Kickstarter has done much to level the playing field between content creators and publishers, inventors, and manufacturers by giving users the ability to crowdsource the funding they need to make ideas a reality without being at the mercy of investors, publishers, or committees.
Starting a Kickstarter project is a fairly simple process. You submit your project idea, rewards for backers, and create a pitch that will encourage people to fund your project. The reality of the situation is a little different.
A successful Kickstarter campaign means that you can expect an influx of funding for your project, and a group of backers that have expectations of return on their investments. Your funding rewards as well as your project have to be delivered within a reasonable time. Just as though you were backed by venture capitalists or investment corporations, you have agreed to produce whatever it is you promised to produce on your project page.
I’m currently in the process of working with a team of talented individuals to turn a year-long project idea into reality through Kickstarter. This will be no small project, though some of the lessons I’m learning early on could very well apply to someone that’s attempting to find backers for something fairly small. Whether you’re after hundreds of thousands or even just a few hundred dollars, the expectations and planning remains about the same.
Here are some tips to help you before you hit submit on that Kickstarter project.
Form a Company (If Needed)
When your project is funded, are you ready to receive that funding? Depending on the size and complexity of whatever it is you’re working on, you may be better off making sure that you have a company formed and sorted out to deal with the business end of your project.
Remember, receiving funds privately is very different from doing so in the form of a business. If you need to hire contractors or even employees to complete the project, this is a serious consideration.
Also, Kickstarter does not allow you to create a project to form a company. This is something that needs to be done on your own.
List the Things You Need
Before you can come up with any numbers, you need to list out everything you can think of that requires funds to complete. You need to list equipment, staffing, time (and the costs associated with this time), licensing fees, registration costs, and more.
Everything and anything you can think of needs to be listed and sorted by priority. What you need, what you’d like to have, and what you might expect in a perfect world should be added to this list. You practically have to create a roadmap for your entire project right here just to think through the potential surprises that might pop up.
Think short and long term with this one. If your project revolves around recording an album for your band, you might want to consider the costs of the sound engineers, studio time, master printing, album art, registration and copyright fees, follow-up publicity, instruments, printing, and distribution. If you want your album to play on local radio stations, you’ve got to account for the copies you’re going to have produced and sent to the studios. Everything adds up.
This list can also come in handy during your pitch as you justify your request and explain to potential backers why you need whatever amount you do come up with.
Set Reasonable Time Expectations and Deadlines
Even simple projects can take a year or more to complete. As part of your project roadmap, you should be able to determine exactly what you can and can’t accomplish within a given period of time. Each project must include an expected date of delivery for backer rewards, and your project itself should be completed within a reasonable time.
Failure to deliver on your promises may result in legal action on behalf of your backers. Kickstarter keeps funded projects on the site permanently, which may result in your reputation being forever linked to a failure to deliver on a promise.
Setting deadlines can also help you with determining an amount to request for funding. Each day that passes during work is another day of costs and payroll to consider for anyone working on the project with you.
Many Kickstarter projects are done with phases in mind. One stage of deliverables can be expected at a given time, while another stage may be extended a certain amount. This is how many companies work on larger projects while giving customers something physical to enjoy in a timely manner.
Determine Realistic Project and Rewards Costs
Kickstarter charges a 5% fee on all funded projects. Amazon, the primary payment portal for project funding, charges an additional 3-5% for each transaction. So, whatever number you come up with as your projected project cost should be raised by an additional 10% to cover these charges.
Taxes are also a concern. Whether you’re accepting funding as a private entity or a company, project funding counts as income for your company. Taxes are an important consideration to make.
It’s very easy to come up with rewards that sound inexpensive and simple to produce, but you’ll be surprised at how quickly these costs can add up. Bandwidth to supply backers with digital copies of your product, t-shirt printing, shipping and handling, and any number of other costs can be associated with deliverables for your backers. Some projects offer posters and physical media that can be an extraordinary cost.
On the other hand, going too cheap on your rewards will keep potential backers from signing up. You need to find a balance between offering something inexpensive enough to maximize the actual funds received by backers for your project, and yet good enough to make backing your project a worthwhile venture for everyone involved. While plenty of folks will back a project for the sake of promoting a good idea, the real draw for the masses is getting something out of their investment worth the price.
Build a Prototype
If you don’t have a prototype, you’re going to have an uphill climb ahead of you finding backers. This is especially true for product projects that base their funding request off 3D mockups that look cool, but may not actually be possible with available machinery. Even musicians hoping to have an album funded should have something recorded for backers to base their funding decisions from. Previous work is a plus, though there’s nothing quite like having a physical demo in your video or project description.
Just about any project could have a prototype of some kind available in the demo. Video games could show footage of a one-room test, concept art, or even a rendering of the rough concepts exclusively for the project. Documentaries could benefit from having a single scene or initial interview in the project video to demonstrate the type of content viewers can expect from the finished product. If you’re an artist attempting to fund your masterpiece, give examples of your previous work as your prototype, or perhaps some rough outlines that might help the audience visualize the result.
Prototypes are a physical proof of concept. They area a manifestation of your commitment to the project and the viability of whatever it is you’re proposing. While it costs money to come up with a prototype, not having one could cost you the funding you need for the project to be a success.