Kickstarter

Author: Kaitlyn Short

Founded in 2009, Kickstarter is a crowdfunding site devoted to gathering funds for creative projects. They support projects in many areas including films, games, music, art, design, and technology. Since their launch six years ago, 9.3 million people have pledged over $1.9 billion to fund 91,000 creative projects. Backing a project through Kickstarter is more than just giving money—it’s about supporting that person’s dream to create something they want to see exist in the world.

 

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The Good

• Model type
• Fees
• Fund type
• Maximum allowed raise
• Deadlines

Model Type

Kickstarter has a donation/reward model type. Backers (donators) that support a project get an inside look at the creative process, and also get to choose from a variety of unique rewards offered by the project creator. Rewards vary from project to project, but often include a copy of what is being produced (CD, DVD, book, etc.) or an experience unique to the project, like meeting the creator or getting producer credits. Project creators keep 100% ownership of their work, and being a rewards model, Kickstarter cannot be used to offer equity, financial returns, or to solicit loans. A Rewards type means artists or creatives can retain full ownership of their project (or business).

Fees

If your project is successfully funded, KickStarter will apply a 5% fee to the total amount of funds raised and Stripe, their new payments processor, will apply credit card processing fees of 3% + $0.20 per pledge. Pledges under $10 have a discounted 'micropledge' fee of 5% + $0.05 per pledge. Since KickStarter offers an All or Nothing funding model, there is a 0% non-completion fee. This is due to Kickstarter not charging donators anything if you do not complete your campaign. Some crowdfunding companies may charge you a fee for All or Nothing for whatever reason, but Kickstarter's 5% fee is standard in the crowdfunding industry, although it's on the higher end (typical fees are 3-5%). Not having non-complete fees lessens the financial burden for many "starving artists" trying to raise funds. (More of a burden is Stripe's deductions per transaction.)

Fund Type

Kickstarter offers an All-or-Nothing fund type. While that may be discouraging for some potential users, this fund type can actually be beneficial in this sort of situation. For example, say a project reaches $1,000 of its $5,000 goal. An All-or-Nothing fund type ensures that backers won't be expecting you to use $1,000 to provide rewards on a project intended to earn $5,000. It's helpful for backers, too, in that they can be sure their money is helping the creator to make actual progress on their project.

Maximum Allowed Raise

Kickstarter allows project creators to determine what their project's funding goal is. This is beneficial for those who have a large goal that would exceed the maximum funding limit of other crowdfunding sites.

Deadlines

At KickStarter, every project creator sets their project's deadline. This makes raising campaign funds very flexible and conducive to the best interests of the person raising money. Many crowdfunding sites have a 30, 45 or 60- day deadline, which may not be a good fit for the type of campaign that person is raising.

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The Bad

• Receiving funds
• Administrative work options

Receiving Funds

If the project succeeds in reaching its funding goal, there is a 14-day window for collecting and processing pledges. Once the 14-day window has passed, funds are automatically transferred directly to your bank account. 14 Days is a long time to wait for a direct transfer-especially compared to the 7 Day window typical to most crowdfunding sites. For some, the money transfers in real time. To receive funds through Kickstarter, you sign up for an account on their website. As of January 2015, project creators won't need to set up an Amazon Payments business account anymore to get their funds. Kickstarter is now transferring their system over to Stripe, a third party processor similar to Paypal, which just requires you to enter your bank account details on the Account tab during the project creation phase. For backers, this means a simpler, faster and easier checkout process without being redirected or having to log in to a separate service to donate. For project creators, however, it means more fees and less money received.

Administrative Work Options

In place of providing administrative work options, Kickstarter offers a more "DIY" approach-something they call a "Creator's Handbook" to new project starters. It walks them through the administrative work tasks-everything from planning their shipping to communicating with project backers. The handbook is free and easily available on their website. Other administrative topics the handbook covers:

• Getting Started
• Building Rewards
• Funding
• Promotion
• Fulfilling rewards promises

Kickstarter's Creative Handbook also offers a list of what they call "fulfillment partners"-a list of third party businesses that specialize in things like mass mailing, warehousing, packaging and other 'back end' tasks. If managing all the logistics of your project starts to feel a little overwhelming, or you wind up with more backers than you were prepared for, this list of possible resources may solve your problem and alleviate a lot of stress. Plus it may make for a more successful campaign and avoid any legal issues, such as a project backer not receiving their reward as promised. The only issue with this is that it creates more work for the project creator. Some crowdfunding sites have administrative options "in-house" which makes it easier to manage than dealing with several parties.

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The Bottom Line

Kickstarter is a great platform for creative individuals who are anxious to bring their dreams to life without giving up any equity in their product without outrageous fees. Still, as an All-or-Nothing fund type, slow fund disbursement, no in-house administrative options and mediocre success rate cause potential users any uncertainty, then they should consider using a different site to have their crowdfunding needs met.