One has to wonder though, if you priced out your Kickstarter project because you wanted to make one for yourself and well if you could get 100 other people to kick in you would be able to get the better price on parts, and then 10,000 people kick in and now you're looking at something which was 'spend the weekend building up a hundred or so foo-widgets' becomes 'spend the next six months building 10 thousand foo-widgets' that has to suck.
Kickstarter is really about funding a project, not really about selling merchandise. You can put "perks" for various funding levels, and many projects use the product as a perk at some level, but you don't have to. And KS lets you put limits on rewards. For example the DoubleFine page says
Pledge $1,000 or more
84 Backers • Limited Reward (16 of 100 remaining)
Mini portrait of YOU, painted by the game's artist, and all previous reward tiers.
Actually its not. Let me phrase it differently and you tell me if you'd volunteer :-)
"Hi! I need you to work for slave labor wages for the next six months, if you don't you are going to be pilloried and your reputation destroyed, no one will ever work with you ever again, you may not be able to find future employment.
How about it?"
The situation arises when you haven't covered all of the possibilities. Generally the one over looked by Kickstarter participants is the 'wildly successful' one. The dilemma is as follows, to make one of something by hand might take an hour of your time. If you are going to make 10 you might create a couple of frames or something to hold parts to make it go more smoothly so it takes three or four hours, to make 100 might involve some slightly more elaborate frames and all weekend. Now if you've priced your kickstarter such that you 'make' a couple of dollars on each unit, then you've spent your weekend making a hundred widgets and you've got $200 to show for it. If you need to make 10,000 things get more complicated. You can invest in more sophisticated jigs and holders (that eats into your profit), or more sophisticated machinery (that eats into your profit), or more help (that hugely eats into your profit) So you still 'make money' after making 10,000 but its like $2,000 over 6 months, rather than $200 over a weekend. I suspect you could find better work for $350/month. However if you had priced your widget such that you could make money building 10,000 of them, well then you're golden because you've included the cost of paying for tooling at a small factory nearby and having them make the widgets. Now the second 10,000 are like 'free' since you've already got the overhead of setting up manufacturing paid for. The downside is that at the higher cost your Kickstarter might not fund that many.
Its just a cautionary tale for would-be kick starters to think though the various scenarios and internalize what each scenario would mean to them and then price out accordingly.
Really interesting point, but since kickstarters aren't technically obligated to offer their product as an incentive, it would be pretty simple to get around that without messing with pricing by just saying 'first N backers get a widget' (though, this in itself does also require the foresight to consider your scenario).
Right, I guess I assumed that any manufacturing plan of items put up to KickStarter would include considering mass production and sourcing options in case of major success. But just this morning I had a conversation with an inventor who would be similarly unprepared so this has been helpful to understand.
Not if you are pricing your own labour at a lower cost than it's possible to outsource it. An episode of Big Bang Theory, where Penny makes penny blossoms, illustrates this pretty well: http://www.imdb.com/title/tt1256028/
Anecdotally, this is also a problem that a lot of medium-sized Etsy sellers run into. When their sales scale up, they realize they need to either scale up their operations from something that is more than just one person at a kitchen table making crafts, or they need to spend dozens of hours a week just cranking out their craft projects.
I loved that episode. Way back there was a robotics circuit board called a 'Miniboard' that used a Motorola HC11 and an Hbridge part etc. Some people would get together and organize 'group buys' (kind of like an improvised kickstarter project) where if more than 'n' were bought they could be had for $y. (I believe you can still find some of the emails about these in the archives of comp.sys.robotics) anyway, a couple people who did this got waaaaaaay over their heads, (kitting a few is easy, kitting a few hundred is harder, and kitting a thousand was at the time insanely time consuming for what was essentially no-profit). People were actually sued, sad actually (although I know some Kickstarter projects where the money has vanished and I suspect they are heading for lawsuits too but only time will tell).
That being said, these are some great examples of what you can do with this concept. It is very disruptive. It has never been possible before to have capital so directly influence the creation of a good or service, that is new territory for the economics geeks out there.
