Unmentioned insanity: the raised amount is reduced by almost a million dollars because of 8% to 9% kickstarter fees ($820k to $925k of the raised amount vanishes right off the top).
Anybody interested in my 4% fee bootstrapping site? It'll go live next month. If you want to have a project featured on it for launch day, let me know.
1) Anyone even peripherally involved with transaction processing as a business rather than a hobby will take you aside privately and say "Look, you need to charge more." It is incredibly difficult to make money taking 0.5% to 1% of transactions as your margin and then paying your expenses out of it -- you need flowing rivers of cash to make a living that way, and they (sadly) do not occur spontaneously. One engineer will cost you $400k a month in transactions. (There exist many examples of HN-launched/YC businesses which did not know this on launch day. If you keep an eye on them, they universally accede to reality and bump their fee or they fail catastrophically.)
2) You seem to be of the impression that people choose bootstrapping sites based on fees or that this is their primary value proposition. Bootstrapping sites are like mobile platforms: they charge for access to a built-in audience who demonstrably pay money for things. Kickstarter has this. Apple has this. You don't.
3) The people you successfully lure from Kickstarter will not be the folks who are going to make $X,000 videos to promote their products which go on to sell $10 million. These folks, who are clueful, are going to choose based on network effects. The customers, and I use that term loosely because most won't actually pay you a penny, that you will successfully recruit are going to be pathological customers terrified of someone making an entire $3 off of the $30 they're going to raise. You will not successfully support a business on them. They'll give you lots of headaches when you try.
The day I realized that my transactional business model needed to process $1MM a month in sales to be interesting to me AT ALL was the day I became slightly less enthusiastic about it. Thus, my short-term focus remains solidly on subscription-based businesses.
Thanks for the amusing breakdown. Here's a counter-breakdown:
1) Point taken, but you're assuming I have a cost overhead and I care about income. Perhaps I just want to destroy something beautiful?
2) (fuzzy) I don't feel most people sit around kickstarter.com looking for ways to spend money. They get led in through media, websites, friends, viral virulence, etc. Kickstarter is basically the world's most expensive webhost at this point.
3) The fun projects may drift over if we shift the narrative towards "Would you rather give Kickstarter $10k for having a pretty website or do you want it in your pocket?" (Based on the Light Table raised amount and a kickstarter fee of $25k-$28k versus a $13k fee for my pricing model. I have spreadsheets and everything -- you can't argue with spreadsheets. Up and to the right, baby.)
Laugh while you can about Kickstarter's brand. Donors are going to be happier sending money via an entity they've actually heard of, that has a track record of delivering millions of dollars as promised. Vendors are going to ask themselves how their use of a cut-rate bootstrapping vendor reflects on the quality of their own brands.
These problems will all get worse once the first Kickstarter clone goes under and a bunch of people with Twitter feeds get burned. That will happen.
Meanwhile, consider this excerpt from Founders At Work, chapter one:
MAX LEVCHIN: It was pretty funny because [at the time of PayPal's launch] we met with all these people in the banking and credit card processing industry, and they said "Fraud is going to eat you for lunch." We said, "What fraud?" They said "You'll see, you'll see."
I actually had an advisor or two from the financial industry, and they said, "Get ready for chargebacks. You need to have some processing in place." We said "Uh huh." They said "You don't know what a chargeback is, do you?"
If Levchin had done nothing else for the world than dictate these words, it would have been sufficient. Every time I hear someone, often myself, utter a phrase like "that business is so simple; it's just a glorified Perl script and some JPEGs" I try to envision Levchin, reading these words to me.
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