Kickstarter, one of the world’s largest crowdfunding sites, was launched in 2009 with a mission to “help bring creative projects to life.” Yancey Strickler, Kickstarter’s CEO and co-founder, recently joined Jessi Hempel, a writer for Wired and the head of editorial for Backchannel, in a conversation about staying true to that mission. They discuss why the company shifted to becoming a Public Benefit Corporation and how best to support artists in the years and projects to come.
Jessi Hempel: You launched this company with two co-founders in 2009. Since then, ten million people have backed projects. You have had 2.2 billion dollars pledged and more than a hundred and one thousand projects have been funded. How did you get started?
Yancey Strickler: It got started a lot earlier. The creator of Kickstarter is Perry Chen, who had the idea in 2001. He had wanted to throw a concert in New Orleans. It was going to take him twenty grand to put it together, which stopped it from happening, but he had this thought he could have proposed the idea for the show and people could have pre-bought a ticket but would only be charged if the show sold out.
Yancey: That immediately crystallized in his mind as a really good idea. He was interning at a recording studio and hanging out in New Orleans and wasn’t a tech person. This is 2001 internet, like pets.com and Yahoo are the only two websites that existed.
He moved to New York in 2005 and we met in Brooklyn and got to be friends. At the time I was working as a music critic writing mainly for the Village Voice. We started talking about this idea but the 2005 internet is also crazy. YouTube is brand new. I don’t know if Facebook existed yet.
Jessi: It had just been born, only college kids used it. MySpace was the big thing.
Yancey: Yeah. It took us four years to launch the site because I’m a rock critic and he was waiting tables at the time and Charles, our third founder, is a great designer but still none of us could actually build Kickstarter.
Jessi: Fair enough. Did any of you code?
Yancey: No. At the time, it was all built around our MySpace widget strategy.
Yancey: It’s a very different time.
Yancey: There’s always a long history. For Perry, it was eight years from having the idea to it seeing the light of day for the first time.
But art and creativity, it’s trying to make something that you feel proud of. That’s victory and we saw that that the way the culture industry worked didn’t account for that very well.
Jessi: How do you go from that’s a cool idea to this is a company?
Yancey: The desire was never to build a company, it was just we were really compelled by this idea. We knew that it was very hard for creative people to do anything interesting because you had to get financed for it. And the way that you got financing is by being able to say to someone, “If you give me money to make this, you’re going to make a lot of money. This is a great investment for you. This can be a hit.” It’s always from this mentality of producing a profit.
But art and creativity, it’s trying to make something that you feel proud of. That’s victory and we saw that that the way the culture industry worked didn’t account for that very well. There are grants but those are quite cumbersome. Could there be a world where a great idea could happen just because other people thought it was cool? It felt like a universe that we should live in.
Jessi: Right. This is part of this larger trend, crowdfunding. You guys were really first. Most entrepreneurs, when they hit on one of those defining ideas, raise a billion dollars and turn it into a two hundred billion dollar company like Facebook. You guys chose a very different path. I would love for you to tell us a little bit about how you raised money.
Yancey: The first investor in Kickstarter is David Cross, the comedian. You might know him as Tobias Funke from Arrested Development.
Yancey: This is when Arrested Development was being cancelled and I was a fan of the show and had this idea of, “Oh my God, this is how we can launch Kickstarter. We can all save Arrested Development.”
Jessi: Which is a great idea.
Yancey: David explained, “You clearly don’t know how the entertainment industry works. There’s no way Fox will agree to this,” but he asked to invest. The very first investors were David, the head of 4AD Records, the publisher of Pitchfork, people who are themselves creative and saw why this was important.
We used that money to get a site built and four months after we launched, we had traction. There was an article in the New York Times about a fake wedding chapel that got built in Lower East Side through Kickstarter. We were starting to be on the map. A blockbuster project at that time was raising like eight grand but it was doing exactly what we hoped.
We met every investor in New York and nobody liked it. I remember one person saying, ‘Isn’t there enough art in the world?’
We wanted to actually have some employees and for us to be paid for the first time because none of us were being paid. We met every investor in New York and nobody liked it. I remember one person saying, “Isn’t there enough art in the world?”
Then we met with Union Square Ventures, with Brad Burnham, one of the partners, and two minutes in, he’s like, “Yeah, I’d buy it. Why can you guys do this?” It totally stumped us.
They were first in Twitter, Tumblr, Foursquare and SoundCloud. So that was exciting that we were able to talk to Fred [Wilson]. But the twist for us is we were very specific in what we wanted. Perry said to Fred, “We’re never going to sell the company and we will never try to go public. If we are to work with you, you’re not going to pressure us to do those things.”
Jessi: Here’s what strikes me about that is weird. Venture capitalists have two goals. One, to sell the company. Two, to take it public.
Jessi: Why would Union Square Ventures decide that it would be a good thing to invest in you?
Yancey: We’re in the same fund as their Twitter investments so maybe they’re just like, “We already made a billion dollars so it’s fine.”
Jessi: It’s gravy.
Yancey: Here’s some patronage. Maybe it’s that. I just think that they liked us. About two and a half years ago, Fred wrote a blog post where he talked about that first conversation with Perry around never selling, never going public. He said that to be honest, he didn’t believe him because everybody says this, then a check comes across the table.
Fred admitted after five years, he realized that we meant it but that he didn’t regret. We’ve just always had a specific idea in trying to build this, and not be something that is released to the market and becomes whatever the hell people want it to. Honestly, staying true to that is a daily challenge.
Jessi: Let’s talk about that a little bit because I would imagine that once you began to gain momentum, there would be a lot of different ways that you could have grown the company. At what point was it hardest to stay focused?
Yancey: In 2012, when there started to be million dollar projects. Before then, there had been two projects that got six figures and then on one day, February 9th, 2012 two projects crossed a million dollars within three hours of each other. Suddenly, Kickstarter goes from the thing that people appreciate and patronizingly tap on the head like, “It’s cute that you exist,” to the internet’s lottery ticket.
To experience it for the first time is absolutely wild. It reaches its climax about three months later with Pebble, which created smart watches, which raised more than ten million dollars before shutting down its project saying, “We don’t want to raise any more money.” They could have gotten more but they said, “This is enough.” While we enjoyed the experience of going through that, we also had concerns. The sort of people expressing interest in using Kickstarter was changing.
Jessi: Did you feel like Kickstarter had been kidnapped by the marketers?
Yancey: It wasn’t marketers yet. What we saw was the beginnings of professionalization. There are people who have enormous success with Kickstarter using very advanced tools, and it’s complicated because we as a company benefit from that financially. But I wouldn’t want to end up like the App store and lose the amateurism.
Yancey: We remain very focused on the starter part of Kickstarter.
Jessi: How big is the starter part of Kickstarter relative to the other things happening on the platform at this point?
Yancey: If we’re talking gadgets I would say a lot of those are starter. Like two people in a garage. Others are more experienced and are thinking of this as a launch, a marketing platform. It’s a very small minority — we’re talking less than five percent of projects — but they’re the ones that get all the press. PRI has a great project live right now about funding global crisis journalism but if you were to do some Kickstarter news search, what would you see? Probably gadgets on Tech Crunch getting the most attention.
That’s a tension that we deal with. That moment when we had the million dollar projects for the first time, was a crisis of identity.
That was a moment where we stepped in front of a money train and said, ‘No thank you,’ and I remain very proud of that.
Our answer to that was we ended up rolling out a series of new rules and a governance ideology around gadgets under a heading “Kickstarter’s not a store.” That was a moment where we stepped in front of a money train and said, “No thank you,” and I remain very proud of that.
Jessi: Let’s explain for a second just how Kickstarter makes money.
Yancey: It’s very simple. Every Kickstarter project has a funding goal of how much money they want to raise. If they reach their goal, we get five percent of what they raise. The only way we make any money is if the platform is successful in helping the creator get the funds they need.
Jessi: In light of that, it’s useful to remember that by choosing to be very disciplined about the people that you support on Kickstarter, you are also choosing to turn off a certain profit spigot.
Yancey: Yeah, sure. I’ve always felt very secure in that.
Jessi: I would love to talk about the structure of your company, which is fairly unusual. First, you became a B corporation and then you moved to a PBC, a public benefit corporation. Tell us about that progression.
Yancey: We think a lot about structure. The structure of a for-profit company in America and the financialization of all parts of culture has led to this need for companies to maximize returns and try to make as much money as possible.
Jessi: Right, it’s called capitalism.
Yancey: It’s what Milton Friedman says capitalism is, but it’s a modern interpretation by Wall Street. We haven’t wanted to be that way and we’ve never behaved that way. Yet, if Kickstarter’s around in a hundred years, as long as we are within this structure that demands increasing growth at all costs, there can very easily be a day where Kickstarter gets ruined.
We became aware of this new legal designation that’s only come into existence the past four years called a public benefit corporation. The only company you would have heard of that is a public benefit corporation is Patagonia. The basic idea is that a company is equally responsible to their shareholders and to providing a positive benefit to society. They have the option to write a charter which declares what your commitments are.
This process of becoming a public benefit corporation is pretty intense. Your shareholders have to vote and at least sixty six percent must vote yes. All of our shareholders agreed, even though this definitely means we will not try to make as much money as possible.
Jessi: Let’s go back a second. Who gets to say what the public benefit part of a public benefit corporation is?
Yancey: The company does. There’s a legal body in Delaware that reviews it to make sure it’s not like, “We’ll provide Skittles to children.” Keeps it from being a perversion. Legally, it commits the company on paper. It can be sued.
The things we laid out are things that will be permanent as long as Kickstarter exists. It codifies our mission of helping bring creative projects to life. It mandates that we engage in the environments and conditions affecting artists and creative people regardless of whether Kickstarter is involved.
Jessi: What do you mean by that?
Yancey: We actually want to be an advocate for artists more generally, not just for them to use Kickstarter.
Jessi: Got it.
Yancey: We also talk about setting a higher standard of corporate governance. Those things include never selling user data, fighting requests for government data, trying to have a minimal environmental impact. Committing ourselves to not employing any legal but esoteric tax avoidance strategies and that we will publicly report our tax rate and exactly how we arrived at those things every year. We will support artists working in less commercial areas. We will fight systemic inequality in various ways and finally, we will donate five percent of our annual profits, half to organizations providing arts and music education in New York City and half to organizations fighting to end systemic inequality.
Jessi: You guys are reporting on this every year. Legally, you only have to report every other year.
Yancey: Yeah, and you don’t even have to do it publicly. If we do it, we’re going to go all the way. In February 2017, we’ll have our first annual report. We’ve been a PBC for five months and it’s changed the way we behave. It gives a sense of permission to say what you think because once you lay it out, why mince words anymore?
Jessi: What do you mean by that?
We believe that there are ways that society should be different and so if we believe that, we need to put our cards on the table and make ourselves the first to jump in.
Yancey: I think it’s a mandate for courageousness. It says that we as a company, we’re trying to hold ourselves to a higher standard. We believe that there are ways that society should be different and so if we believe that, we need to put our cards on the table and make ourselves the first to jump in. We co-signed an Amicus Brief filed about the Apple case. Those are easy calls now. In the past, that’s like a two week discussion of, do we do this? What are the implications? Now it’s just like, “No, the PB says we fight government requests for data. We’re in.”
Yancey: It creates a lot of clarity around things that are often quite difficult and it’s sort of like a North Star around where we want to weigh in.
Jessi: Do you find that it’s harder to recruit talent because they have less of a profit incentive?
Yancey: No, much easier.
Jessi: Much easier?
Yancey: Much easier. I mean, these are the people you want to work with. We are a team of liberal arts refugees, of idealists and of people that feel dissatisfied with the status quo. The internal mission and philosophy book that new employees get, the last page of it reads, “We believe in art and culture. Fuck the mono culture.” There are people that have a similar emotional reaction that we do to that and those are great people to work with.
Jessi: Right. This makes a lot of sense. The moment right now is a very enthusiastic moment for tech startups and you’re in a growth business doing something that is very, very popular.
We’re also at a point where it feels like the tech startup climate is starting to change. Valuations are coming down, tech entrepreneurs are a lot more stressed out than they were. I’m curious how a changing economy could impact the decision to do the things in your charter?
Yancey: Yeah, not at all. You can’t be a fair-weather idealist, right? A lot of people are, but we now have a legal requirement that we cannot do that. We launched in April ‘09 and that was the economic apocalypse, post Lehman Brothers. We did it scrappy and the determined will find a way.
Jessi: You guys have done this one thing. How do you innovate? What does that look like?
Yancey: We don’t want to ride the same horse into the sunset. Innovation and R&D is a big focus for me right now. Our mission statement is to help bring creative projects to life. Our mission statement does not contain the word crowdfunding. We made it incredibly popular, but it was just a really interesting mechanic Perry dreamed up to allow art and creative projects to happen.
We’re thinking about other areas to move into, non-crowdfunding products. What are the other tools and services that could help creative people bring their ideas to life?
I spend a lot of time looking at how has Google diversified? How has Amazon? A lot of it’s just throwing tons of money at things, whether buying YouTube for a billion dollars or creating R&D labs where billions of dollars get spent searching for a next hit. We need to do that in a scrappy way.
Jessi: When you look at those companies and you look at how they think about making new things, they still use the lens through which they made their core product.
Google thinks that every problem is a search problem, Facebook thinks that every problem is a social problem. How do you try to stretch beyond that and make sure that every problem at your company is a crowdfunding problem?
Yancey: We don’t have that issue. When I was a music writer, so much of the conversation around music in 2000’s was around piracy and how do you monetize music? How do you monetize content? I was always struck by the fact that the monetization of music is a businessman’s problem.
For an artist, the challenge is I want to make something in a way that I feel good about. I would love to not have to have a day job while I did that, but really the challenges are around creation. What I felt so strongly, as we were starting Kickstarter, was everyone’s looking at the wrong place. Everyone’s looking at how do we make more money off the shit we can sell, assuming that there’s this constant stream of stuff that’s just going to come.
Yancey: We were looking much earlier in the process, to a place where it was totally unclear how you can make money. We wanted to be in the business of idea manifestation. Later on when it’s about selling stuff that already exists, there are so many people trying to solve those problems and ultimately Amazon seems to be the answer to almost all of them.
Jessi: It’s true.
But having the stomach and the drive and the willingness to challenge what is an already successful enterprise to make it something fundamentally new and even more meaningful, to have an ambition beyond what we’ve already achieved — that’s everything.
Yancey: What are the tools that people need to collaborate? Those are very underserved areas and for us to be distinctly Kickstarter and not just chasing the money, those are the areas where we look. I’m preparing the team — there will be way more misses than hits for sure. But having the stomach and the drive and the willingness to challenge what is an already successful enterprise to make it something fundamentally new and even more meaningful, to have an ambition beyond what we’ve already achieved — that’s everything.
Jessi: How did Kickstarter do market promotion at the very early stages?
Yancey: In the month or so before the site launched, we gave about fifty of our friends invitations to start a project and they also got five invitations to give to their friends. That was all.
Jessi: How about the people who funded the projects?
Yancey: This is the beauty of Kickstarter. When you first start a project, you email the people that most love you. You’re like, “Listen, you’ve heard me talk about the poetry thing. I’m actually going to do it now. I love you so much. Thank you.” You’re happy to support your friend during that and what happens when that person sends out the email about the long awaited poetry anthology they’re finally releasing is that fifteen of their friends are like, “Oh shit. I have that thing I’ve been meaning to do,” and there’s this very close, social validation that happens of people seeing their friends having success.
Jessi: What happens if they don’t finish the poetry anthology?
Yancey: In that case, probably their friends weren’t going to read the book anyway.
Jessi: That’s the truth.
Yancey: But of course there are projects that don’t fulfill. We collaborated with Wharton to do the largest study of Kickstarter projects ever and came back finding that nine percent of Kickstarter projects fail to deliver.
In those cases, the backers are left empty handed, but our policies encourage creators to offer a public postmortem about what went wrong and let it be a learning moment. We’re seeing more creators doing that and we think that’s the right sort of outcome.
Jessi: What do you do about flat out fraud? Do you have a lot of it?
Yancey: No, there’s very little. That study found that it’s extremely rare.
Yancey: Money only changes hands if a group of people have agreed that it’s a good idea and we generally trust the crowd to make good decisions. Historically, about forty percent of projects are successfully funded and, of those, the rate of fulfillment is very high.
Jessi: Can you talk about some of your early mistakes at the company?
Yancey: Yeah. Not knowing how to code. We made a very classic mistake which is that we hired an external development team to build Kickstarter and even worse, it was a good friend of mine that I went to college with.
Yancey: Yeah, that was a disaster. During the time we were meeting with investors and they would ask about the tech team, we’d tell them about this and they would say, “That’s not a good idea.” Our attitude was, “Whatever old man.” They were right.
I like naïve mistakes. I’m very much an optimist and I’d rather make a mistake believing the best in people than not do something based on a cynical or fearful view.
Jessi: I hear you have an awesome office in Greenpoint that grew very quickly. How did you manage the growth while being faithful to your goals?
Yancey: We’ve grown a lot in the past six months. We’ve been hiring a lot but investing in the business. Growing while having such a specific idea around what you want the company to be is frankly terrifying. My wife Jamie was here. We had our first child eight weeks ago tomorrow.
I ended up being out of the office for like six weeks at the start of the year. I’m at home seeing all these new people starting and I’m chewing my hands off of like, oh my God. Ten people started today and I’m not there to tell them everything, which of course is a foolish attitude. If we were to imagine you’re trying to colonize Mars with a new Kickstarter team, what’s a set of instructions where it would turn out reasonably? That’s something that I’m working on.
Jessi: Where do you learn how to do that?
Yancey: I wrote five pages in a notebook of terrible, generic things. Then reread the Netflix culture deck like, oh man. This gets so much right. The way I try to think about it was why do I think we’ve been successful? What are the lessons that I would want us to not forget? If you were immediately empowered to make real decisions for this company, how would I hope you make them?
Jessi: Here’s a related question. How did you ground yourself when facing the crossroads in the
identity crisis for Kickstarter?
Yancey: It just helps that we never really wanted this, this wasn’t the goal.
Jessi: By this you mean the company, not the mission?
Yancey: Yeah. There have been times where I’ve tried to plan, “Let’s imagine we decided that we wanted Kickstarter to be like the Amazon of crowdfunding, the Walmart. We’re going to do it all, be big.” Immediately, I think that sounds way less fun, and I imagine seeing two weeks later the article about the new funding platform for creative projects that launched. I would feel so jealous like, “Oh my God. We had it so good. Why did we let our ego take us to this place that we never wanted? Why did we let a narrative about wanting to be winning in the press take us to a place that is not what our heart desired?”
A lot of what contorts how companies and people behave isn’t Wall Street putting pressure on them to make more money, it’s just the fear of losing. It’s, “The other person did it,” and at first you’re like, “No. We wouldn’t do that,”and then working for them you’re like, “Maybe.” That’s how our standards lower over time.
We assume that of companies now. Volkswagen was so depressing last year because I thought, “Fuck them,” obviously, but also this just increases the cynicism we have about all companies and it creates more permission for companies to act in shitty ways because we just presume they’re doing so.
The market pushes innovation, pushes people to be ambitious, pushes many amazing things but the market will also drive very bad behaviors that are quite successful.
Yancey: Yeah, that are rewarding in the short term and terrible in the long term. You look at the financialization of the economy the last forty years and that’s all that is.
But it continues to reward people. For the world to not be that way either means adding guard rails on capitalism that are hard for us to comprehend in the moment we’re in now, or require everyone taking some vow to not be an asshole. Of course, all it takes is that one person to be the asshole and the other person’s like, “He’s doing it, so I can do it.”
We would love to be always there as the place where a new idea has a chance to find its people.
Jessi: If you could go back and give yourself one tip or piece of advice when founding Kickstarter, what would you say?
Yancey: God, I don’t know. I don’t think I would do anything differently. I’m grateful for all of it. We have made mistakes but we had to. To have any wisdom, you’ve got to fuck up.
Yancey: I think “be yourself” which is like, oh my God, let’s just throw up together. But that’s kind of it. A very sincere expression of who we are — that matters. I think that’s been a good strategy. It feels very grade school but maybe that makes it great.
Jessi: Okay, so let’s flash it forward. Fifty years from now, you go to the people who are running Kickstarter. What do you have to tell them?
Yancey: I’m going to be trying to help see beyond the problems of now that seem so insurmountable and encouraging a real focus on how are we best achieving our mission. The companies that last are companies that have that real focus on excellence and craft. We would love to be always there as the place where a new idea has a chance to find its people.
This conversation has been edited and condensed. It was originally recorded at 92nd Street Y — the New York cultural center that convenes influencers and innovators who inspire a world of ideas. From the arts to business to politics to science, it’s where tomorrow’s most important issues are revealed, and today’s most intriguing conversations begin.