Kickstarter thoughts


If you don't have dreams of launching a UAV project on kickstarter, making zillions of dollars, & quitting your unemployment compensation, you're crazy.  So here's a quick graph of kickstarter funding for "currently funding" LA projects, which is the easiest data to find on their mane page. This was the only easily copyable data set & includes all the future unsuccessful & successful projects.

Out of 334 projects, most of them are getting from 0 to $5000.  There's a definite preference among the crowd to cluster above $15,000 & avoid below $15,000.  The top 24 projects earn more than the sum of the bottom 310 projects & the top 4 of projects own 19% of the total wealth.

It's definitely flatter than wealth distributed by the government, but even with the crowd, the trend is definitely the same.  You see the same trend of concentration of wealth near the very top in food, longevity, dating & marriage.  It's hard to beat biologically wired behavior.

 Assuming you want something to break even & you're American, so you're probably unemployed, you need around $2000 to pay 1 month of the cost of living + the cost of parts in the widget + taxes.

Kickstarter takes 5% of the cut for their CEO running a server & Jeff Bezos charges another 5% for being Jeff Bezos credit card processing.  Anything not spent on your own business expenses, kickstarter reports to the IRS as ordinary income, so you have to pay another 10-30% in taxes.  Fortunately, if you're American, your taxes should be under 10% because you're unemployed.

If your cost of living is your margin & you shoot for no profit, you're looking at $400 of taxes + $2000 to survive + parts, for every month it takes to produce the thing. 

If it takes 1 month to finish all the orders & the widget has no parts, you need to be better than 29% of the projects.  In reality, nothing is finished in 1 month.

For a real focused job, a real simple widget, producing exactly what the customers want & no diversion to your own needs, you're looking at 3 months or $7200.  Attopilot took at least a year or over $28,800 just for the cost of living + taxes.  Only the top 2% make that much on kickstarter.

 The money is conceivably easier, but how many of those kickstarter investments are really due to kickstarter clicks & not people the maker didn't already have a network with or the maker worked his ass off selling to?

At least 1 investment is going to be from the mother.  I suspect most of the money is coming from pavement pounding sales.  Kickstarter of course, would insist that all the money was because of clicks.

As a way to replace your day job, fuggedaboutit.  As supplimental income on top of a day job, it's certainly there.  You won't make as much on kickstarter as you would putting the same amount of time into a day job, but it could certainly allow you to build something.

It may not allow you to think very far outside the box.  Unless you're Steve Jobless, people don't buy stuff that's too different.  What could be real crazy if you went with your own money has to be a bit more conforming to get someone else to pay in advance.

There's never a free lunch.  When you ask for advance payments, you have to deliver what customers think they want & that is never exactly what you want.  You always have to give up some freedom to get someone else to take the risk, whether it's a crowd or a government.

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  • KC is much like the iPhone app market. You still need a small upfront investment, they'll provide the marketing, and limited ops/finance support and take their cut.

    And as I found with the appstore market, including Android, you're only are successful (say >$30K in sales) if you can get that one-time hit that's also promoted heavily by Apple--or in this case, Kickstarter. Also, like the iphone market--it's a FT job if you want to be successful in it.. That's why I got out of apps: e.g. push apps require server IT management, content creation updates, legal & licensing, etc... And Apple only sends you a check when you reach a threshold in profits (like $250 LIRC). 

  • Moderator

    btw, I'm plenty satisfied with my initial kickstarter project support, some crazy guy named Trent posting RC videos on the net!

  • Moderator

    I think the payment rules are by Amazon.  If you exceed $20,000 in gross sales AND you have 200 or more transactions Amazon will file a 1099-K for you.  This will presumably be offset by business expense deductions from your kickstarter project.

    It seems like a good idea to me... it can allow you to guarantee enough sales to make a first production run of a product, while getting the cash in advance so you don't have to borrow at a terrible rate (coz you're a small first-timer).  Of course that also reinforces Elliot's point regarding supporters.  Be careful to pledge only money you can afford to lose!

  • Kickstarter is ripe for fraud, and supporter disappointment.  There's not enough controls to ensure that supporters get what they are promised, within a reasonable time frame, and that the project starters are actually capable of delivering what they are promising.

  • 3D Robotics

    Good analysis. But are you sure about this part: "Anything not spent on your own business expenses, kickstarter reports to the IRS as ordinary income, so you have to pay another 10-30% in taxes."? I assume that most Kickstarter projects of any size are incorporated as companies, and the Kickstarter money counts as revenues. 

  • A while back I came across one report on a successfully funded (yet to be completed) Kickstarter project that might be useful food for thought:

    Their project is software and their pledgers don't get the main product, but they did offer physical rewards. In that post they talked about how costly it ended up being and so on. A software product offers cheap replication for sure, but it's certainly not the only factor to consider. If your product is physical, it certainly adds its own part and complexities into the equation...

  • What it does allow you to do is turn an idea into reality without the risk of nobody buying your product. Sure, you have to make a prototype, video, etc, but if your idea is that insanely great, then that should be fun, right? It means you can say "right, I need to sell a hundred widgets in order to offer them at a decent price" and be sure that you've got orders for a hundred before you put any more time, effort or money in.

    I'm waiting for Kickstarter UK! 

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