Kickstarter

“To help bring projects to life”, this is the stated mission that Brooklyn based company, Kickstarter, lives by since their launch in 2009. This world renowned crowd funding platform allows users to submit projects, be it art work, designs or products, in exchange for tangible rewards or experiences to those that support the campaign. Crowdsourcing is an activity that was once practiced by big organizations, also known as venture capitals or angel investors. This is one of the ways in which start-ups can raise funds needed to expand, start and or support their business. Similar to Kickstarter, in exchange for their monetary support, the company will provide some form of equity or stake within the company. The ultimate goal is an exit by means of either an Initial Public Offering (IPO), merger or an acquisition down the line.

What’s new about Kickstarter is that the amount of investment a person can provide to the company is much significantly smaller (think lunch money). Though individually we may only be able to contribute a smaller amount than venture capitalists, the sheer amount of so called “backers” increases the contributions tenfold. The most funded Kickstarter campaigns brought in a whopping $20,338,986 in 2012 and overshot its initial goal by over 4,067% (Ref 1). This is an example of what happens when a great idea is placed in a public forum and achieved virality.  It is important to note, however, that most projects that appear on Kickstarter are typically within the starting phase of their life cycle. This means that most of the projects would take months and most often years before any of the backers would get their hands on the promised product. This is something to take note off but as the result of this platform, it enables creators, tinkerers and producers that may not initially have the funding, to “kick start” the project. Many of these products are revolutionary but the lack of funding make it impossible for the creators to mass produce them in a large scale. Such is the case for the smart watch Pebble which achieved the title of the most funded project on Kickstarter (as noted above). Also known as Pebble Time, it is arguably one of the first smart watches in the market, even before android or iOS based smart watches were anything more than an idea. Apple took 2 years after the launch of the Pebble to release their own version and even then, many die hard smart watch users would still revert back to their Pebble.

What’s common in most campaigns within the platform is that there would always be a video or some sort highlighting what the company is doing, who the founders are and the product or cause they are trying to support. This is an individual’s first touch point into understanding who the company is and what they are trying to achieve. A message is also common in most cases where the founders would typically state what they would use the fund for. What you would also find when looking into a campaign is the level of pledges you can support. There are typically a variety of levels to choose from, each with a varying degree of things given in exchange. In example, an innovative flashlight campaign would provide the product at a discounted rate for those that pledge $10. Alternatively, a $25 pledge would land them both the product and a companion magnetic USB cord. $35 would give them the product, a USB cord and a power bank. The list goes on and the amount of products in exchange increases simultaneously as the amount of the pledge. Sometimes, companies would also make items of special versions, typically a different color way or a special Kickstarter version to those that support the project. This is a popular strategy for most companies as it provides a sense of exclusivity since the rewards are limited in quantity. Providing mentions, t-shirts or other company merchandise is also a popular route and could also easily be given away in return for funds. People like acknowledgement and sometimes their support for the company is enough without expecting any products in return. Due to the limited time available on these projects, people are also encouraged to sign on as soon as possible before the offer runs out.

Some of the best practices of having a campaign in Kickstarter is to be able to tell your story succinctly with a video, keep the campaign under 30 days, include a budget so backers would know what their money will be used for, offer rewards, send tailored messages and to provide updates or follow ups on the project. Due to the fact that most companies that seek out crowdfunding are in its early stages, backers are understanding when it comes to waiting for their rewards. However, it is very important to keep a detailed update and to frequently communicate with them in one way or another. Backers in this platform are investors, no matter how small their pledges or contribution might be. All of them are essential to the success of the campaign and could make or break the future of the company itself.

Ref 1:

https://www.entrepreneur.com/article/235313

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