You normally hear a lot of startups bragging about how they managed to raise $x and $x million from this and that venture capitalist or angel investor. But not every startup is interested about sharing their product or service to just a handful of wealthy individuals. A lot of inventors are actually more excited about sharing their ideas to the world right away. This is what Kickstarter showed with the growing number of projects being hosted on their service.
But first, what exactly is Kickstarter?
Well, It’s a highly successful online crowd-funding website for creative projects open to US citizens. You can start any project on the site as long as you meet the requirements set by the company. According to Wikipedia: “charity, cause, “fund-my-life” projects and open-ended fundraising are not permitted.” So, what projects are allowed? In the past, Kickstarter has successfully helped raise funds for singers, dancers, designers, writers, inventors, directors, and even cooks looking to start up their own restaurant or publish a cookbook. Project leaders get their projects funded by setting up a Kickstarter account, and then upload media (such as videos and photos) about the nature of their project and how it works. They set a minimum goal for funding and a specific deadline, and wait for the rest of the community to hopefully sponsor their project. The sponsors get a certain item depending on the amount that they pledge. Once the deadline arrives and the minimum goal for funding is reached, the pledged amounts are taken from the sponsors’ bank accounts and sent to the project leader and Kickstarter receives 5% of the total funds raised. If the minimum goal is not reached by the end of the deadline, no funds will be collected from any of the sponsors. All financial transactions are processed through Amazon Payments.
Kickstarter has previously been criticised for not ensuring the quality of the finished products sent to the sponsors. The company responded that it is the responsibility of the sponsors to judge whether the project and project leader will deliver on their promise. There is also no guarantee that the pledged funds will indeed be used for the said project once they have been handed over to the project leaders. There is also the risk that the project may actually cost more than initially estimated by the project leader and the accumulated funds would not be enough.
However, despite these risks, projects are still being funded through Kickstarter, a few of the more successful ones include:
Pebble – A smart watch that is fully customizable with apps from both Android and iPhone.
Total pledged: $10,266,845
Ouya – A hackable game controller that would bring video gaming back to the television.
Minimum Goal: $950,000
Total pledged: $5,479,581 (and counting)
Music album by Amanda Palmer – A studio album from musician Amanda Palmer who became the most funded musician on Kickstarter
Minimum Goal: $100,000
Total pledged: $1,192,793
There are thousands more projects successfully funded through Kickstarter, most of which wouldn’t have been remotely possible if the project leaders still had to go through the lengthy processes of traditional investment. This has certainly helped small business owners get a better chance of being funded, and consequently, positively impacted the SMB economy.