Tablet creators stuck in boom and bust crowdfunding cycle

Even before the COVID-19 pandemic hit, Wyrmwood gameYouTube’s series, called Wyrm lyfe, has provided the internet with insight into how the woodworking company operates. Fans were able to come along when it came out a record-breaking campaign for an affordable modular game table in 2020. They are also there for the growth of the company labor problem, internal conflicts and disagreements over how it should develop. But over the past few months, a bigger problem has emerged: Wyrmwood, like so many other tablet creators, feels trapped by the very tool that helped bring it to life – fundraising from the community.

Wyrmwood’s Latest Kickstarter Campaign for a modular standing desk ended in disaster in October. The project needs $3 million from backers to get fully funded, but its terms put some consumers off. The initial purchase price was set at $3,000, almost double the price of the lowest priced desk in the series. The goal was to stabilize the company’s production processes by limiting demand to only well-off consumers, a population that had appeared in droves to buy the company’s previous products. With a certain amount of workbench to produce, it could easily keep 200 workers in the US while encouraging Kickstarter backers to upgrade their purchases at a time. there.

Image: Wyrmwood

But while big spenders quickly lined up, pushing the campaign past the $2.5 million mark in just a few days, unbanked consumers (and international customers) simply cannot participate. Just a few days after the campaign, the stock actually started to turn around. The project was ultimately canceled on October 27, nearly $800,000 short of its target.

On YouTube, you can see the team react to the situation in real time. Have a stressful cell phone call and some performing booze when they get serious in the boardroom. In another scene you can see Kickstarter’s Newly Appointed Game Director was there to oversee his company’s support of the popular campaign, getting ready for something to do. A box of champagne sitting at a table in an unopened conference room, while the company’s executives licked their wounds on the pizza. Wyrmwood could have lost a significant amount of money just by developing and photographing its models, and layoffs have appeared as a cost-cutting option for months. Then an option to buy a table was added to the site as a pre-order.

Why does it have to be like this? Wyrmwood has been in business since 2015, but every time it releases a new product, it does well — with Kickstarter, at least four times a year — like so many other companies in the board game industry. games and role-playing games. On a call with Wyrmwood marketing director Bobby Downey just days before the campaign kicked off, he told me why: The company simply felt there was nowhere else to go. It needs capital on favorable terms it gets by crowdfunding to keep its company moving forward.

Illustration: James Bareham/Polygon

“Kickstarter is great,” Downey said, “But, you know, instead of getting these huge sums of money, what we wanted to do was put our more expensive stuff online — like our dice vault. me, like our dice, like our rollers — and hopefully we’ll be less chaotic and operate like a little more normal company.

“We call it the ‘Kickstarter crack,’” Downey suggested. “That’s how we wake up, isn’t it? [It’s] necessary, but we can’t stay there forever.”

William Michael Cunningham, Founder Innovative investment research and author of JOBS Act: A Guide to Crowdfunding for Small Businesses and Startups, note that crowdfunding — though still relatively new on a global scale — has earned its place in the market. But it was never meant to be the addiction it has become for companies in the tablet space. The bottom line is that US economic policies over the past 30 years have failed small businesses. And so are the banks.

“Remember back in the 50s and 60s, banks used to be the place you went to get some startup funding,” Cunningham, a University of Chicago-trained economist, told Polygon in an interview. a recent interview. “A restaurant. A barber shop. Whatever. [Now] they are completely out of that business, especially the big banks.”

Consolidation has resulted in fewer banks in general, especially community and savings and loan banks. The remaining banks are larger, with larger reserves and larger fish to fry.

“By 2040, if trends continue in a straight line, there will be just two banks in the country,” Cunningham said. “It was a failure of banking policy. Everyone got caught up in those 1980s ‘Greed is Good’. Investment banking, good.’ Goldman Sachs, Lehman Brothers or whatever — they all fail to realize the social benefits that parent banks and tiny public banks bring to communities and to the innovation economy.”

Cunningham says a bank should ride a white horse to save a successful manufacturer like Wyrmwood todaybut they’re too busy looking for the next opportunity to sell Elon Musk the better part of the $44 billion he needs to buy Twitter.

“If they had any meaning – which they didn’t – they would step in and be the saviors here,” Cunningham said. “Go to the rescue of a local small business and stick it all over their ad. They won’t do it, because they are selfish and greedy, and only focus on short-term money. But they should.”

Another traditional source of local capital is credit unions, a hyper-local reinvestment source for tight-knit communities. But their numbers have dwindled significantly, especially in the last 20 or so years, with many closing their doors or being gobbled up by larger banks.

“Every sector is driven by this absurd profit maximization theory, which makes it impossible for them to provide support to organizations like Wyrmwood Gaming, that they — I think both of us,” Cunningham said. can all agree — […] assuming they are even properly managed, then this is the type of organization that can get financial support.”

But they can’t, and the situation is unlikely to change anytime soon. Wyrmwood’s next pick? risky investment. Where else can you watch Wyrmwood co-founder Doug Costello pitch the idea — where else? — in a YouTube video. His other co-owners sound scared, and according to Cunningham, they absolutely should be.

“The venture capital model doesn’t work” [at this scale],” Cunningham said, “because it’s so focused on making a profit. These guys want 100% refunds and all this crazy stuff.”

That’s it, Cunningham said, or Shark tank. Ironically it was one of the last places where Geek ChicThe iconic exotic furniture maker, which went bankrupt in 2017, has turned its operations around in the face of financial hardship.

So how do detox creators crowdfund?

“What you need to focus on is making solid products with high quality,” says Cunningham. Because here’s another point about crowdfunding: Crowdfunding only works if you’re offering something that can’t be obtained anywhere else, at any cost.”

Once those products are brought to life, the business will sell them every year — and connect with your biggest fans in direct and authentic ways — without exploiting the hype cycle to get the next big cash flow ready. And sadly, a fast-growing company like Wyrmwood might need less than 200 people to do it.

Crowdfunding is an exceptional tool to breathe life into unique projects. That’s why Kickstarter has created so many capable competitors, like game found and Backerkit — two platforms that initially grew around providing crowdfunding products to backers. Desktop and video games in particular have found a home in this economic sector, with Kickstarter creators alone raising funds. over 1 billion dollars in games category since 2009. However, especially in the last few years of the pandemic, flipping through the latest board games or trinkets on the table feels like jumping on a treadmill. The campaigns that encourage you to place your money before the opportunity passes are finally over… only to get it back almost instantly in the form of long-term pre-orders on other platforms. It’s a heavily advertised cross-platform ouroboros that keeps eating — and tired – consumer goodwill.

Turns out that’s also a terrible way to run a business.