The Next Web NYC - Yancey Strickler, Kickstarter

A clear separation between home and work life. It's not something he's really into. Anyway, our next speaker is actually the co-founder of Kickstarter. So, speaking of momentum, he's seen a lot of companies get launched on his platform. But, like Leo said, company value is also very, very important. And one of the awesome changes that Kickstarter did was they went from an LLC to a public benefit company. And this is for a company that has investors, and investors, at the end of the day, they need to get paid. So how on earth he did this, I have no idea, but hopefully he'll let us know. Ladies and gentlemen, please raise the roof for Yancy Strickler. What's up, y'all? My name is Yancy. I'm CEO and co-founder of Kickstarter. Thanks for being here and listening. I want to tell three stories about momentum today, pulling from our history. And it starts with how we began Kickstarter. So there are three founders of Kickstarter. This is us. On the left is Charles Adler. He was a graphic designer before Kickstarter began. In the middle is Perry Chen. Perry is the person who originally had the idea of Kickstarter. And was an artist before Kickstarter started. He was also our CEO up until about three years ago. And is now our chairman and has returned to being a full-time artist. And that's me on the right. Before Kickstarter, I was a music journalist, reviewing records and reviewing shows for a living for about a decade. So none of us are business people. None of us are technical. None of us had any desire to be entrepreneurial. Instead, we were drawn in by the power of this idea that Perry had. And the idea for Kickstarter came to Perry 15 years ago, 2001. He was living in New Orleans and wanted to throw a concert. He wanted to bring two Austrian DJs, Kruder and Dorfmeister, to come play a show. He reached out to try to set it up and they asked for 20 grand to come play. He did not have this amount of money, so the show did not happen. But he had a thought. What if he could post online the idea for the concert? People could pre-buy tickets. But no one would be charged unless the show sold out. If the show didn't sell out, if people weren't interested, no big deal. Everyone just walks away and it never happens. This was a way that this decision and the responsibility and risk of it would not just rest on his shoulders. It would be shared with a lot of people. So he's very excited and interested in trying to launch this. But 2001 was a very different internet. I think pets.com was the only website that was around. So to go from having an idea to putting it on the web was very, very challenging. And he didn't know how to do it. But he did not let go of it. And for the next four years, he continued to work on Kickstarter. Talking to people, trying to figure out how it could happen. And it was then in 2005 that he and I met. And around that time, he had created the very first design of Kickstarter. This is it. This was finished in September of 2005. So the same time YouTube and Facebook were getting started, we were trying to get Kickstarter off the ground. This is not the best design, I would say. But you can still see the essence of Kickstarter very clearly. Back this project, a funding goal, a video to pitch your idea. All of the elements that you now know about Kickstarter have been there for more than a decade. That's how long we've been working on this and thinking about this. So we were quite excited and motivated by this idea. It really spoke to us as creative people. We love the notion of a universe where ideas could happen because people were excited about them. Because fans wanted them to happen. And not because they needed to produce a profit. But for an investor. That is the model we have for how culture and ideas are made in a world before Kickstarter. I give you money for something if you're going to make me money. We don't like that model. We think there should be other models. And so we started trying to make this come to life. And we met up with Charles, who is a designer. And our ideas became a little bit more real. And I remember around then we went into lower Manhattan to an office supply store and bought a whiteboard that we put up in my apartment. It was the most business-y thing I had ever done. And I felt a guilty thrill about it. But that's how naive we were. We had no interest in business. No interest. We just had an idea that we realized to make this real, we're going to have to move out of our comfort zone. We're going to have to shift from being artists and creative people to being more of an entrepreneur and learning how to do that along the way. Now, in 2006, something interesting was happening in the greater world. There was a very popular, actually not very popular, but a cult show, Arrested Development, that was being canceled by Fox. And I was a big fan of the show, as were my partners. Fans at the time were mailing bananas to Fox to protest the cancellation. And we had this idea, well, this should be the first Kickstarter project. The fans can step up and save Arrested Development. Screw Fox. We can do it ourselves. And Perry went to college with the cousin of one of the stars of the show, David Cross. That was our tight hookup, knowing someone's cousin. And through that, got a meeting with David. And Perry pitched him, hey, here's our idea. We're going to save Arrested Development. The fans will fund it. You can be free of your corporate overlords. You can make your show the way you want to. And David very patiently explained that we had no idea what we were talking about. And the entertainment industry did not give up power that easily. And there's no way this would work. But as an artist, he connected with the idea very much. The idea that he could do something on his own with his audience and not wait for some corporate bigwig to give him the green light was deeply appealing to him. So he asked us if we needed money to get started. And David Cross became our first investor. And most of our first investors were other artists, people who, frankly, could not afford to invest in us. But it spoke to them so clearly, the idea of a world where you could do things because you wanted to and not because you were trying to get a rich person even richer. So this was so long ago that our growth strategy was based on a MySpace widget. We made many mistakes. We tried hiring external developers. Got screwed. We made every mistake you can possibly make as a new entrepreneur. Thankfully, no one knew who we were. So we only had to experience that pain and embarrassment privately. But finally, it came together. And in April 2009, we were finally ready for Kickstarter to go live. And the way we started building the site was very simple. We gave invitations to start projects to 50 of our friends who were artists and gave each of them between 5 and 10 invitations to share with their friends who were artists. And that's all we did. And from there, the site started to grow. This is what the site looked like the first day it went live. The first project was by Perry. It was to make a T-shirt. At the time, he had a stencil. He made a picture of Grace Jones that said, Grace Jones does not give a fuck. That was the first Kickstarter project. It failed. However, three days later, the first project was successfully funded. It was called Drawing for Dollars. And the project was, if you give me $5, I'll draw you a picture of something. And it got $35. Now, this looks humble now, I realize. But for us, this was mind-blowing. The idea worked. On the back end, we could see that credit cards got charged, and money got deposited into somebody's account. We didn't know this person. He found this site and figured out a way to use it without us having to tell him how to do it. And for Perry, he waited eight years. Eight years of grinding on this idea for the very first public validation that he hadn't wasted his time. Eight years. Eight years. And a week after that, the site really became alive. This is a project from a musician named Allison Weiss to make her first album. Now, Allison's project has all of the tropes and clichés you know about Kickstarter now. A very clever, fast-cutting video, very cute. Rewards included a personal mix date made for backers, or she would write a song about you. She did a Skype chat with the backer who put her over her goal. And she hit her goal in just eight hours. We hadn't imagined projects exceeding 100% of their funding goal, but she almost quadrupled it. This is the moment that Kickstarter became truly alive, and it was through the eyes of another artist. Whereas we had a two-dimensional form field of a page to get funding and build excitement, she made it three-dimensional, and making it a place for a community to come together, and making it a showcase for the emotions that motivate her music, showing who she was and why she does what she does. And so from Drawing for Dollars and Allison Weiss, it is built from there. Oculus Rift got started on Kickstarter. Pebble and the whole category of smartwatches began on Kickstarter. Independent filmmakers have raised more than $350 million to make new movies through Kickstarter. Six straight years, there has been a Kickstarter-funded movie nominated for an Oscar. One of them won. In the world of art, it's had an amazing impact. There was a gigantic show at the Royal Academy in London last year, Ai Weiwei's first big show in the West, funded on Kickstarter. And the world of gaming has been completely transformed. More than half a billion dollars to independent game developers, both video games and tabletop games through Kickstarter, including Cards Against Humanity. This was funded by a couple hundred people for 10 grand. Now it is routinely the number one selling game on Amazon. This started with a few people with an idea and wanting to share it with the world. It's also quite silly things, like a family in Atlanta that conducted a census of all the squirrels in their local parks. A translation of Moby Dick into emoji that got inducted into the Library of Congress. And last year, the Smithsonian launched a project to restore the spacesuit that Neil Armstrong wore on the first walk on the moon. So it's an incredibly diverse universe of things that have been made through this platform. And it's almost half a billion dollars to designers, technologists, and game makers. And there have been more albums, movies, and books and magazines made than anything else. 24,000 music projects funded. More than 20,000 films funded. And the highest success rates belong to categories that are in the fine arts, that are more community oriented. This is a very diverse umbrella of creativity. And you add it all up together, and that's almost three billion dollars in funding for independent artists and creators and more than 100,000 new ideas in the world that would not have existed otherwise. And they have produced 300,000 part-time and full-time jobs, nearly 10,000 new companies and non-profits, and for every dollar pledged on Kickstarter, that creator receives an additional $2.50 in revenue. Billions of dollars to the independent creative class that would not have happened otherwise. And it all began with a project with three backers and 35 bucks. So we've experienced huge growth in Kickstarter. And it's taken a long time. Again, 15 years ago this started. 15 years ago. And as we experience this big growth, we've also experienced some of the downsides of that. You know, you shouldn't assume that all momentum that you experience is positive. Some things are going to take you in a direction that you do not want. And for us, people who've always had a clear goal, we've always had a clear goal. We've always had a clear idea of what we want to accomplish. We've always been very focused on that. And in 2012, we were put to the test. So the year began with a very exciting moment. Up until that point, no project had raised a million dollars before. And suddenly a project that had launched just the day before, Double Fine Adventure, was closing on a million dollars in its first 24 hours. Here's the team gathered in our office watching it happen. Here we are waiting for the clock, for the timer, the money, to tip over. And that kicked off a wave of million dollar projects on Kickstarter. Suddenly they were coming, sometimes multiple times a week. And for the first time ever, people, anybody, could put an idea out into the world and wake up the next morning literally with millions of dollars of support. Never before in history had there been something like this. It was the people's lottery ticket for creative ideas. And of course this was very exciting for those creators, very exciting for backers, exciting for the press. Exciting for us internally. But we also had real concerns about what this was doing. Now we've always put a lot of time and focus into guiding the rules of the site. Every project on Kickstarter is reviewed before it goes live. We have looked at more than half a million projects one by one over the past seven or eight years. Making sure they meet our rules. And our rules are pretty simple. Everything must be a creative project. You are making something that will be shared to enjoy. It's something that you can check a box at some point and say this has been done. And we also don't allow charitable fundraising or fundraising for general business expenses. And those rules have guided us from day one. But we were seeing that these rules maybe did not fit what we were seeing with this new blockbuster mentality. Because if a project that's showing very little amount of information is able to raise millions of dollars very quickly, that said to us maybe people are putting more trust in Kickstarter than they should. So in the middle of this, in September 2012, we announced a new set of rules under a heading of Kickstarter is not a store. We began requiring every project to list its risks and challenges. We forced the creator to say if this project were to go south, here are the reasons why. In the world of design and hardware, we also banned the use of photorealistic 3D renderings. We were seeing projects that were showing something made in AutoCAD or Adobe. And raising tons of money off of them. And we didn't feel this was a fair fight. That backers were being manipulated sometimes with ideas that were in too early of a stage to garner that much support. And so instead we wanted to ground the site not in just what was being made, but how it was being made. And who was making it. We required projects to show a physical prototype. Show the ugly plastic molding. Show your breadboard. Show the guts of this. Show how it is that this thing is being made. Let's ground this platform now. Let's show the people in this community in the creative process. And the real guts of what it takes to make something. Not just the marketing bullshit that we see all around us. And recently we just added a prototype showcase. A way for creators to show their creative process. You can teach people what it is to make the thing they're making. In the case of Pebble, the first project to cross 10 million dollars. They were posting updates from the factory floor in Shenzhen. So not only were you getting one of the first smartwatches ever made. But you were getting a weekly account of how it was being made. To level transparency that is unprecedented. But of course even with this, projects do fail. And this is the most common criticism of Kickstarter. Sure, people raise a lot of money. But does anyone even do what they say they're going to do? So we set out to find out. And last year we partnered with the University of Pennsylvania. To conduct the largest study ever of Kickstarter projects. Surveying tens of thousands of projects. Hundreds of thousands of backers. And asking them, hey, was this project fulfilled? Was it on time? Was it your experience? Etc. And the end result of that report found that 9% of projects failed to deliver rewards. So 9 times out of 10 it works out fine. 9 times out of 10. 1 times out of 10 they can't deliver. And we think this is a testament to the strength of this system. To the strength of the model. Because if you think about how Kickstarter works. Someone comes with an idea. We make sure it meets our rules. Then it launches. But no money changes hands unless they've reached their funding goal. We are allowing the public to decide which ideas are worth moving forward on. And through this model, 9 times out of 10 it works. And if you look at the projects that do fail. Most of them raise less than $1,000. So the number of failures that happen at the high end are quite low. But under $1,000 that's where you'll see people get into the most trouble. But of course there are big projects that fail. The biggest to date is a project called Zeno. A drone out of the UK. And about a year ago they posted an update to their backers. That just said, we're out of money. It's over. And gave not much more info than that. Backers were upset of course. As were we. So we decided to hire an investigative journalist. And told them they have total journalistic freedom to pursue this story. And to find out what really happened. We put them in touch with the most angry backers. We made sure they could talk to the creator. They interviewed me and our staff to find out about our policies. And how these projects went live. And we said whatever you find. Whatever you publish. We will loudly promote. Because we want people to understand the reality of this. If we're gaining momentum through people not understanding the truth of this system. Through people not understanding what the reality of the creative process is. We don't want that. We want this system to be based on the truth. Not on an unbridled optimism for what may be. So in the past couple of years. There's been a lot of discussion between myself and my partners. About what are our existential reasons for existence. If we think about that. That idea that guided us 15 years ago. What prompted us to first start Kickstarter. Helping creative projects coming to life. Instituting this new model. We have checked that box. That has been completed. And even if we were to close our doors today. There are plenty of other sites that have followed what we've done. To where this model we've created would continue. Kickstarter is not needed for this model to continue to be successful. So why is it that we exist? Why is it that this is something still worth us putting our life into? What is our reason for existence? And one of the big things we thought about was our idealism. We are a deeply political organization. We are very idealistic. We have strong feelings about our obligations to society. And last year that led us to become a public benefit corporation. Now this is a new, very new legal type. It came into existence in about 2013. There are roughly a thousand companies in the United States that have this designation. Us in Patagonia. Patagonia are two of the only ones you've heard of. But radically a public benefit corporation is required to not only produce value for its shareholders. It has an equal weighting on producing a positive benefit for society. So it's not just you get rich and you didn't pollute a river. It's actually that you have made the world better through your existence. And in drafting our public benefit corporation charter. We got to say what we need to be held accountable to. And those include things like a prohibition on Kickstarter ever using legal but esoteric tax avoidance strategies to avoid paying our fair share. It includes a commitment to artists working in less commercial areas. It includes that we will donate 5% of our after tax profits each year to organizations providing arts and music education programs. And to organizations fighting to end systemic inequality. We do not want to be a company that profits off of the world. That extracts value from it. There's a quote that Les Moonves, CEO of CBS said earlier this year. Donald Trump is bad for America but great for CBS. That is the attitude that is too prevalent in our society. That is not us. That has never been us. And to make this change to be a public benefit corporation. That requires your shareholders approval. There's a vote that happens. And at least two thirds of your shareholders must agree that this will happen. And we were very open. Listen. This route means we are not prioritizing profits. We're not trying to make as much money as possible. That has never been who we are and it never will be who we are. And not a single one of our investors dissented. This has always been what we are about. This is important. And if we want to change society to something that works for everyone and not just for the rich, this is the sort of thinking we need to have. So the mindset of being a public benefit corporation and thinking about how we are producing value not just for ourselves but a broader creative community has driven us to introduce some new things this year. A couple of months ago we launched a new project called the Creative Independent. This is a standalone site that is a platform for emotional and practical advice for creative people by other creative people. Each day it features an essay by a very noted artist explaining their practice, exploring what they do. We've had essays by Stevie Nicks, by Matthew Barney, by Bjork. The most popular so far was by Philip Glass, an 80-year-old avant-garde composer on the importance of getting paid for what you make that had him trending on Twitter. These are the sorts of voices you never hear. Another essay was by the singer Anoni who had a music video earlier this year funded by Apple. And just weeks after it came out she wrote an essay to express the shame she felt at having taken money from a corporation to support her art. These are real conversations that aren't normally being had. And on the weekends the site turns into a gallery. We'd rather people spend their weekends outside and not on their internet. So we put together a website. We black out the site and instead post a work of art each weekend. Someone reading a poem, a sound installation. Something that takes people out of their day to day and lets them experience something greater. We also recently launched a live streaming platform called Kickstarter Live. And this is something where projects can do live demos of what they're making, interact with backers, do that tour of the factory floor live and in real time. But we also see it as a place of performance for the future. What does performance look like for a musician? What does it look like for a musician without a physical venue? What is a movie screening without a physical movie theater? This is something we will develop in the years to come. And just yesterday I was in Mexico City where we launched a new platform. We expanded Kickstarter Mexico for the first time. And we did it in a very new way. Partnering with an excellent local crowdfunding platform there and combining forces with them. Empowering local entrepreneurs instead of us coming in and trying to put them out of business. We love this model of working. One that is benefiting not just us. But other people on a similar mission. And this is the sort of path we want to continue to follow. Now internally at Kickstarter on your first day you get a copy of our handbook. That says this is our philosophy. This is what we stand for. And the last page says this. We champion and celebrate the creation of art and culture. Fuck the monoculture. We want to change the world where everything is the same. We want to change the world where decisions are made because of money. We want to change the world where the entire universe is an investment portfolio. For the rich to get richer. We want to create a world that works for all. And we believe that means creating a platform that supports new voices. New ideas. And a greater diversity of motivations and reasons to exist. So in the years to come our vision, the way we are shifting the focus of Kickstarter. Is to support artists more generally. To help it so that creative people can live sustainable creative lives. Artists and creators have very little infrastructure. They can't get health insurance. They don't have a regular paycheck. And they also struggle for validation. Their parents don't think what they do is real. Their friends say why don't you get a real job. They don't understand that creativity, art are real things. Are vitally important to society. These things are not luxuries. Creativity is what lets us shape the world and make sense of it. It's how it is we can understand where we are and where we need to go. And this is our deep commitment. Our commitment is to the arts. To creativity. To the people who are trying to imagine a world better than we have today. One that is less selfish. One that is more collective. And that is the reason for our existence and will be in the years to come. Thank you. That was really good, Yancy. I hope we've inspired a lot of people to follow in your footsteps. I think the world will be a lot better prepared. If we do. So, speaking about places. Our next speaker.