Bing bing bing.
“Attention! Excuse me! Attention!”
It’s well past midnight in Park City, Utah, at the Sundance Film Festival, when Karim Amer hoists himself onto the bar, stands up straight, puffs his chest, and starts tapping his glass. The 200 or so producers, agents, studio executives, and assorted Hollywood types who are drinking whiskey at High West–which bills itself as “the world’s only ski-in distillery and gastro-saloon”–turn to half-listen.
“We just had our premiere,” Amer begins in a booming voice. His film, a documentary about the 2011 protests in Cairo called The Square, received a standing ovation just hours ago. “And in the spirit of doing it ourselves, and of saying”–he pauses dramatically to extend his middle finger toward the saloon’s wooden rafters–“fuck you to the Man, we’re launching a Kickstarter campaign tonight. Let’s make it happen!”
Kickstarter, the New York crowdfunding website, is hosting this party. The site has helped 10,000 filmmakers raise more than $88 million since it launched in 2009. Though most of these are student projects with budgets of less than $10,000, dozens of filmmakers–including the screenwriter Charlie Kaufman and the director Paul Schrader–have raised more than $100,000 on the site. At Sundance, 19 films, or 10% of the festival slate, had been funded on Kickstarter.
“I just wanted to make sure you saw that,” the company’s cofounder Yancey Strickler tells me after Amer steps down from the bar. Strickler, who is in Park City in part to recruit more filmmakers to the site, has been working with Amer and The Square’s critically celebrated director, Jehane Noujaim, for a year. “More and more people are looking at Hollywood and realizing that they have a choice,” Strickler says. “It’s about maintaining control of your work.”
Kickstarter has only been around since 2009, but the concept behind the site is centuries old, dating at least to the days of the House of Medici. Creators make a pitch for funding and offer something in return to their patrons. Amer offered prospective backers a “thank you” credit in the film ($5), a digital download ($20), a commemorative lithograph ($250), and a Skype chat with the filmmakers ($1,000). If a project raises its funding goal within a predetermined time frame–generally a month or so–then the backers’ credit cards are charged, rewards are sent, and Kickstarter takes a 5% fee; if not, no money is exchanged. In 2012, the company, which has 55 employees, helped artists and product designers of all kinds raise $274 million–taking in roughly $14 million in fees. The site has been called everything from the future of media to the future of the finance industry.
But this excitement hasn’t all sat well with Kickstarter, which lately has been getting attention for banning dozens of project categories. Last year, Perry Chen, the company’s mercurial cofounder and CEO, took an especially aggressive stand against gadget makers–erecting rules that have made it more difficult to launch a new product on Kickstarter. The move was both sudden and slightly maddening, and without compelling explanation. Chen had simply fired, or at least reined in, what appeared to be his most promising (and lucrative) group of customers.
Now Chen has finally agreed to break the silence. I spent hours interviewing the company’s founding trio: Chen, Strickler, and Charles Adler, Kickstarter’s designer. It was the first time they’d agreed to speak at length since the company’s dramatic rise. “I hope people understand we’re doing this because we want the best things for the ecosystem,” Chen says. “It’s not about monetization. It’s not about maximization–of anything. We think this is healthier, better.”
There’s something beautiful in this confidence, and also something of a paradox. Chen’s vision of subverting the traditional system has proven so popular that it has forced Kickstarter into the awkward (or perhaps inevitable) position of acting a bit like a traditional gatekeeper–the Man that a young filmmaker just flipped the bird to. Can one of the hottest tech companies in the U.S. succeed if it insists on acting like something other than a hot tech company? Just what does Kickstarter think it is?
Perry Chen is 36 years old, though he looks considerably younger. He’s 5 feet 9 inches tall, with a slender build and a full head of long dark hair, which he parts neatly on the side and pushes behind his ears. The effect–complemented by a tight black jacket, a pair of dark jeans, and beaten-up canvas sneakers–is of a downtown gallery owner or perhaps a particularly handsome barista, which pretty well reflects Chen’s professional background. “I never had interest in too many careers,” says Chen, who rarely reaches the office until noon most days. “I like working in restaurants. I like music and art. And I had this idea for Kickstarter.”
Though Chen is at times introverted, speaking in clipped sentences and rarely showing much emotion, he has a quick wit and can be disarmingly funny. Several years ago, he secretly coauthored a coffee-table book of bad tattoos under a pseudonym, and to this day he operates an online storefront that sells T-shirts with the words grace jones does not give a fuck stenciled in black spray paint for $40 a pop. (I placed an order months ago. Chen promises that he’s working on it.) “The angle from which Perry approaches everything,” says Strickler, “is backward and 110 degrees from how anyone else would think about it.”
The son of a public school teacher and a social worker, Chen grew up on New York’s Roosevelt Island, an experimental, planned community stuck halfway between Manhattan and Queens. He was naturally smart–in seventh grade, he earned a spot at Hunter College High School, an ultra-selective public school on the Upper East Side that is considered one of the country’s best–but was not particularly motivated. He sometimes cut class to go to Yankees games, his grades were average, and he missed out on the Ivy League, ultimately graduating from Tulane University’s Freeman School of Business, in New Orleans, and becoming a regular DJ. In January 1999, he moved into a one-bedroom apartment in Manhattan with two friends and started applying for entry-level jobs at record labels. He never got an interview.
It was the height of the tech boom, and Chen eventually found a gig working as a day trader. “It was like playing video games,” he says. “No phone calls, nothing that made me feel terrible like sales. It was my inoculation to that world.” He used his earnings to open an art gallery in Williamsburg, Brooklyn, but left and moved back to New Orleans six months later. “I wanted to focus on,” he says, and then pauses as if measuring the appropriateness of what is to follow, “dropping out of society.” From 2001 to 2005, he bused tables and worked several days a week at a preschool, while trying to carve out a career as an electronic musician–though that left him feeling lonely and remote. “I was really separated from the community,” he says. Even more than a record deal, Chen craved a sense of artistic belonging.
It was in this isolated environment that Chen got his idea for a website to help working artists. The Kickstarter founding myth, which has been retold numerous times, goes like this: In 2001, Chen wrote to the Austrian DJ duo, Kruder & Dorfmeister, asking what it would cost to bring them to New Orleans for a show during JazzFest. They wanted $15,000 and five business-class tickets–not an insurmountable sum, but one that Chen had no hope of pulling together himself. “I had this feeling that this was a problem that should be solvable,” he says. “There was a possibility that the artists would have a great show and everybody would have a great time. But none of that could happen because the decision had to be made by me–based on my own resources. There was an inherent flaw in that.”
Over the next few years, Chen’s idea took on a near-mythical status. He’d ignore it for a while and then return to it when he was feeling lost. “This thing had a power to it,” says Chen, who often refers to his company as, simply, the idea. “It was pulling me.” In 2005, he returned to New York and started working on Kickstarter, while once again bouncing between day jobs, including a gig as a waiter at a Brooklyn restaurant where Strickler was a regular.
Strickler, who is two years younger than Chen, had come to New York to try to make it as a freelance music writer, eventually becoming the editor-in-chief of eMusic. Though their backgrounds couldn’t be more different–Strickler grew up on a farm in the Appalachian foothills–he is, like Chen, idealistic and something of a shut-in. He was also, crucially, one of the only people Chen knew who worked on the Internet. Chen suggested they get a drink and told Strickler about his idea.
Over the next few years, Strickler worked nights and weekends to help Chen map out the site. In 2006, they started raising capital from friends–the comedian David Cross, a cousin of Chen’s coauthor on the tattoo book, was one of the earliest investors, as was Chris Kaskie, the president of Pitchfork Media–and Chen was able to devote himself to Kickstartr, as it was then known. (“We hadn’t gotten the e yet,” Chen says.)
At the end of the year, and working alone in his Bedford-Stuyvesant apartment, Chen finished a mock-up of the home page. Though the sketch was crude–to represent the amount of funds raised, Chen drew a thermometer that looked like a misshapen tomato–it was a remarkably complete realization of Chen’s vision. All of the elements of today’s crowdfunding sites are there: the video in the top left corner, the countdown clock, the rewards, and the all-or-nothing funding concept. “The vision was so compelling,” says Adler, a freelance designer who joined in 2007 as a cofounder. “It captured so much of what I wish I had been working on all along.”
When Kickstarter went live as an invitation-only website in April 2009, it had a handful of projects, including the Grace Jones T-shirt and a collaborative art book by Strickler, Chen, and a friend. During the first few months, artists who didn’t have invites would email their ideas. Strickler, who became the company’s public face and a kind of co-CEO, would let them in and encourage them to make a video. Their project would be posted on Kickstarter for free. Project creators were given a limited number of invitations, and fees were instituted that September.
This forced scarcity created buzz, as early users brought in their artist friends and early backers returned to support other artists. It took Kickstarter four months to fund 100 projects and a year to get to 1,000 projects. By the second year, the company was launching 1,000 projects per month. Today, the figure is 3,200.
Because projects that fail to hit their goal get no money at all, the site tends to turn even the most insecure artists into shameless self-promoters. With each success, those artists then promote Kickstarter as the Promised Land. “If you can raise money on Kickstarter, you don’t have to wait around to be green-lighted,” says Matt Porterfield, a Baltimore filmmaker whose Kickstarter-backed movie, I Used to Be Darker, premiered at Sundance. “You green-light your fucking self.”
You green-light yourself–the idea that creative people don’t need intermediaries–has long been one of the Internet’s great promises, and Kickstarter appears to finally deliver on it. Film is its largest category, but the company’s impact has been felt across the media landscape. Last year, a midlist singer-songwriter named Amanda Palmer raised $1.2 million to make an album, which debuted at No. 10 on the Billboard 200. The site is already by some counts the second-largest publisher of graphic novels, and it regularly pays six-figure advances to unheralded authors and illustrators. Video games is one of its fastest-growing segments. Last spring, Double Fine, a San Francisco video-game developer, launched a campaign as a kind of marketing stunt and wound up raising $3.3 million. “The walls of the citadel of big media are coming down,” says a triumphant Tim Schafer, Double Fine’s CEO.
But over the past two years, success stories haven’t just been limited to artsy types. In April 2012, a small team of hardware hackers posted plans for an elegant digital watch, the Pebble, that syncs with the wearer’s smartphone. Their goal was to raise $100,000 and sell around 1,000 watches. They raised $10 million instead, from backers who preordered the gadget. The success sparked a rash of imitators: Ouya, an open-source video-game console that raised $8.6 million; Lifx, a fancy LED lightbulb that raised $1.3 million; Elevation, an aluminum iPhone dock that raised $1.5 million. Though Kickstarter does not keep track of dollars pledged to hardware projects–perhaps to discourage interest in the category–a quick scan of the company’s publicly available data suggests that as much as $90 million has been raised to fund gadgets, which would make the category as important to Kickstarter as film. The excitement has been so great that last year, as part of the Jumpstart Our Business Startups (JOBS) Act, Congress passed a law that would allow Kickstarter creators to legally give stock in their companies to their backers.
Such developments would be welcome by any self-respecting tech startup. But rather than embrace the gadget makers, Chen seems to be doing everything in his power to thwart them. Last year, just as excitement about crowdfunding hit a fever pitch, he quit talking to the press. Then he imposed a set of special, clearly targeted rules–prohibiting the use of product renderings and product simulations, for example–and announced in a September blog post, “Kickstarter Is Not a Store.” He indicated that Kickstarter would not allow its users to take advantage of the JOBS Act.
Even so, consumer-product makers have kept coming. “We saw Kickstarter as a marketing opportunity, and a great way to generate excitement,” says Cameron Robertson, the 26-year-old founder of Apigy, a Mountain View, California, electronics startup. In 2012, he submitted a project for Lockitron, a $179 box that fits over most deadbolt locks and allows users to open their doors with an iPhone. Two days later, Kickstarter rejected it.
A team of six community managers reviews every Kickstarter project before it goes live. “The only thing we’re looking at is, Is this a creative project?” says Cindy Au, who reviews submissions as the company’s head of community. “For us it’s really important to keep creativity separate from other intentions.” Roughly 75% of all projects are accepted; those that are rejected receive a terse form letter: “Unfortunately, this isn’t the right fit for Kickstarter,” said the email Robertson got. It included a link to an appeals page, in which he was given 500 characters, less than 100 words, to make his case.
“We were flabbergasted,” says Robertson, who didn’t bother filling out the form. “You have three tweets’ worth of info to make your appeal?”
In an email exchange, a Kickstarter representative politely told Robertson that Lockitron was a “home improvement product”–one of 32 entries on the company’s list of “prohibited items and subject matter.” To Robertson, the distinction was arbitrary: Kickstarter is full of projects that might be part of improving a home. He flew to New York and tried to plead his case, but no one at the company would meet with him. “It was kind of like we were interacting with a brick wall,” Robertson says. The web is full of similar accounts from pissed-off authors, filmmakers, and entrepreneurs who were rejected because their project fell in one of the banned categories or because it was found to be charity, which is also verboten. Robertson’s takeaway was, “The truth is that Kickstarter allows projects on the basis of their own personal taste.”
Chen disputes this characterization. “It’s not like we say, ‘This is good music, but I don’t know about the drummer,'” he says. “We’re trying to tilt things in the direction that we think would be good for the community.” That concern–community–dominates much of Kickstarter’s decision making, even if it’s not clear a community of Kickstarter backers truly exists. Of those who backed projects last year, only 25% backed more than one, and only 2% backed more than 10.
Instead, Kickstarter’s founders seem deeply focused on artists, who bring their own communities to the site. (Project creators I spoke with say that the vast majority of their backers are existing fans.) “The thing is, if Michael Bay came along and wanted to do a Kickstarter we’d probably tell him, please don’t,” Strickler tells me. “I would never want to scare the girl who wants to do a $500 lithography project, ’cause that’s why we started this thing. We think we have a moral obligation to her.”
It’s an idealistic position and forfeits untold amounts of cash, but it may also be the site’s genius. By setting up rigorous guidelines, Kickstarter has avoided turning itself into a SkyMall for nonexistent products. (This is exactly how Kickstarter’s chief competitor Indiegogo seems at times–or as one creator put it to me, where you turn “when your Kickstarter fails.”) It’s hard to imagine the Sundance set embracing a Kickstarter full of self-help books and bake sales.
Lockitron turned out just fine: Robertson simply posted his fundraising appeal on his own website and took the prepayments himself, raising $2.3 million (and saving $115,000 in Kickstarter fees). But if he didn’t want to bother, he could have just gone to any number of knockoffs that have taken advantage of the increasing popularity of crowdfunding. Meanwhile, niche sites have sprung up in pretty much every category that Kickstarter bans, including charity, startup capital, and, yes, because this is the Internet, pornography. And of course there’s Indiegogo, which launched a year before Kickstarter, added a Kickstarter-like all-or-nothing funding option in 2011, and has been marketing itself as a more-inclusive platform.
Chen shrugs when I bring up competitors. “In some ways, we don’t care,” he says. “The important thing is that things get created–not that we have ownership of the path to creation.” Chen seems more invested in the long-term health of his funding mechanism. “The idea will outlive Kickstarter,” Chen wrote in an essay that he published last year on Tumblr on Kickstarter’s third anniversary. “People will be funding and building community around their projects, on the web, in this general way, for a long, long time. (And we plan for Kickstarter to be around for generations.)”
This sounds like a contradiction–the concept outliving Kickstarter, and the company’s longevity–but Chen insists it’s not. “The fact that we actually care about things being created puts us in a position to have the best tools and the best resources,” he says. Chen seems to believe that his ideological purity–the fact that he was a starving artist and Indiegogo’s founders are business types; the fact that the idea is still the idea–is Kickstarter’s great strength.
This spring, the company plans to move into a new headquarters in Brooklyn, across the river from its current spot on Manhattan’s Lower East Side. The new building, a dilapidated 19th-century pencil factory that was still being renovated when Chen took me there in January, has nearly 30,000 square feet of space, plus an enormous roof deck that Chen plans to use as a garden and outdoor theater. In addition to the normal work areas, there will be a 70-seat theater, a large gallery space, and a library roughly the size of Kickstarter’s current footprint. And Chen isn’t renting; Kickstarter spent $3.6 million to buy the building.
“This fucking building has so much character,” Chen says. “And it aligns with the way we think of things. It can accommodate 100 people, but the hope is we never get there. We never want to move. “
The building is thick with dust as we enter, and in one corner workers are using metal cutters to shape giant steel ducts, sending white-hot sparks into the center of the room and making the place smell half-cooked. As the foreman takes us into what will be the movie theater, Chen removes his yellow hard hat and exclaims, “No, no, no. This is all wrong.” The foreman takes a half-step away, a panicked look on his face. Chen grins: “Kidding.”
We then walk to the library where Chen, who likes to work in relative silence, plans to spend much of the workday. “You okay with ladders?” the foreman asks, but Chen has already started up a long, slightly rickety wooden frame. I follow him to the roof, where workers are preparing to lay thousands of pounds of topsoil for a green roof. Construction has gone well–the only battle that Chen has had so far has been over the rehabilitation of the century-old building’s exterior. Since it’s located in a landmark district, Kickstarter was advised to clean the bricks. Chen would rather not. “I just want to leave the graffiti,” he says. “It seems too clean.”
The gritty exterior is an attempt to shape perceptions, to make Kickstarter feel like something other than a normal tech startup. Though it’s also easy to see the new quarters as Chen’s home. He spent nearly two years scouting potential offices. Among his requirements: The space had to have its own entrance, preferably on the ground floor–“an office elevator is one of the most dehumanizing things,” he says–and ideally in one of four hip residential New York neighborhoods: Chinatown, the Lower East Side, Williamsburg, or Greenpoint.
I asked Chen if his investors, including Union Square Ventures, which led a $10 million venture capital round in 2009, had any objections. No, he says, but even if Union Square had reservations, it wouldn’t have mattered. Kickstarter has been profitable since mid-2010, has raised no additional funding, and anticipates no need to do so in the future. Chen and his cofounders own a majority of the equity, and he controls the board. “This is a founder-controlled company,” he says. “Our investors understand that we want to stay independent forever. We have no intention of selling this company or doing an IPO.”
Kickstarter’s backers rarely comment publicly on the company. “They get yelled at if they do,” Strickler says. But in September, Chris Sacca, an early angel investor, divulged that as a condition of his investment, he’d been made to promise never to sell his shares. “I had to do a little soul searching to sign up to that idea,” Sacca said on the podcast This Week in Startups. “Perry and Yancey run the company for the longest, longest term… There will be no liquidity in that company for 20 years.” Chen confirms this dictum: “Twenty years is kind of arbitrary, but what Chris said is true in spirit,” he says. “We hope that we can return some of these funds to the shareholders through some kind of profit sharing or dividend–and that’s it.”
Later, Chen tells me in a low, excited whisper that he’s been reading about companies that have been able to operate continuously for centuries. He sees them as a model for Kickstarter. “Did you know there are companies in Japan that have been around for a thousand years?” he asks. “It’s weird: In the Internet industry, you’re basically a custodian of your own idea for maybe three to five years and then you’re supposed to sell. That’s insanity.”
Kickstarter’s enormous new home is meant to be a graffiti-covered, green-roofed rebuke to all that Internet nonsense. It’s also an expression of the conflict Chen faces. If he allows Kickstarter to become home to doodads and gadgets and Michael Bay movies, it might generate enough money to fund Kickstarter for decades. But that’s not the kind of place Chen wants to settle down in. That’s not the idea.
[Photographs by Larry Fink; infographic by Catalogtree]
[Ed. note: The online version of this story clarifies details of Perry Chen’s educational background and his feelings about business and finance as they appeared in Fast Company magazine’s April issue.]