Nine Percent of All Kickstarters Fail, Study Finds

Is that higher or lower than you were expecting?

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Dec 7 2015, 6:43pm

Image: Kickstarter

It's not just high-profile duds like the Coolest Cooler: Roughly 9 percent of all Kickstarters fail to provide their backers with the product they promised, according to new research conducted by the Wharton School at the University of Pennsylvania.

Wharton's Ethan Mollick and his team attempted to survey more than 450,000 randomly selected backers about their experience using the crowdfunding site, and about 50,000 people responded. The responses represented 30,323 projects across all of the site's product categories.

According to Mollick, 9 percent of all Kickstarter projects fail to deliver any product whatsoever or eventually deliver a product that's not at all what was promised. Roughly 8 percent of all money spent on Kickstarter goes to failed projects. About 65 percent of respondents "agreed or strongly agreed with the statement that 'the reward was delivered on time.'"

Kickstarter and Mollick suggest that this failure rate does not indicate a "systematic problem associated with failure or fraud on Kickstarter." Of the projects that completely fail, backers got at least a partial refund roughly 13 percent of the time.

Image: Kickstarter

The actual picture is a little more complex, as Mollick had to define what, exactly, makes a project a "failure." According to Mollick's paper, just 7 percent of those surveyed did not receive any reward whatsoever (a further 18.8 percent of those surveyed are still waiting). Because many of the projects included in the study had responses from more than one backer, the overall numbers are slightly different.

"The broadest definition is to say if anyone reported the project as a failure, then the project has failed," Mollick wrote in the paper. "This would classify 9.95 percent of all projects as failures. However, given that individual complaints are not uncommon, this is likely too harsh a definition.

Image: Mollick

"If instead, we classify projects where at least half of backers considered the project as a failure (which I will refer to as the 'middle definition' of failure), the rate drops to 8.6 percent, and if we take the strict definition that all backers should consider the project a failure, the failure rate is 5.6 percent."

Interestingly, the most-funded and least-funded projects were most likely to fail, suggesting that perhaps if a project is overhyped (and thus overfunded), it's more likely to be something of a disaster.

Kickstarter says that it "had no influence over [the survey's] findings."

"We're here to safeguard the system against bad actors, not against ambitious ideas"

"Is a 9 percent failure rate reasonable for a community of people trying to bring creative projects to life?" the company wrote in a blog post. "We think so, but we also understand that the risk of failure may deter some people from participating. We respect that. We want everyone to understand exactly how Kickstarter works—that it's not a store, and that amid creativity and innovation there is risk and failure."

Of course, Kickstarter has long held this view. By setting expectations low, the company attempts to shield itself from lawsuits and consumer complaints should a project not deliver. According to a Freedom of Information Act Request filed by Motherboard, consumers filed 77 official complaints with the Federal Trade Commission about Kickstarter in 2014 and 2015.

Much ink has been spilled discussing how much—if any—blame Kickstarter should take should take when a project fails. In recent months, Kickstarter has booted a couple high-profile funding drives from its page. Most notably, a laughably fake laser razor that had earned $4 million in promised funding was kicked off the site. Earlier this year, the FTC required a would-be board game maker to refund his backers.

"We acknowledge failure will always be part of the system," Justin Kazmark, a spokesperson for Kickstarter, told me. "Failure is not the same thing as fraud. A lot of conflation between fraud and failure and flops. It's, did they create the film but fail to deliver the DVD? It's not, did they deliver the DVD but no one liked it."

"We're here to safeguard the system against bad actors, not against ambitious ideas," he added.

Correction: Though Kickstarter "invited" Mollick to conduct the research, the company says it did not fund it.