KissKissBankBank is one of the oldest crowdfunding websites in the world. The idea was loosely based on SellABand, who were the first one ever. They started seriously working on the idea 6 months before Kickstarter.
What is crowdfunding?
Crowdfunding comes in four flavors: P2P lending, philanthropy, rewards, and microventure. They are in the most popular one: rewards. The famous example is the design company that designs a cool watch, but doesn’t have the capital to invest in manufacturing, nor the risk appetite. So instead, they allow people to preorder their watch, and prepay. The project only happens if so-and-so much money is raised. So essentially, it’s a pre-sales channel that reduces risk.
Vincent Ricordeau, CEO and co-founder of KissKissBankBank, calmly explains that since they started, 32 competitors sprang up in France, and around 400 of them worldwide.
He says that, although Kickstarter is huge in the US, that’s not necessarily because they’re executing better. Rather, the US has a culture that’s much more adapted to the crowdfunding model, compared to France. He explains: In France, if you’re a professional, and you admit that you need funding, it’s seen as a weakness. He and his team are busy changing this perception, of course!
Technical co-founder or not?
KissKissBankBank, after some early love money, managed to raise €700k in 2009. With that cash in pocket, they realized that the team didn’t have a technical co-founder. So they shopped around for one, but were turned off by the demands of good technical people: 20-30% of equity. The number they had in mind was 10% as a maximum.
Should startups outsource?
Discouraged by this, they made one of the biggest mistakes a startup can make: they outsourced their whole product development!
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At the accelerator where I work, the subject of development outsourcing comes up in a regular basis. While KissKissBankBank made the classic mistake – outsourcing without any internal technical knowledge, choosing a development company that never works with startups, and treating the project as one giant project, instead of iterating over many small releases, there are numerous examples of how it can go right.
First of all, you need a technical co-founder. There’s no way around that. Without that, you can neither manage, nor keep a close eye on your outsourcing partner. Second of all, the instinct of large IT companies and web agencies to sweep all the features together into one giant project is the exact opposite of what a startup should be doing: keeping the product development cycle short and lean. While there are development companies that specialize in startups, and are capable of doing that, clearly the company they chose was not able to do this.
Vincent concluded that although [removed] is a great company, it was a poor match for them. Thankfully, they recovered in time from their mistake, and hired two developers as fulltime, internal employees.
The traditional model for crowdfunding is to take a percentage from the project owner, and that’s exactly what they do – 5% of it. But they chose not to only have a B2C business model, and added a B2B revenue stream, by coming up with a clever and innovative formula.
Sponsoring comes in two ways: either you pay a lot of money to be a big sponsor, and many eyeballs see your brand. The second model is that you’re only a small sponsor of a big name, and that you use that big name in your own communication constantly. KissKissBankBank pursues that second model, but with a twist. Big-name client Banque Postale also tops up certain projects’ balance! They will match the funds of certain project by 50%. Obviously, this is hugely beneficial for both the project owners as well as the customers. What does BP get out of it? They get to talk about it endlessly! KissKissBankBank even goes so far as to provide the content for the PR messages.
For the future, the first and most important focus is other countries than France. Germany, the UK, the Scandinavian nations, and perhaps Italy and Spain (not much money there at the moment though). They are careful not to overextend themselves, and hire a big team in a new country.
The other high priority is to get more sponsors (read: money)!
When asked about his interest in the other categories of crowdfunding, he expressed some interest in microventures, but cautioned that the French law is not up to it yet, and must be changed, and with the new President being so anti-business, that may not happen any time soon.
As for funding, they are currently funded to the tune of €1.4m, which allows them to move forward and keep building their community. He plans to start a new and bigger round of VC money in early 2013 at the earliest.
Several conclusions: first of all, Silicon Valley clones ideas from Europe and doesn’t get called on it! Second, crowdfunding is a fast growing field, that has huge untapped potential in France. Third, don’t do a startup without a technical co-founder! And last of not least, go check out KissKissBankBank, their platform is pretty cool.