Crowdfunding or Crowdbuying ?

May 1, 2012 by

Crowdfunding or Crowdbuying ?

Much has been made of the various amounts of millions of dollars that sites such as Kickstarter and Indigogo have raised for various projects. Recently one project topped over $3 million in contributions.  This of course has led to the seemingly obvious conclusion that there will be millions invested by all sorts of good folks who are interested in innovations when the Jobs act and the Crowdfunding bill  become law.

After seeing the many crowdfunding portal companies that have sprung up over the past several months, you would think that in fact it is a slam dunk that millions will be raised by startups seeking funding. – Clearly,  these crowdfunding portal companies  are preparing to somehow laugh all the way to the bank.  It is likely they took a look at Kickstarter’s success and projected all sorts of numbers that showed how the really big market is for the crowdfunding of startups and Kickstarter will seem like small potatoes once this save the world crowdfunding bill is passed.

One question  Is Kickstarter and it’s ilk really crowdfunding ?  Or is it something else.  Lets take a quick look at one of  Kickstarter’s highest funded project http://www.kickstarter.com/projects/66710809/double-fine-adventure?ref=most-funded

The game raised $3.3 million. Sounds impressive ? Not really, when you take a close look.

There was a total of  87,142 pre buyers of the game. That translates into roughly $38.28 per buyer.

Clearly, the overwhelming majority of participants in the Double Fine adventure are actually gamers that are interested in prebuying the game for some perceived benefit in the prebuy .  Take a closer look  and you see that over half the buyers (47,946 to be exact) brought within the $15 range.  ( As an aside, as games go this is not considered a hit by any stretch – and a game selling even 87,000 units is not a successful one)

The reality is the buyers were not actually crowdfunding the game- what they were doing was prebuying the product.  This is crowdbuying- exchanging an ap front cash payment in return for a tangible product.

Buying a product is easy, you get a product, you like the product you understand the product.. and you want the product.

That is not to say that there may not be people who would be willing to crowdfund companies…

but what is going on currently is definitely not crowdfunding.

Real crowdfunding is far more complex, does not involve receiving a product, is not likely to be popular in deonominations of $15 ( that may change ) and is not going to be anything as simple to what is currently popularly called crowdfunding.

Yes it is true that in theory the game if being funded by the crowd – however, the reality is that real crowdfunding will be far different and can not really be compared to the simplistic pre sale of projects of Kickstarter and Indiegogo.

Yes it is true that Kickstarter calls the pre buyers “backers” but the reality is that are nothing more then people who are pre buying copies of a video game.

Yes, It is true that the buyers are taking the risk that the game itself may never be completed, but the focus clearly is on the buy of the game. Point. Click and play

Real crowdfunding for equity will be far more complex, will not just be point click and buy,  have much more rules and regulations and will be a big surprise to many who have a very simplistic view of it’s future.

 

 

 

 

 

 

 

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