and Zach Braff, who are raising millions of dollars. Last week the MP George Galloway announced a £50,000 Kickstarter campaign to finance a film about Tony Blair.

So what explains this? The founders of Kickstarter like to say that they are merely upholding a longstanding tradition of group philanthropy, albeit with a modern cyber twist. “The Statue of Liberty was funded by crowdfunding. So was Mozart,” insists Chen. And the “exchanges” that are under way in Kickstarter certainly fit the classic pattern of so-called “generalised reciprocity” – to coin a phrase pioneered by anthropologist Marshall Sahlins to refer to the practice of contributing in a wider sense to the social good, to “buy” social harmony even without an economic return.

But I suspect there is another social trend at work too: a reaction to some of the trends being unleashed in cyber space. In some senses, the 21st century is an era of great individualism and economic efficiency; or, if you like, a time of potential anomie, the word used by the sociologist Emile Durkheim to describe modern alienation. But while the cyber revolution often intensifies this ruthless economic efficiency and anomie, it also offers us a way to rebel. More specifically, people who donate to Kickstarter are notably not trying to maximise any economic gain, or behave in an individualistic way. Instead, they are affirming their values, identity and sense of community, delivering non-monetary paybacks for donor and donee alike. “The people who come to us [to raise money] come for the funding, obviously, but they also love the sense of community,” Chen says.

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Of course, this may just turn out to be a temporary fad, like so many other internet sparks. If any big legal squabble ever erupts around Kickstarter (say, over intellectual property), it could hurt the site. And, even without this, some Kickstarter supporters are dismayed that directors such as Spike Lee are now using the site for commercial, profit-seeking ventures; after all, there is no reason why Lee really needs “charity”, they complain. In any case, recent Obama reforms are now making it much easier to raise equity for films from small-time investors. This may eventually prompt some Kickstarter devotees to become more hard-nosed – and start moving to rival websites to invest in films for monetary rewards.

For now, Kickstarter continues to ride the reciprocity wave. Just last week, Jennifer Siebel Newsom announced that she had raised $101,111 worth of donations for her film from 2,417 backers (half of whom had pledged less than $35). It is a small, heartening reminder that free-market economics cannot always explain everything in the modern world; and, of course, of the way that the cyber revolution can truly surprise us all – for good, as well as bad.

gillian.tett@ft.com