It seems as if the news and other media outlets are full of crowd-funding success stories. An individual or group has an idea, then markets that idea through platforms such as Kickstarter, to get the capital needed to materialize that idea, bringing it forth from the ether. Unfortunately, the stark reality is that these stories create a false hope that anyone with a computer and a dream can crowd-fund their way into success.
The numbers tell a shockingly different story from news outlets. Only 45 percent of crowd-funded projects ever meet, or potentially exceed, their goals. Of that 45 percent, 29 percent are for projects with an eye for less than $10,000. Only 4 percent reach goal between $20,000-$100,000, and in excess of $100,000 a measly 0.9 percent. That means that 55 percent of all Kickstarter campaigns do not reach or exceed their goal.
Unfortunately, that’s only half of the equation. There are fees to consider, such as Kickstarter’s 5 percent, then markdowns, and finally, rewards offered to backers. To better succeed, Kickstarter suggests making a video for potential backers to view. This can be a costly endeavor. Then there’s the cost for social media expenses to advertise your campaign as well. All of these fees and costs can eat into profits, which can then eat into the capital that was initially needed to start the business in the first place. That can lead to delayed start times.
Approximately 25 percent of all fully-funded campaigns through Kickstarter will deliver on time. That means that 75 percent of fully-funded campaigns experience delays. This places an impact on potential customers impacted before the product has even reached them. This can affect brand loyalty and disrupt the necessary customer-base for the product being sold.
This is not to say that Kickstarter is not useful in its own right. Crowd-funding can allow small businesses with big dreams spread the word about their product. It can be a useful tool if combined with the necessary legwork and effort required to get a business from an idea to reality. However, solely relying on crowd-funding is a dream riddled with pitfalls. A potential business needs a plan of action. Having goals, meeting those goals in a timely fashion without the reliance on crowd-funding platforms, and channeling hard work and dedication into delivering a fantastic product is all a business really needs to succeed.