Has anyone here used Kickstarter for fund a project ?
Bean
Posts: 8,129
A couple buddies and I have a project we want to make and are thinking about using Kickstarter to fund it.
Problem is none of us have ever used kickstarter before, so I don't know how it works.
It look pretty straight forward, but the questions we had were:
How do you get the money ?
Is the money taxed as income ?
What happens if you cannot make the product for some reason ?
How do you know where to send the product to the people who funded ?
Any insight would be appreciated on these and just general comments about using Kickstarter.
Thanks
Bean
Problem is none of us have ever used kickstarter before, so I don't know how it works.
It look pretty straight forward, but the questions we had were:
How do you get the money ?
Is the money taxed as income ?
What happens if you cannot make the product for some reason ?
How do you know where to send the product to the people who funded ?
Any insight would be appreciated on these and just general comments about using Kickstarter.
Thanks
Bean
Comments
1) No idea but it gets extracted from funders credit cards the moment the project reaches it's pledge amount. (See link below)
2) Clearly yes. Presumably it gets taxed like any other endeavor. If you make a profit at the end of the day there is tax to pay.
3) As far as I can tell, that's it. You burn the money trying, you fail, funders all lose out. Much like any other form of investment.
4) Kickstarter collects names and addresses of all the funders, you will know where to send stuff and where to email updates on progress to people.
You will be interested in this explanation: http://www.kickstarter.com/blog/accountability-on-kickstarter
Good luck.
2. I don't think so...
3. You really should try to repay the backers. However, you're not legally obligated to do so. Not trying to i going to mess up your reputation on KS, though, as projects can't be deleted afterwards.
4. KS has a function to send backers a Survey where you can ask that and other questions. But be careful as you can only send it ONCE to any pledge level. Send it too soon and you risk some of the backers move somewhere else in the meantime...
If your product is HW of some sort that will need manufacturing, I suggest having limited numbers available, and if necessary open up new pledge levels with delayed shipping dates as necessary.
Some Projects has hit 10x or more units pledged for, and this has caused severe problems for the creators.
Add that KS seems to include international shipping in the total amount, and you may find that the money and numbers doesn't really add up.
It sucks if you have a product priced at $50, which cost $25 to ship internationally, and you need an even 1K of them to get decent prices on PCB, components and assembly, and after you hit goal with $50K, you suddenly find that 200 backer are international, so $5K disappears in shipping costs, and you only have orders for 900 units.
Check and doublecheck postage before setting up pledge levels, as you can't change a pledge level after someone has pledged on it.
You can lock it so that no one else can pledge that level, and set up a new (higher postage?) level though. Then you need to post an update and explain why you did it, and hope that those who pledged on the 'wrong' amount will play nice.
I know of one project(for plushies) where the creator has seriously miscalculated the postage, and will probably end up costing her money.
There' a yammering for 'stretch goals' on KS and other Crowdfunding sites.
(Ussually when the project hits round numbers above the goal)
Please don't fall for the temptation of promising too much. This has brought down some projects.
If you absolutely have to have some, insist on them being based on number of units sold or something.
KS isn't a 'preorder store', so they generally frown upon 'more than one unit' pledge levels, but it's possible to be creative with 'classroom sets' of some types. Never cross the 10 items limit, though.
Differently coloured units, or different sizes is also possible.
http://www.kickstarter.com/projects/1055691335/food-huggers is one where they did that.
Expect delays... My P112 Z180-based SBC was optimistically promised in December 2012 (KS ended in November 2012), and it is only now ended up in the gentle arms of the USPS...
(Parts shipped to the wrong place, chips with bent pins, unreadable silk screens, anything can happen to a HW project)
As far as I can tell, that is just dumb. You are basically making an investment into creating something that does not yet exist. Like any venture that can have risks.
It's up to backers to investigate if the project is doable and if the guy running the project can do it. And even after all that it's a bit of a gamble.
Say that your product uses some sort of consumable...
Maybe strands of 3mm plastic, such as the 3Doodler uses...
Or you're working on add-ons such as shields, but aren't certain that you can have them ready in time, or at all.
Then you can use a service BackerKit (it's a third-party site) that can send the backers a second 'survey' where they can order those consumables or add-ons, in the quantities they want. This is also a one-shot, and can be sent any time after the normal funding ends. It also handles payments, and updates your backer list with what they want to buy extra, so packaging it correctly should be easy.
As the main page of the Project can't be edited after funding ends, make bl**y certain it contains all necessary information, including links and FAQ so that interested people can find you later on.
(This is how I found the ShapeOko CnC mill I'm building)
Send updates when anything important happens.
(Updates are sent as emails to all backers in addition to appearing on the site)
After funding ends, try to have something 'important' at least every two weeks or so, or the comments section fills up with whiners.
Spamming with with daily updates is also asking for alienation.
It is possible to set an update as 'backer only' so that only those who pledge will ever see it. Nice for rebate codes and such.
While it's nice to have a FaceBook page for the project, or even to tweet about it, remember that not everyone uses those channels. Keep updates where they belong.
They can try... But will probably be thrown out of court by anyone but the most senile judges.
It's all covered in the FAQs on Kickstarter. A Pledge is NOT a contract to buy something.
You could raise a million on Kickstarter and then forget all about the project and blow the money.
You could raise the money for a project that you know is impossible, a perpetual motion machine say, you just want the money to provide a living for a year "trying".
In such cases it could be argued you were acting fraudulently.
Kickstarter does not offer any checks or protections against this happening. Which is quite understandable.
As a "fundee" I would guess it's important to keep your funders updated with news of progress and be honest about any hold ups.
I suppose you could claim that it is all donations as gifts, with reciprocal gifts in return. After all, the IRS excludes gifts up to $10,000 USD from any one individual in any one year.
Once you hit $10,000 from each grantor, there is gift tax (imposed on them, not you).
I think a lot of us could use a crowdfunded vacation.
Then again, it all depends which country you are in.
-Phil
When the pledge target is met all the backers credit cards are emptied into an account belonging to the project owner.
As such all they are doing is offering an introduction service between creators and backers.
As such I don't see what there is to regulate.
-Phil
Kickstarter is not offering shares in a limited company or corporation which themselves are heavily regulated.
There is no "investment" being made with the promise of dividends and/or share trading.
The shear scale of Kickstarter and it's projects. The biggest so far is only funded to the tune of ten million dollars.
Rather it's just giving some guy some money to complete a task. Which may end up in a physical delivery or perhaps could just be a novel or music that ends up on the net for free download. I just put a few pounds into the Espurino project, hopefully I get a couple of boards back in return but my main point was to get Gordon Williams to come through on his promise to publish his TinyJS interpreter it uses as open source so I could play around getting it working on Prop II.
I guess if/when the Kickstarter and other such services get big enough regulation will follow close on their heels.
We might imagine that some future Google or Facebook goes to Kickstarter to raise funds rather than going IPO and they are asking for a billion dollars then the regulators will take notice.
http://selfstarter.us/
There may have already been many a mysterious lady that has been challenged by the IRS to how she supports herself so well ... gifts from generous admirers... many admirers, but all less than $10,000 USD in one year.
There is no law in the USA that says you cannot be helpless and dependent upon the generousity of others.
Indian gurus seem to do equally well with this dodge.
Crowdsource was fun for awhile, but it is getting tedious now... and very likely to go down in flames with a few big scandals.
You must realize that Kickstarter positions itself to hold all the cash for a few months interest free, and even charges a hefty fee for doing so. The opium of finance is spelled O.P.M. (as in Other People's Money).
Where do you get that idea from? So far I have backed two projects, to the tune of 150 Euros, and no money was extracted from my credit card until the pledge goal was reached. After that I fully expect Kickstarter to take their 10 percent, or whatever, that is no longer my concern. Then the money immediately goes straight to the projects account.
Kickstarter has been going since 2009. Don't you think that if there was some shenanigans going on people would be shouting very loudly over the internet both from the creators and the backers side?