Crowd Funding: Kickstarter

What is Crowdfunding?

Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the Internet. Crowd funding is a form of alternative finance, which has emerged outside of the traditional financial system.

Three types of actors fuel the crowd-funding model: the project initiator who proposes the idea and/or project to be funded; individuals or groups who support the idea; and a moderating organization (the “platform”) that brings the parties together to launch the idea.

There are various types of crowd funding platforms online, most notably GoFundMe, Kickstarter and IndieGoGo. This week we will be focusing on Kickstarter

Kickstarter

PROS

• Brand Messaging can be very effective on kickstarter
• Creates A Community Of Support For Your Business
• Kickstarter has a huge repeat visitor base with disposable cash, with users actively looking for interesting projects to back.
• Backers and pledges can be used a validation of your target market. This is data you can bring to angel investors or venture capitalists for future investment.

CONS

• Kickstarter takes a 5 percent cut of your pledges. If your margins are slim, this could be significant.
• You’re not permitted to “pledge” toward your own project, which means you need to find a trustworthy third party to agree to pledge any offline funds. This also means the offline donors won’t be noted on Kickstarter.
• Unfortunately, the all-or-nothing pledge system can be a bit confusing.
• You must invest time and money in creating an attractive project page, brainstorm rewards, and make a compelling video.
• PR firms – they laugh at the opportunity to represent a business on kickstarter and tend to charge more due to the business’ firm need for them during a kickstarter campaign.

KICKSTARTER SUCCESSES

The Pebble smartwatch – https://getpebble.com/

OUYA android gaming console – https://www.ouya.tv/

Makey Makey a device that uses nearly anything to control your computer – https://www.makeymakey.com/

KICKSTARTER FAILURES​

MyIDKey 

a USB drive with a built-in display and fingerprint reader that would auto-fill passwords and login information when attached to a computer. – Although the delivery of the finished product was supposed to be September 2013, Arkami and its product been the topic of complaints. According to Ars Technica, only a small number of myIDkeys have actually been shipped, and numerous backers who had received the gadgets complained about failing buttons and freezing displays. In the end, all $3.4 million was spent without the promised product.

The CST-10 

The CST-10 promised to be the thinnest electronic ink display watch, and it proved extremely popular – exceeding is goal of $200,000 to reach an incredible $1,026,292.

This seemed to be an amazing product, receiving rave reviews from tech websites from across the globe – but then it all began to fall apart:

Originally, they expected to be manufacturing one to two thousand units per week, but an update in April this year said the actual number being made was closer to two hundred a week. To make matters worse, the number of units that were without fault was exceedingly low: parts were being crushed during the manufacturing stage because the devices are so thin.

UBUNTU EDGE 

This Linux-powered smartphone was, in fact, responsible for the biggest crowd funding campaign ever! This project beat even beat the well-known Pebble smart watch to raise the most money ever seen on a crowd-funding site.

However, despite raising a staggering $12,814,215, this still fell somewhat short of the original goal of $32,000,000 – and that means there are still plenty of disappointed fans wanting the handset.

The handset specifications are definitely something to get excited about: the Ubuntu Edge offered more RAM and storage than the current flagship handsets on the market, and came with the added bonus of being able to connect it to a monitor and use it as a fully-fledged desktop computer.

But it wasn’t to be, and in the end, everyone has had his or her pledges returned via PayPal. At least they got something back, though – unlike the Smarty Ring, this particular project opted for ‘fixed funding’. This simply means that because the total goal was not met, the campaign didn’t get to keep the funding pledged to them by backers.

For that reason, anybody hoping to grab one of these phones will have been bitterly disappointed. Despite how exciting it may have been initially, it didn’t pull in enough backers to get the project off the ground – and so, it inevitably failed.

What Users Say

​

In Conclusion

​Kickstarter may be the perfect way for your business to get funded, but it also has its hinderances. If this is the avenue you are going to pursue we suggest you understand your market, your product and all the processes and rewards you will provide.  Crowdfunding can provide good publicity, but at the same time can provide equally tough criticism. It is a steep learning curve but if mastered you can achieve your idea and provide your startup with some well needed funding.