There are many success stories that have come from Kickstarter in recent months where millions of dollars have been raised. There are also many stories of failure which have come from this crowdfunding platform where months of planning and effort resulted in zero funds being transferred. Should you be using this platform to raise money for your next project? Here are the pros and cons of Kickstarter to consider.
What Are the Pros of Kickstarter?
1. People like to back a winner.
It doesn’t take much for people to want to unlock the potential of a Kickstarter campaign. Although there are no official numbers, it is estimated that 9 out of 10 campaigns that can reach a 25% funding level at some point will actually meet or exceed their funding goal. This means creators and supporters seek each other out when there is the potential for success to ensure that goals can be met.
2. Your campaign can generate a lot of attention for free.
A number of tech magazines, online publications, and individuals all browse through Kickstarter on a regular basis to see what new campaigns have become active. Quirky and innovative campaigns can generate a lot of free press when they get noticed, which can help grow a brand even if the crowdfunding effort isn’t eventually successful.
3. Fundraising periods are kept rather short.
The longest a campaign is allowed to currently run on Kickstarter is 90 days. This means you don’t have to worry about extending your fundraising efforts for an indefinite period of time. There are deadlines that must be met and these can be used to your advantage, especially if you are close to a fundraising goal and are looking for a little extra help to get over the top.
4. It’s free until you meet your goal.
If you don’t get your project fully funded on Kickstarter, then the only costs you’ll face are the ones you’ve generated internally to create and market the campaign. There are no upfront charges to be on this platform that you need to worry about. That’s good news for the 55% of campaigns that currently do not meet their funding goals.
5. Kickstarter will provide you with a personal review.
In the past, Kickstarter required all campaigns to be reviewed for approval. That restriction has been lifted somewhat [we all remember the potato salad campaign], but is still available for companies and individuals to use. It’s useful to take advantage of this opportunity because the staff of this crowdfunding platform can give you insights that may make your campaign more likely to succeed.
6. There is no transfer of ownership of your product, service, or idea.
Kickstarter does not take an equity share of your campaign as part of the commission process. This means all creators are able to keep 100% of their ownership share when representing their work.
7. Kickstarter offers an interface that is easy to use.
When you take a campaign live, it’s easy to keep track of what is happening with it. You’ll receive up-to-date statistics, be able to communicate with all supporters with ease, and be able to promote your campaign in multiple ways. You are even allowed to purchase a domain name that redirects to your Kickstarter campaign and embed it onto your own website if you wish.
What Are the Cons of Kickstarter?
1. It’s an all or nothing format.
If you want to receive your crowdfunding cash from Kickstarter, then you must meet your funding goal. Should your goal not be met, then you receive nothing from the pledges and those who donated to your campaign are not charged anything.
2. All successful campaigns must pay a fee.
Kickstarter will take 5% of all the cash that is raised as a commission for being able to crowdfund on the site. Payment processing fees of up to 3% can also cut into your funds. For companies that are running on tight margins, these fees must be taken into account before the crowdfunding campaign ever begins. Manufacturing costs and other production-related expenses must also be fully realized to avoid similar delays like the Coolest Cooler have encountered.
3. You cannot pledge toward your own project.
Many companies will hold fundraising events outside of Kickstarter to help supplement a campaign. This might include raffles, silent auctions, or even door-to-door efforts. The money which is raised from these efforts cannot be added to the online campaign because businesses are not allowed to pledge these funds on their own. This means community fundraising for Kickstarter must encourage people to donate online instead of in person and that’s not always easy to do.
4. People can forget that they pledged money.
Because of the length of a crowdfunding campaign on Kickstarter, some early supporters might forget that they authorized a pledge. When the charge comes through on their debit or credit card, they may dispute the charges, not realizing that they had authorized them up to 3 months before. This can make it difficult sometimes to gain access to all of the cash that was pledged right away.
5. Crowdfunding is not an actual marketplace.
Although Kickstarter has been proactive about removing scam campaigns from their platform, there is still no guarantee that a backed campaign will provide a funding level product or service. It’s often treated as an online store, but it’s really a small way for the average person to invest into a company, brand, or idea in its earliest stages. When a failure happens, it tarnishes every other active campaign and could drive away potential investors.
6. Kickstarter has certain standards that must be met.
In 2014, an anti-abortion movie campaign was denied access to the crowdfunding platform because Kickstarter requested changes to the campaign that the creators felt were unreasonable. Ultimately every brand must remember that even though Kickstarter is a public resource, it is also a business and they have the right to set their own standards or change policies that benefit their brand. This means that not everyone may be allowed to start a campaign or may have an instant campaign taken down.
7. It isn’t easy.
For most campaigns, the funding will be coming from family, friends, and some local community members. Even brands that are widely known can struggle to find the funding they need because of the uncertainty that this platform involves. Getting noticed on Kickstarter takes time, and even if a campaign becomes a staff pick, it’s still not a guarantee that it will be fully funded.
The pros and cons of Kickstarter show that it can be a useful way to raise money, but there are certain negatives that must be addressed before taking a campaign live. Take time to plan, be active in marketing your idea, and you’ll give yourself a good chance to succeed.