After the Crowds Leave: Finding the Post-Kickstarter Ecosystem

NEW YORK ( TheStreet) -- After launching its Kickstarter project, LIFX Labs got a "tidal wave" of queries from venture capitalists, manufacturers and distributors. Two days later, the team stopped taking money, having reached $1.3 million, which was well above their initial $100,000 request. There is still 26 days to go.

"Some of the biggest tech companies in the world have reached out to us via Kickstarter, and this has given us many more options than we anticipated," said Andrew Birt, cofounder for the smartphone app-controlled LED light bulb. "We didn't expect interest from manufacturers and retailers of the size we're talking to this early, it's a real privilege."

Now the hard part: Delivering product and turning it into a business.

Crowdfunding, most notably using, is disrupting the film, videogame, tech gadgets, toys and a slew of other product industries. The funding fever is phenomenal with projects like a modern-day watch attracting $10.3 million!

But this alternative route to investors -- who don't get equity, but rather some sort of reward -- relies heavily on the project creators, who dream up the idea, build the campaign and then social network their souls out. Kickstarter, Indiegogo and others provide the platform, but once it's over it's up to the creator to make sure the products get made and incentives are delivered. With very little help.

Misguided budgets, undelivered product and other tragic tales are becoming common, causing Kickstarter to recently adjust terms to make sure creators deliver on promises. But Kickstarter's minimal FAQ page plus some tips don't go as far as to advise how to get stuff made, how to deliver or where to sell. As Kickstarter noted last month, Kickstarter is not a store.

>>Also see: 10 Niche Crowdfunding Sites: Which One Fits You? and Crowdfunding Fills Gap for Investors and Companies

Other businesses are happily stepping up. From patent agents and public-relations firms to shippers and tax accountants, companies are adding crowdfunding keywords to their sites and proactively pursuing successful projects. Shipping and logistics company Shipwire uses past Kickstarter clients, like the Glif, to approach new ones. cornered the news angle and is working on another Crowdopolis conference., and created online markets that showcase and sometimes sell successful crowdfunded projects.

Once the JOBS Act goes into effect next year, crowdfunded projects will be able to attract money in exchange for equity.

"Just like any smart company that has the led in the industry, they (Kickstarter) want to let someone else do it and succeed at it, and then come in and do an acquisition if that is in their plans," believes David Borish, cofounder of one of the latest additions to the Kickstarter ecosystem, CrowdHut, which launched this month .

CrowdHut may be the most complete post-crowdfunding marketplace yet. It offers a store (it takes a 30% cut), publicity and order processing. It plans to offer group discounts for shipping, distribution and fulfillment. And it's focusing on building its team of experts who can advise successful projects on filing patents, getting into Wal-Mart ( WMT) and creating infomercials, for an added fee.

"It would not be smart for them (Kickstarter) to start doing this right now. If we're successful and they see this is a way to scale their business, instead of Amazon ( AMZ) calling us, we may have Kickstarter calling us," Borish said.

Meanwhile, launched in May 2012 linking buyers to "successfully funded Kickstarter & Indiegogo" projects, which are sorted by pre-order or available. Founder Sam Fellig says that money isn't the focus, but he is working on a way to add ecommerce options.

"Inventors and product designers are just getting their brands off the ground and don't have the resources to handle requests from every website that claims to be a crowdfunding store. When it comes to, they understand our vision and are excited to work with us," he said.

Back in the "old days" of crowdfunding, it was more of an unorganized effort by astute businesses. Jun Axup, whose Biochemies DNA-molecule plush dolls raised four-times more money then she'd asked for in the Fall 2011, says she was contacted by manufacturers, distributors and the logistics company Shipwire. She was able to line up several retailers during the campaign although currently, she only sells them at her site, .

"In general, the Kickstarter platform generates a lot of publicity, and it has become the go-to place for innovative ideas," Axup said, adding that she still gets a lot of traffic from her Kickstarter page. "It's also very inspirational, making the visitors feel like they can do a Kickstarter campaign too."

Max Borges Agency, a PR firm specializing in tech gadgets, stumbled into the space out of its own enthusiasm for certain projects, said Lorin Munchick, the agency's business development manager. In the past year, the agency has helped 17 projects, which combined raised more than $3 million.

"We only want to be taking on products that are really disruptive technology and not just me-too projects. That's what we strive for - to take on projects that everyone on the team here is excited about and that we can get them great coverage for," Munchick said.

The agency barely markets its services, apart from a few press releases and making sure its site is search-engine optimized. It also doesn't charge a standard fee. "We're getting creative with our fee structure. It has varied on all of our projects. I don't think any of them have been the same," Munchick said, adding that if the team is really excited, they'll consider an equity stake.

Max Borges takes a proactive approach. With 17 crowdfunded projects to its credit, the team created a "best practices" guide. It uses its experience as a conversation starter for potential crowdfunded clients.

"It's certainly a growing portion of our business that we're excited about. When a project comes to market in a traditional way, it's already been through so many layers of approval and production that some of the ideas get watered down. So to get involved so early in the process is pretty exciting for us," Munchick said.

There are other ways the crowdfunded ecosystem is working, says Brian Fargo, chief executive of InXile Entertainment, whose idea to update 1988s Wasteland game attracted nearly $3 million on Kickstarter last spring.

"I'm thinking of all the people who've contacted me (because of Kickstarter). We did an apparel deal with J!NX specific to Wasteland, we have a lot of contractors and there's the engine license we're using. We end up touching a lot of people at the end of the day. Being a job creator may be a cliché but it's been really great for the economy," Fargo said.

Kickstarter took the lead in attracting game developers -- eight have raised more than $1 million this year. Such stats likely enticed newcomer,, to launch last month and target the game industry. Growing awareness among indie game developers have created their own support system.

"I'm constantly tweeting support. I bet over half the games I'm throwing money at on Kickstarter I wouldn't have bought in retail. When you see the developer talk about his game on Kickstarter, you see the passion. The dynamics are different," Fargo said.

Then again, any organized attempt to manage the post-Kickstarter flow by a third party or even Kickstarter itself could dull the excitement, said Andrew Birt, whose LIFX light bulb project took the rare step of turning down money after reaching 13-times its goal in two days.

"I think a huge part of the magic of Kickstarter is the unbridled creativity the platform lets people access," Birt said. "...I think it'd really water down the excitement and inspiration we all get from following Kickstarter if the process was too sanitized and too heavily guarded. It's certainly a balancing act, and with time this will continue to mature but I have a lot of respect for them and the way they go about it."

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Tamara Chuang is an outside contributor to TheStreet. Her opinions are her own.

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