Even with all the posted statistics on demographics, failure rate and high cost of marketing for running a Kickstarter campaign, inventors believe that they will be one of the elite to overfund. Here are the top reasons inventors give me when I ask them why they want to Kickstart and some things to consider before crowd-funding:
It's extremely difficult to find traditional or venture funding for product-based start-ups except on Kickstarter.
While not completely unfounded, the Quandl report on Angel/VC funding for consumer product ventures shows that the statistics are low - less than 5% for VCs and 16% for Angel investors. Consider this, Kickstarter is market proof that someone will buy your product. Failing to fund like the 63% unsuccessful projects reported in 2015 will make it even more difficult to get investors. Making a small run on Amazon will cost you about the same as the average $10-20,000 marketing budget needed to mount a successful Kickstarter campaign and be more valuable retail sales proof to get investment.
Kickstarter is the best way to build a large social media following.
It's a myth that the following on Kickstarter actually follows you elsewhere. Kickstarter reports that 3.1 million members are repeat backers and discourages communication with backers outside of the update process. Additionally, in order to be a successfully funded project, you need to already have a following and significant email list outside of Kickstarter that will yield you funding of 30% of your goal within the first week. Many companies like the all-time top-funding Pebble Watch come back to Kickstarter for their next launch. They know their following is already within Kickstarter and can easily achieve the one-third threshold from those existing backers.
Kickstarter is the fastest way to get onto a retail shelf.
Retail buyers are wise to the high-risk that comes from a Kickstarter start-up. They know you likely haven't fully engineered and tooled or lined up reliable manufacturing and logistics, so they will wait to you've proven delivery. Going back to our Amazon model, if you are ranking high on Amazon, with good sales and reviews, they know you are capable of delivering. More importantly, they know you appeal to general retail demographics where 86% of retail purchases are made or influenced by women. Circulating Kickstarter stats only report that up to 44% of backers are women.
Running a Kickstarter campaign will get me press to build my brand for me.
Promoting your project is a job for marketing and advertising, not press articles. If your message isn't compelling enough to write about before your campaign, don't count on the press boost during your campaign. Additionally do not count on press to give your project visibility until after you are already guaranteed to fund. Everyone loves to talk about a winner. (Please don't send me your press releases on Kickstarter campaigns. They go right in the trash and your email address will be blocked.)
It's the least risky and fastest way to make my first run and pay for tooling.
Learn from the Coolest Cooler's cautionary tale. As we head into February, I am reminded that the Coolest Cooler is beyond delayed for fulfilling their rewards. After overfunding by 26,570% at the end of August 2014, they were supposed to deliver February 2015 in time for my husband's birthday. At least I still have this 3D Printed model of the Coolest Cooler to give my husband - happy birthday, again.
Based on their most recent update, it is now looking like April 2016 backer delivery assuming there are no more engineering changes, factory strikes or shipping to Amazon before backers. After 18 months from funding, they have spent the entire amount collected, including $2 million for design and engineering on a product that should only cost about $250,000 with an experienced product designer and taken less than 6 months to start producing.