Nadia Eghbal

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What's Next For Crowdfunding?

The Internet got itself up in arms recently about Marco Arment’s decision to support his new podcast app, Overcast 2, through donations only, embracing patronage as an explicit revenue model.

Most people probably agree that patronage is a funding model worth aspiring to, but the point of contention hinged on the strength of Marco Arment’s personal brand. Marco can fund his app through patronage because he has the brand to do so, built over many years. Not every developer is in the same position.

The debate around Marco and Overcast 2 has already been hashed out, so I won’t repeat it here. The fact that it happened at all, though, points to an uncomfortable and rarely-discussed tension when it comes to crowdfunding.

Crowdfunding itself is an evolution of other forms of financing. AngelList syndicates are the next evolution of venture capital. Kickstarter is the next evolution of friends-and-family rounds (or having a rich uncle). Kiva is the next evolution of microlending banks. But crowdfunding has its limitations, and so I wonder, what does the next evolution of crowdfunding look like?

One of the biggest limitations of crowdfunding is that it is essentially a marketing campaign. Instead of getting one big check from an angel investor or major donor, you need to ask for many small checks from hundreds, if not thousands, of people.

Thinking about the next evolution of crowdfunding requires agreeing upon what, exactly, crowdfunding has validated for society. Is it that the power of the crowd is stronger than the power of the individual? Is it that we like to feel close to the causes we support and see the impact of our dollars? Is it that people are willing to engage in seemingly irrational behavior, like paying money for something that may never come to fruition, in hopes that it will exist?

Maybe all of these things are true. One point that isn’t discussed enough is that crowdfunding validates our desire to see creativity exist in the world. If we acknowledge that creative contributions are valuable to society, the marketing-heavy nature of running a successful Kickstarter campaign starts to look more like a bug than a feature.

Surely we can agree that not every skilled creator has a strong personal brand, nor cares to build one. In fact, I might venture to suggest that many creators are particularly not disposed to personal brand building, because some of the most interesting ideas are also the most unpopular. This is true not just for disciplines like writing or illustration, but also robotics and computer science.

How do we take what crowdfunding has arguably validated - that we want to see crazy things exist in the world - and capture the remaining value? Consider AngelList Syndicates, which is both an example of crowdfunding and its evolution, depending on who’s asking. The leading angel must aggregate a pool of capital from other investors. But the startup only sees one check, and only one name appears on their cap table. This avoids startups having to take checks from 50 angel investors (also known as a “party round”), and makes it easier for investors to find good deals without the work. What would an AngelList Syndicate look like for Kickstarter?