Have you ever considered Kickstarter crowdfunding for your creative projects? It’s one of best ways to get your great idea off the ground and connect with potential supporters. But before you dive in, it’s essential to be realistic about the costs involved.
Sure, there are fees with the crowdfunding platform. Still, other costs to consider, like taxes, campaign branding, design, social media ads, influencer marketing, and professional photos and videography.
Kickstarter’s Fees
Let’s take a Kickstarter project as an example. It’s one of the biggest crowdfunding platforms. They charge your credit card a fee of 5% of the total funds raised for a specific project creator. The payment processing fee are charged at 3% plus $0.20 per pledge. And that’s not all; Stripe, their payment partner, also charges between 3% to 5% of payment processing fees.
So when you cross the finish line, you wouldn’t receive the total amount of money. If you raised $10,000 from a Kickstarter crowdfunding site. However, after deducting 5% Kickstarter fees and payment processing fees, you’d end up with approximately $9,000. And that’s before taxes. All crowdfunding sites have similar platform fees.
Depending on where you live, you may owe federal and state income taxes on the funds raised and sales tax. Assuming a national income tax rate of 22%, you could owe $1,980 in taxes received from Kickstarter. The United States, Canada, New Zealand and the United Kingdom consider it taxable income. Nevertheless, income taxes may not be that high, if you consider that expenses would reduce your taxable income from crowdfunding.
Fees and Taxes can take up to 30%
So now you’re down to $7,020 available for your crowdfunding project. But other costs are to consider, like campaign design fees, social media advertising, influencer marketing, PR, networking, and conferences. These expenses can significantly increase the overall costs of the campaign. Plus, you’ll need to factor in the cost of incentives offered to funders. These would be the personalized rewards or discounts on the final product.
So, is it worth it? That’s up to you to decide. Crowdfunding can be a great way to get your own ambitious project off the ground. Yet it’s essential to carefully consider the costs involved before you dive in. Budget accordingly and ensure the return on investment (ROI) is worth it.
The crowdfunding industry
North America alone is generates a whopping $17.2 billion yearly. Experts say it’s expected to reach $300 billion by 2030!
One of the most popular crowdfunding platforms out there is Kickstarter. They hold about 22.14% of the market share, and over 7,800 companies have used their platform to fund their projects.
Regarding success rates, Kickstarter’s fully funded projects represent 40.34% of all projects. Most projects fully funded on Kickstarter usually raise less than $10,000. By the way, the most popular type of projects on Kickstarter is board game. The next are video games followed by design, technology, and film & video projects.
Costs related to the campaign
There are other costs to consider when planning your crowdfunding campaign. Here are a few examples:
Campaign design fees: If you’re uncomfortable designing your campaign page, consider hiring a graphic artist to help. Depending on who you hire, the cost can range from $500 to $5,000.
Promotion costs: You’ll likely need to spend money on marketing. I would include social media advertising, influencer marketing, and other promotional activities in your campaign. It’s essential to budget for these expenses and make sure the return on investment is worth it.
Professional photography: Good product photos are critical to a successful Kickstarter campaign. If you don’t have the skills to take them yourself, consider hiring a professional photographer. Costs can range from $300 to $3,000.
Videography and editing: Videos are a great way to showcase your product or service. If you need professional help, it can cost anywhere from $300 to $10,000. It will depend on the complexity and duration of the video.
Remember, these are just estimates, and costs may vary depending on your needs. Be sure to budget for these expenses and factor them into your overall fundraising goal.
The cost of reward levels.
When creating a Kickstarter campaign, the incentives offered to supporters. They can range from inexpensive options like digital downloads or small discounts. It can include more costly rewards such as personalized designs or naming a character in the game. Campaign creators must be mindful of the expenses involved in each incentive. It will ensure that the cost of producing and delivering rewards, such as shipping costs,doesn’t exceed the funds raised. Set a reasonable goal that considers these expenses. Limit the availability of certain rewards to ensure that the campaign remains feasible.
How much is left over? Is it enough to make it worth it?
There are several factors to consider when judging whether or not a crowdfunding campaign is worth it. Firstly, it’s crucial to have a clear and realistic, and specific goal for the campaign. It must include a budget that considers all of the costs associated with their own project. This includes the direct costs of producing and delivering rewards and any campaign design, marketing, and other expenses.
Secondly, it’s crucial to have a realistic target audience for the campaign. This will ensure that the incentives offered are attractive enough to motivate people to contribute. This might involve doing market research to determine potential customers’ interest and types of incentives that effective.
Thirdly, it’s essential to have a realistic timeline for the campaign. It will ensure that the goals and incentives are achievable within that timeframe. Setting realistic funding goals and deadlines and monitoring the campaign’s progress regularly to ensure it is on track.
When is it not worth it
There are examples where crowdfunding campaigns are not worth it. Such as for projects with low-profit margins or require a large amount of capital to get off the ground. For example, a project that requires expensive equipment or materials may not be feasible through crowdfunding.
On the other hand, some successful projects through crowdfunding, such as those with a passionate and engaged audience or those offering unique and attractive incentives. For example, a project that provides exclusive access to a celebrity or a limited edition product may be more likely to succeed, as it offers something that is not easily obtainable elsewhere.
The money needed to make a crowdfunding campaign work depends on the project, the incentives offered, and the campaign’s goals. Generally, it’s essential to set realistic funding goals that consider all of the project’s costs and ensure that the incentives offered are attractive enough to motivate people to contribute. Ultimately, the success of a crowdfunding campaign depends on several factors, including the quality of the project, the target audience, and the campaign’s overall execution.
Swayed by success stories
Be realistic; you are not likely to be in the charmed group.
Exploding Kittens is one of the most funded games and one of the most successful Kickstarter campaigns ever, receiving over 8.7 million U.S. dollars in pledges from over 200 thousand backers in less than a month. However, you should be realistic about what is a successful campaign you will be?
You should not be swayed by these stories and do your homework.
Is it worth it
There are several factors to consider when judging whether or not a crowdfunding campaign is worth it.
Firstly, it’s crucial to have a clear and realistic Kickstarter goal for the campaign, including a budget that considers all of the costs associated with the project. This includes the direct costs of producing and delivering rewards and any campaign design, marketing, and other expenses.
Secondly, it’s essential to have a real target audience for the campaign and to ensure that the offered incentives are attractive enough to motivate people to contribute. This might involve doing some market research to determine the level of interest in the project and what types of incentives are most likely to be effective.
Thirdly, it’s essential to have a realistic timeline for the campaign and to ensure that the goals and incentives are achievable within that timeframe. This might involve setting realistic funding goals and deadlines and monitoring the campaign’s progress regularly to ensure that it is on track.
There are some examples where crowdfunding campaigns may not be worth it, such as for projects with low-profit margins or those that require a large amount of capital to get off the ground. For example, a project that requires expensive equipment or materials may not be feasible through crowdfunding, as the funds raised may need to be increased to cover these costs.
Worth it
On the other hand, some projects may be successful through crowdfunding, such as those with a passionate and engaged audience or those offering unique and attractive incentives. For example, a project that provides exclusive access to a celebrity or a limited edition product may be more likely to succeed, as it offers something that is not easily obtainable elsewhere.
The money needed to make a crowdfunding campaign work depends on the project, the incentives offered, and the campaign’s goals. Generally, it’s essential to set realistic funding goals that consider all of the project’s costs and ensure that the incentives offered are attractive enough to motivate people to contribute. Ultimately, the success of a crowdfunding campaign depends on several factors, including the quality of the project, the target audience, and the campaign’s overall execution.
Angel Investors
There are several reasons why a startup might choose to seek out an angel investor instead of crowdfunding:
Need for guidance and mentorship: An angel investor can provide more than just funding. They often have a wealth of experience and connections in the industry and can offer advice and mentorship to the startup.
Higher funding amount: Angel investors are typically high-net-worth individuals who can provide more significant amounts of funding than crowdfunding campaigns.
Flexibility: Angel investors often have more flexibility than crowdfunding campaigns regarding the terms of the investment, such as equity ownership, repayment schedule, and return on investment.
Less public exposure: Crowdfunding campaigns are public and require a certain level of transparency. Some startups prefer to keep their plans and strategies private, which can be difficult with crowdfunding.
Faster funding process: Crowdfunding campaigns can take a lot of time and effort to set up and manage, while angel investors can often make decisions and provide funding more quickly.
Higher success rate: According to some statistics, the success rate for raising funding through angel investors is higher than through crowdfunding platforms.
It’s important to note that every startup is different. The decision to seek funding from an angel investor or crowdfunding campaign will depend on factors such as the amount of financing needed, the industry, and the startup’s goals and objectives.
Conclusion
If you’re considering crowdfunding to fund your creative project, taking a realistic approach and considering all the associated costs is essential. While it’s true that crowdfunding can be an effective way to raise funds and connect with potential supporters, it’s crucial to understand the fees and expenses involved. For example, platforms like Kickstarter charge a 5% fee and payment processing fees of 3% plus $0.20 per pledge, which can eat into the amount you raise.
Additionally, taxes, campaign graphic designer fees, social media advertising, and incentives for funders can add up quickly. Whether crowdfunding is worth it for your project depends on your circumstances and budget. It’s essential to consider the costs and benefits carefully and ensure that the ROI justifies the investment. While crowdfunding success stories can be inspiring, it’s crucial to approach your own campaign with a clear-eyed view of the challenges and expenses involved. By budgeting carefully and setting realistic expectations, you can give your project the best chance of success.
Facts about Kickstarter
Here are some additional points:
- Kickstarter has specific campaign rules and regulations, including a vetting process requiring campaign creators to provide detailed information about their projects. Campaigns must also adhere to strict guidelines to ensure transparency and protect backers’ interests.
- Kickstarter has a strict all-or-nothing policy, meaning that if a campaign fails to meet its funding goal, the project will not receive any of the funds raised.
- Kickstarter campaigns often require significant time and effort to promote and manage.
- Kickstarter has a large and active community of backers, making it an excellent platform for creators to connect with potential supporters and gain project exposure.
- Kickstarter has an excellent reputation and is widely recognized as a reliable and trustworthy crowdfunding platform.
- Kickstarter campaigns can provide valuable feedback and market validation for creators. By gauging interest and generating buzz for their projects, creators can understand whether there is a viable market for their product or service.
- Kickstarter campaigns can be an excellent way to build a community around a project.
- Kickstarter has various resources and tools available to help creators manage their campaigns successfully.
- Kickstarter has a global reach, allowing creators to connect with backers from all over the world. It can be a significant advantage for creators looking to expand their reach and tap into new markets.
- Kickstarter campaigns can be a valuable source of funding for creators, providing them with the resources they need to bring their projects to life. However, it’s essential to approach crowdfunding with a clear understanding of the costs and risks involved and to carefully plan and budget for all expenses.
Other Platforms
There are several other crowdfunding platforms that you can consider besides Kickstarter. Here are some popular ones:
- Indiegogo – Acrowdfunding platform that allows people to raise money for various projects, including technology, film, music, and more.
- GoFundMe – GoFundMe is a popular platform for personal fundraisings, such as medical expenses, education, and other causes.
- Patreon – Patreon is a membership platform that enables creators to earn a monthly income from their fans, primarily used by artists, writers, musicians, and podcasters.
- Crowdfunder – Crowdfunder is a platform that helps startups and small businesses raise money from investors, both equity and rewards-based crowdfunding.
- Seedrs – Seedrs is a UK-based equity crowdfunding platform that allows investors to invest in startups and early-stage businesses.
- Fundable – A crowdfunding platform for startups and small businesses, providing access to investors for equity and rewards-based crowdfunding.
- Rockethub – Rockethub is a crowdfunding platform that provides resources and tools to help project creators raise money for their projects in creative fields, including film, art, music, and more.
- Ulule – Ulule is a European-based crowdfunding platform that allows people to fund creative ideas and innovative projects in various categories, such as arts, culture, and technology.
These are just a few examples, and there are many more crowdfunding platforms available, each with its own unique features and benefits. When choosing a platform, it’s essential to consider the type of project you want to fund and the audience you want to reach.
