How Kickstarter Help Ouya Solve the Cold Start Problem

$3.7 million dollars. That’s how much the OUYA game console raised on Kickstarter from nearly 30k consumers in fewer than 48 hours. Coverage has focused on this success from a funding standpoint, as in “wow, now they can use this money to get the console made,” and indeed, the company has leveraged the support to set production targets at 80,000 devices. But viewing this phenomena as just crowdfunding without having to give up company equity misses a significant part of the story: OUYA didn’t just derisk funding, they solved the cold start problem by signaling to developers the size of their initial installed base.

OUYA is a platform. Out of the box it won’t do anything. You need games to play on it. New game platforms often struggle to interest developers. They are forced to provide developer incentives (ie cash) or otherwise commit significant amounts of comarketing dollars, prove distribution for the platform, etc. OUYA just showed any independent developer or small game studio that out of the gate they’ll have at least 30,000 hardcore gamers who have already voted with their wallet to launch this product. This is the bigger risk factor than funding production – the vicious cycle of consumers saying “I’ll wait to buy it until there are better games” matched with game designers promising “Once there’s a large enough installed based, we’ll develop games for it.” Inability to break this Catch-22 leads to stillborn platforms.

Getting $3.7m without giving up equity is smart business. Solving the cold start problem and accelerating the ecosystem around your product pre-launch is just plain amazing. Good job OUYA.