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How a Kickstarter Project Can Massively Exceed Its Funding Goals and Still Fail
An anonymous reader writes: In November, 2013, a Kickstarter project for a software-defined camera trigger scored £290,386 (~$450,000) in funding after asking for a mere £50,000. After almost a year of delays, they've now announced the project is dead. Their CEO has published a lengthy article about how such a successful funding round can still turn into a failed product. In short: budgeting. To get their software into a workable state, they ended up spending 940% of the amount they'd originally allocated to software development. Their protoyping went over budget, too, and they had to spend a fair bit in legal fees to fend off a major camera manufacturer complaining about their product's name.
Still, they had more funding than they expected, and would have been able to deal with these costs. Unfortunately, the bill of materials for their final product clocked in way higher than they expected. They would have had to sell the device at about $350 each, when they were originally targeting a $99 price point. (And that figure assumes good sales — with a smaller production run, price per unit goes even higher.) The company is now going to refund the remaining money left over from its Kickstarter campaign — about 20% of the total. They're also open sourcing the software and sharing the PCB designs and schematics.
Still, they had more funding than they expected, and would have been able to deal with these costs. Unfortunately, the bill of materials for their final product clocked in way higher than they expected. They would have had to sell the device at about $350 each, when they were originally targeting a $99 price point. (And that figure assumes good sales — with a smaller production run, price per unit goes even higher.) The company is now going to refund the remaining money left over from its Kickstarter campaign — about 20% of the total. They're also open sourcing the software and sharing the PCB designs and schematics.
If you make the wrong asumtions with your budget, you will fail financially? Who would have thought this?
Don't fight for your country, if your country does not fight for you.
Morale: gloomy
But!
That doesn't mean you should never contribute to hardware kick starters. It's a good idea to carefully examine what they have done before to see if they can handle making the new thing...
But!
Sometimes, it's just plain good to kickstart something even if it looks unlikely they will reach the goal. I would argue that is what happened in this case, because they found out a LOT about making this thing a lot of people want, and are sharing what they found. Eventually the thing people really wanted may well get made. If I had contributed to this Kickstarter (I did not) I wouldn't be mad, just a bit sad it didn't go through.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Actually, kickstarter is not allowed to give out equity under US law *yet*, but that may change soon. ANd if they want to stay relevant, they should, because the kickstarter model is starting to show cracks.
A company called Symbid (symbid.nl) has been doing this for quite some time now because they're not in the US and under Dutch law they can already do this. You can invest small sums of money (20 euro and upwards) and in exchange you get equity. That sounds simpler than it is, but it seems to be working for them. They take over all the hassle of the process of issuing shares, the lawyer part of it etc. and make things cheap and easy enough to work for small sums.
If I ever invest money, it will be through something similar. But not through kickstarter. Kickstarter is where you give donations. Investors go elsewhere.
Therefore, by the (faulty) logic you're using, you're just a cow with a keyboard - osu-neko (2604)
I believe the morale of the story is positive. It looks to be in good spirits!
HBI's Law: Frequency of calling others Nazis is directly correlated with the likelihood of the accuser being Communist.
It's not an investment platform, it's a begging platform with door prizes. Investors get ownership for their money and can demand accountability *during* the life of the project.
And startup investors invest a large sum of money for that ownership. You aren't going to get ownership for 5-100 bucks.
Maybe that means that their is room for a new kickstart. You invest and get x amount of the company per dollar. So you put in say $100 into a "Kickstarter" and you get .01% of the company.
The venture fails and you get write it off on your taxes.
It becomes Facebook and you get to retire.
Except that scheme runs afoul of a whole host of rules, and will get you in hot water with the SEC (possibly including jail time)
That very concept has a name: "Initial Public Offering", and the rules surrounding it are complex enough that most companies hire a brokerage house to handle the details.
I wish I had a good sig, but all the good ones are copyrighted