Kickstarter is a brilliant concept.  But a runaway success may be their all-to-soon undoing.

What Is Kickstarter?

Visionaries post their ideas and the general public gets to contribute towards funding these ideas.  In addition to donating towards what the micro-investor considers to be smart innovation, investors will often receive a nominal return such as early access to the theoretical finished product, recognition as a contributor in the finished video project and occasionally even an actual physical product once it's produced.  Kickstarter is to investing as Kiva is to banking - making real funding available via micro-investments and bypassing the big players.

Kickstarter could well be everything right about our new macro-connected world.  Then again, they are also on the verge of becoming the Pets.com of our era.

Enter The Pebble Watch Runaway Success Story

Last week a product kicked off on Kickstarter call the Pebble Watch.  The Pebble Watch is an incredibly interesting concept watch.  This watch features bluetooth connectivity and integrated sensors that enable reportedly robust synchronization with mobile phones, a rich purported set of capabilities, a yet-to-be-released SDK for developer innovation, and a very nice design complete with a geek-cred-tastic e-ink display. 

After a rocky start looking for VC investment, the Pebble Watch team registered on Kickstarer with an initial stated goal of raising $100,000.  They did everything right, offering rich product concept imagery, videos and details, as well as unique packaging opportunities including early SDK developer access and bundles of actual watches.  From the looks of the early blog coverage, they even did a great job in their (or Kickstarter's) PR and social media outreach.

And here is the problem.  They got a bit too successful too fast and I'm afraid they may have bit off more than they could chew.  

In just 7 days Pebble has:

• Raised over $4.2 million dollars.  And they appear to be open to funding for another 30 days.  
• Accumulated almost 30,000 investors.
  • 7 investors in for over $10K in exchange for 100 watches and no equity.
  • 18 backers at the $1,250 level, in exchange for 5 watches and a custom watch face.  And no equity.
  • 118 backers at the $1,000 level in exchange for ten watches and no equity.
  • 272 backers at the $550 level in exchange for five watches and no equity.
  • 1847 backers at the $240 level in exchange for two watches and no equity.
  • 100 backers at the $235 "hacker" level in exchange for an early prototype in August (4 months away) and early access to an SDK.  And no equity.  This category is already sold out.
  • 1343 backers at the $220 level in exchange for two black watches.  And no equity.
  • 6341 backers at the $125 level in exchange for one watch in any color.  And no equity.
  • 18,757 backers at the $115 level in exchange for one black watch and no equity.
  • 200 backers at the $99 level in exchange for one black watch and no equity.  Limited to 200 backers, this option sold out early.

And the watches won't ship until an estimated September 2012.  As of this writing, that is five months away.  And nobody has yet seen or tested one of these watches in the wild. To be clear, despite all the media hype I have not yet found a single blogger or member of the media who has seen or played with this device in person.

This is an inflated market.

The community clearly shows high demand for the concept and high expectations for the finished product.  And Kickstarter, whether they like it or not, is now in the public spotlight with much of their reputation staked on a single prototype product and about 30,000 promises to deliver.  And those promises are growing by the hour.

Kickstarter needs to take action.  Kickstarter needs to put a cap on pre-sales and over-exuberant investment.  When a product raises 40x their stated goal in a week, they need to shut the door on that round of funding.  Sure, they could create a second tier of investment opportunity but this over-enthusiasm is as much an asset as it as liability.

If this watch fails to ship on time or otherwise fails to meet this massive user base's expectations, Kickstarter is going to have one hell of a black eye.  

Ebay struggled with seller and buyer fraud in the 90s.  Ultimately Ebay implemented a series of checks and balances, including investment in better education, policy and service.  Kickstarter is going to have to put better checks and balances on their investment community.  Or this week will forever be remembered as the week the vision over-promised, setting themselves up for an avoidable nightmare.

Then again, I'm awfully tempted to buy one of these watches... they do look really, really good.

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