Kickstarter is a crowdfunding platform for creative projects. Launched in 2009, the company has raised over $13 billion from more than 18 million people. Creators can use Kickstarter to raise money for a wide range of creative projects, including films, music albums, video games, art installations, and food products. In order to receive funding, creators must reach their project’s funding goal within the set time limit.
First things first. Let us understand what crowdfunding is.
What Is Crowdfunding?
Crowdfunding is a type of funding that involves raising monetary contributions from multiple sources. This can be done through an online platform or by word-of-mouth, but the idea behind it remains the same. You’re trying to raise money for something big and in return offer backers some kind of reward. The types of rewards vary widely depending on what you are funding. They could range from copies of your final project to special event invitations to bulk discounts off products before anyone else has access.
There are a few things to keep in mind when crowdfunding through platforms like Kickstarter:
– Treat this like a project finance undertaking. You have to create a product or service that people want. If you’re just starting out, your project may be more likely to attract backers if it’s something they can see and touch. This is where having a prototype comes in handy.
– Don’t forget about shipping and delivery times! People will want to know how long it’ll take to receive that T-shirt.
– Keep track of your expenses. Crowdfunding isn’t just about getting money to make something. You must prove that you’re going to use the raised funds as promised.
– Do your research on what other similar campaigns are doing and how they went. This will help get an idea of how much money is enough for a successful outcome.
Types Of Crowdfunding:
There are quite a few different types of crowdfunding available; here I’ll talk briefly about each one and its pros and cons:
Crowdfunding For Businesses:
Many people have used this type of funding in order to improve their business ideas by raising capital. The main advantage of this type is that it gives people the opportunity to invest in something they believe will succeed. Which isn’t always easy when investing money into businesses with no proven track record. We shall cover this topic later in this article.
Crowdfunding For Startups:
This involves raising monetary contributions from multiple sources for smaller companies or individuals to start a business. It’s usually more complicated than other types of crowdfunding. This is because, at this point, you have to convince potential backers of the safety of their investment.
Photo by Carlos Muza on Unsplash
Rewards-Based Crowdfunding:
This is the most common type of crowdfunding and usually involves individuals or businesses raising money for creative projects, like making a movie or producing a new album. In exchange for their financial support, backers receive rewards that are related to the project itself (early access to the product, special editions of the final project, etc). The main advantage of this type is that it allows people to become involved in something they’re passionate about, while also helping out the creator financially. Visit the Kickstarter website to see prohibited actions.
Debt-based Crowdfunding:
Also known as peer-to-peer lending, this method of crowdfunding helps borrowers find lenders willing to invest money into their business/idea in return for periodic interest payments. The advantage to this type of funding is that it’s usually easier to obtain than a loan from a bank, and the interest rates are often lower as well.
Equity-based Crowdfunding:
This involves people investing money into businesses/ideas in exchange for a piece of the company (equity). Compared to other types of crowdfunding, investors are taking on more risk by participating in equity-based campaigns; but if everything goes according to plan, they could see larger profits down the road.
How Does Crowdfunding Work?
Now that we know about the different types of crowdfunding available, let’s take a look at how the entire process works:
Individuals or businesses create an account on a crowdfunding platform and post a campaign detailing what they’re trying to achieve.
Backers (people who want to support the project) browse through campaigns and choose one that interests them.
If they decide to back the project, they pledge an amount of money and select a reward tier depending on how much they’re willing to contribute
Once the campaign reaches its funding goal, the creator(s) get busy working on their project and sending out rewards to backers.
There’s usually a time limit associated with each campaign, so make sure you factor this into your timeline.
Do You Have To Repay Crowdfunding?
One thing people often wonder is whether crowdfunding donations need to be repaid – the answer is no! Unlike loans, contributions made through crowdfunding platforms are considered gifts and there’s no expectation of repayment.
Photo by Camylla Battani on Unsplash
Advantages Of Crowdfunding
There are a number of advantages to using crowdfunding as a way to raise money:
It allows you to bypass the often daunting task of finding investors – all you need is a great idea and some solid marketing skills
You can get your project off the ground much faster than traditional funding methods allow
Crowdfunding campaigns create a sense of community around your project, which can help drum up interest (and financial contributions) from backers
Backers feel like they’re getting something in return for their donations, whether it’s early access to the product/service or special editions/perks related to the project
Another major benefit of crowdfunding through platforms like Kickstarter for the creator is that you’ll have a better idea about how many people are interested in your product/service before actually going into production. This can reduce overall risk and save money because you won’t make thousands of units only to find out nobody was really interested in buying them
Disadvantages Of Crowdfunding
Before jumping on board with any type of crowdfunding campaign, it’s important to be aware of some drawbacks:
It often takes longer than expected to reach funding goals (especially if you need a lot of capital) – this could lead potential backers away from projects they don’t think will succeed or push back other deadlines related to the project itself (release date, etc.)
Crowdfunding websites typically take a percentage of the funds raised as payment for hosting/advertising.
Crowdfunding campaigns can be expensive to run and maintain – from creating graphics, producing videos, etc.
If your project is unsuccessful, it can hurt your reputation in addition to leaving you without any funding or backers.
Examples Of Crowdfunding: Kickstarter Case
Why Kickstarter Is The Best Thing For Your Business
Kickstarter is the world’s largest crowdfunding platform, operating in 191 countries and 29 languages. It has funded more than 100,000 projects with a total value of over $9 billion.
That’s the short version. The long version is that it’s a marketplace where creators can post their ideas, set a funding goal and deadline, and provide rewards for backers. Funding can come from a single person, an organization, or a group of people, as long as they’re at least 13 years old.
There’s no equity or debt exchanged, and backers are not charged if the project doesn’t hit its funding goal. What’s important to note is that Kickstarter does not take a cut of the funding or the revenue. This is not a business model for those who want to cash in. It is a great way to get your product manufactured and into the hands of customers.
How Kickstarter Works
Once You’ve Registered on the Kickstarter platform and Chosen a Category – First, you’ll need to register, which is free and easy. You’ll need to provide some basic information and a little about what you’re trying to accomplish. You’ll also select a category, and the type of project you’re working on. Furthermore, you can search the categories or browse through the top picks to find one that fits your project.
Once You’ve Created Your Project – Next, you’ll need to create your project. Do some research and see what others are doing that has been successful. You’ll need to include all the relevant information about your product, your funding goal, and your estimated delivery date. You’ll also need to set a funding goal and deadline for your project.
Once You’ve Posted Your Project – Finally, you’ll need to submit and post your project to Kickstarter. You’re able to add in some copy about your product and why you’re creating it. You’ll be able to upload photos and videos (some projects have more images than others).
Reasons Why Kickstarter Is Good For Your Business
- You’re not sure why people would want your product. Kickstarter is a great place to start gauging interest in your product. You’ll get to see how many people like your idea and how excited they are about it. You’ll get real feedback about what people think about your product and what you could do to make it better. You’ll get real data about your customers.
- If you’re looking for an investment or a loan from a bank, you’ll likely need to provide some financial projections and figures. You’ll likely be guessing or putting the best-case scenario. Kickstarter is the best place to see real numbers behind your business and your product.
- You’re not sure how to price your product. This is hands down the most important part of Kickstarter. You need to know how much your product is worth and what to charge for it. You need to know what features are standard and what features are add-ons. Furthermore, you need to know what your profit margin is. This is something that is not easy to do, and it can cause a lot of headaches. Kickstarter is a great way to start pricing out your product and seeing what people think is fair. Getting help from a business advisor or mentor can be a great way to help you get through this hurdle.
- You’ll get in front of a lot of potential customers. Backers can choose to receive updates about your project and see what is going on behind the scenes. You’ll also be able to post updates about your progress and let backers know how the project is going. Kickstarter helps you share and update backers about your project, the more likely they are to share your project and product with their friends.
- You’ll get feedback and insight on your marketing and business plan. With everything that is going on with your project, you’ll likely be spending a lot of time marketing and talking to potential customers, media, and bloggers. Kickstarter is a great place to start testing your marketing and talking to potential customers. You’ll be able to see what kind of messaging resonates with people and what makes them excited about your product.
Kickstarter is an effective tool for validating your business idea, gauging interest, and getting feedback on your marketing, business plan, and product. But you should know that many projects also fail on Kickstarter.
What are the other best crowdfunding websites besides Kickstarter?
Here is a list of some of the most popular crowdfunding websites:
#1. Indiegogo
Indiegogo is one of the most well-known crowdfunding platforms and allows campaigners to raise money for a wide range of projects, from creative endeavors like films and music albums to charitable causes and entrepreneurial projects. People can also crowdfund business ideas, philanthropic ventures, and charitable causes on Indiegogo, which has a premium option for non-profit campaigners that allows them to keep their donations even if they don’t reach the funding goal.
#2. Speedinvest Technology
Speedinvest Technology is A crowdfunding platform that helps start-ups and small businesses to raise seed capital. Based in Vienna, Austria, SpeedInvest aims at helping investors discover startups with high growth potential by providing an easy way for the companies to reach out to those who are interested in investing their money into young entrepreneurial ventures.
#3. Mightycause
This site is for nonprofits and charities that were founded in 2007 by Eric Jagla. MightyCause’s platform offers campaigns to raise funds for nonprofit organizations, schools, churches, or other not-for-profit entities.
#4. StartEngine
StartEngine is a crowdfunding platform for startups and small businesses. The company was founded in 2013 by Howard Marks, co-founder of Acclaim Games and Activision. StartEngine helps entrepreneurs to raise money from accredited investors through its online marketplace.
To date, the company has helped to raise over $140 million for companies across a range of industries, including technology, food and beverage, fashion, and real estate. In September 2017, StartEngine announced the launch of its own Initial Coin Offering (ICO) platform, which will allow startups to raise money by issuing their own digital tokens.
#5. GoFundMe
GoFundMe is one of the most popular crowdfunding platforms for personal causes. Launched in 2010, the company has raised over $11 billion for people in need. GoFundMe allows individuals to raise money for themselves or others, for medical expenses, funeral costs, education expenses, and other personal needs.
One of the great things about GoFundMe is that there are no deadlines or funding goals to meet – donors can donate as much or as little as they want, and the campaign will continue to receive donations until it is closed.
#6. Patreon
Patreon is a crowdfunding platform for artists, musicians, writers, and other creative professionals. Launched in 2013 by Jack Conte and Sam Yam, Patreon allows creators to set up monthly subscription tiers in order to receive financial support from their fans.
Creators can offer rewards to their patrons for different levels of financial support, such as exclusive content, behind-the-scenes videos or early access to new work. Patreon has become a popular way for creators to generate a steady income from their fans, with over 100,000 creators generating over $500 million in total revenue in 2017.
#7. Wefunder
Wefunder is a crowdfunding platform for startups and small businesses. The company was founded in 2013 by Howard Marks, co-founder of Acclaim Games and Activision. Wefunder allows entrepreneurs to raise money from accredited investors through its online marketplace. To date, the company has helped to raise over $140 million for companies across a range of industries, including technology, food and beverage, fashion, and real estate.
#8. Ulule
Ulule is a European crowdfunding platform for creative projects. Launched in 2010, the company has raised over €190 million from more than 100,000 creators.
Creators can use Ulule to raise money for a wide range of creative projects, including films, music albums, video games, and art installations. In order to receive funding, creators must reach their project’s funding goal within the set time limit.
In conclusion, Crowdfunding has taken the internet by storm. But what is it? How does it work, and are there any benefits or disadvantages to consider before jumping in headfirst? We hope this article helped you understand crowdfunding better so that you can make an informed decision about whether crowdfunding for your business will be worth all the effort involved. There are other 7 ways of raising funds for your project that you should read about.
Whether you choose Kickstarter or any other crowdfunding platform, you need to do your homework before approaching funders.
