#179 2009 · Kickstarter · Crowdfunding / fintechincentive-flip
Kickstarter made it harder to get your money by refusing to give creators a single dollar unless total strangers hit their target together
the problem
A crowdfunded project that raises only part of its goal has taken people's money without being able to deliver what it promised
background
Perry Chen's idea for Kickstarter traced back to 2001, when he wanted to bring a DJ event to New Orleans during Jazz Fest and couldn't find one backer willing to fund the whole thing — the insight that followed was that many small contributions from many people could replace one large sponsor, if there were a mechanism to collect them. The obvious version of that mechanism, adopted by most crowdfunding platforms that followed, is 'keep-it-all': whatever money comes in by the deadline, the creator keeps and does their best with, even if it's a fraction of what the project actually needed to be made.
That default creates a hidden failure mode: a project that raises 40% of its stated goal still gets funded, but the creator now has to deliver a product they never had enough money to actually build, and the backers who contributed early, expecting the full vision, get something diminished or nothing at all. Kickstarter, launching in 2009, built the platform around refusing that outcome from day one.
the move
Kickstarter set every campaign to all-or-nothing funding: if a project doesn't reach its stated goal by the deadline, no money changes hands at all, backers are fully refunded, and the creator receives nothing rather than a partial amount to work with. The rule doubles as a built-in urgency and coordination device — because backers know the whole campaign fails if the target isn't hit, early supporters are motivated to actively recruit more backers rather than passively hope the goal gets reached by others.
the payoff
Kickstarter's own data, along with published research comparing crowdfunding models, found campaigns run on an all-or-nothing basis reached their funding goal at roughly twice the rate of equivalent keep-it-all campaigns. The platform grew from launch in April 2009 to more than 3,900 successfully funded projects by the end of that first year alone.
what came after
All-or-nothing funding became Kickstarter's defining structural choice against competitors like Indiegogo, which offers both models, and the mechanism is now studied in crowdfunding and platform-design research as a case where a rule that makes success objectively harder to achieve (full funding required, no partial fallback) produces a higher completion rate than the more permissive alternative, because it aligns backer incentives around actively pushing a campaign over the line rather than passively contributing to an uncertain partial outcome.
references
- [1]Why Is Funding All-Or-Nothing?Kickstarter, 2018updates.kickstarter.com
- [2]Crowdfunding models: Keep-It-All vs. All-Or-NothingResearchGate (peer-reviewed economics research), 2019researchgate.net