But that's not what Kickstarter is about. Kickstarter is not a donation page, why would I donate to someone who's trying to start an enterprise or a product? I could imagine donating to an artist, but that's about it. Nobody donated for my company either.
So Kickstarter is a "It would be awesome if this product came to existence and I'm willing to buy the alpha version even if it doesn't exist yet and may never exist" kind of thing. It's the pledge that I buy one of those, unseen and unproven because it would be cool if I had one of those. You just need to be aware of the risk and you won't feel screwed over as badly. And don't go for kickstarters that just look too good.
It's a hard to solve problem, but I think the only thing that kickstarter can actually do is to better communicate the risk.
I think Kickstarter could add a maximum cap in addition to the minimum funding requirements as some function of the minimum. This would minimize Kickstarter's risk of over-subscribed products (but would obviously make them less money in many cases) and push further sales into the regular retail world. This would keep Kickstarter closer to what I believe its true intention is - get products and art off the ground, not sell your first $10 million.
I the long term I also think this is better for the campaigns - a lot of hardware projects seem to struggle shipping if they get a significantly higher number of orders than predicted. I'm sure in the moment it's exciting to see how many orders you can pull in, but painful in the long run when it is difficult to deliver on your promise, especially if you're planning on building a long-term sustainable business.
That's actually a really important change that they need to make. If you are trying to raise $5,000 to make 200 widgets by hand, and suddenly your project takes off and you get $500,000 in pledges, then as much as everyone would like to say "that's a great problem to have!", well, it's not.
This point is counterintuitive but here it is: Assuming that there are relatively rigid time constraints, you might be able to make a profit at 200 units, and a profit at 200,000 units, but not at 20,000 units. This is because there are thresholds where you suddenly have to invest in infrastructure, and setting up infrastructure fast is particularly expensive.
If you're raising capital to produce your widgets, you can lay out a business plan and predict with reasonable certainty that you need to sell X widgets before you can break even. You present that to investors and they decide if they think you can sell X widgets.
On Kickstarter, you are implying a fantasy claim of arbitrary linear production scaling that says "I need $25/widget and I will make however many everyone wants!" And hell, that doesn't even work for selling commodities.
So what the model should be for people starting a business selling a tech product is that they say "We're developing a prototype, and if you pledge $X you can get a prototype". Then limit that to a small production run and raise enough money so everyone can involved can quit their job. Now they have time to look for investors, and a great proof of concept that the idea is marketable.
Well, that's actually possible. You can limit the number of backers for any pledge level. So you can have a maximum of 50 supporters backing you to receive a "foo" and another number of "bars" for a different price.
So the usual place where you see an unlimited number of backers is for digital products. See the Amanda Palmer or the Planetary Annihilation: They had limits on any backing that required a physical or personalized goods, but unlimited pledges for digital-only pledges - and there the assumption of "the more I sell, the more I gain" holds true.
The other side to this is that higher numbers give them the benefits of scale. Ordering 1000 rather than 100 of a particular part allows you much cheaper prices. Which means higher chance of success. Having to deal with a few million dollars worth of orders is a good problem to have. Much better than the same product, but only a few thousand.
The key word you used is "alpha". As the OP of this thread said, you're not buying a product, you're donating to someone (probably not a very large company with lots of resources) to develop and make something you're interested in, and in return you may get the 1.0 (or perhaps earlier) version of what you're donating for.
I don't believe it's Kickstarter's fault in any way if people view it otherwise.
It's not donations. Donations are given without return to a cause you consider worthy. An exchange is promised, but the promise is not a sale, it's "We try and make this, and if we pull it of, you get one." It's more of a high-risk investment where you already consider the money lost, the moment you spend it.
And I'm on your side: It's not kickstarters fault, if people think otherwise - still they could make that point a little stronger.
Kickstarter supports the arts. Many, many people support artistic endeavors solely for the tshirt and the satisfaction. Its the larger part of their base.
I'm totally on your side. But then, if physical products or other services as reward were forbidden, the big Amanda Palmer campaign would probably not have happened. Most of the rewards were cds, an art book, entrance to more or less private gigs etc. So even though people liked it, all got something in return. And if Amanda Palmer would have flunked and not finished the recording in time or the tour would have fallen through or... they'd all be pissed off. She managed to pull that one off admirably and people are happy with what they got, but that's the same with products. If things go well, everybody is happy. Perhaps the problem is twofold: Artists may be forgiven by their fans for a failure. (Fans are fans in the end) And maybe physical products are much much harder than a T-Shirt.
>why would I donate to someone who's trying to start an enterprise or a product?
In order to bring to market a product you want that is not currently available and would not be feasible to bring to market without first knowing there is a sufficient market for it.
Kickstarter is the ultimate fail-fast, it cuts out a huge chunk of market-research when trying to build a business around something. If people don't want to kickstart it, others are unlikely to buy it.
Well, that's my point: I want that product on the market because I want to own it. So why would I donate first and then pay up again to buy it? I want to shell out money now, get the product in return at some point and run the risk of the whole transaction failing since the product cannot be produced at a reasonable price (at least not by that company). If that happens, I'm down the money I paid, that's my risk.
So Kickstarter is a "It would be awesome if this product came to existence and I'm willing to buy the alpha version even if it doesn't exist yet and may never exist" kind of thing. It's the pledge that I buy one of those, unseen and unproven because it would be cool if I had one of those. You just need to be aware of the risk and you won't feel screwed over as badly. And don't go for kickstarters that just look too good.
It's a hard to solve problem, but I think the only thing that kickstarter can actually do is to better communicate the risk.