Kickstarter Business Model

The Kickstarter business model is based on helping people raise funds for their creative and innovative ideas and projects. As such, it has revolutionized how people think about raising money for creative projects. Founded in 2009, Kickstarter has become one of the most well-known crowdfunding platforms in the world. The concept is simple: people with ideas can create campaigns on Kickstarter, set a funding goal, and offer rewards to backers who pledge money towards their project. Once the goal is met, the project is funded, and the creators go on to realize their ideas.

The company has helped democratize creativity by allowing anyone with an idea to seek funding from the general public rather than relying on traditional funding sources. Since its inception, Kickstarter has successfully funded 238 292 projects and raised over $7 billion in pledges from over 40 million backers (supporters). These projects span various creative fields, including film, music, art, and technology.

Aside from funding creative ideas and encouraging creativity and innovation, it allows creatives and entrepreneurs to showcase their work and connect. Additionally, it allows supporters to participate in something new and exciting while bringing creative ideas to life. Kickstarter has changed people’s thoughts about creativity, entrepreneurship, and funding, opening new possibilities for passionate and visionary creatives. Truly, Kickstarter is changing the world of creativity, one idea at a time.

A brief history of Kickstarter

Founded in 2009 by Perry Chen, Yancey Strickler, and Charles Adler, Kickstarter is a crowdfunding platform that enables creative projects to be funded by people worldwide. It was created to connect artists, designers, filmmakers, and musicians with potential supporters who could help them bring their projects to life. Kickstarter founders — Chen, Strickler, and Adler — were inspired by the idea of micropatronage, first introduced by Chen in 2001 when he organized a concert series in New Orleans. He found that he could fund the concerts by getting small donations from many people rather than seeking a single large sponsor. Chen realized this model could be applied to other creative projects, and Kickstarter was born.

n April 2009, the founders launched a beta version of the platform, which was widely accepted. Within just a few months, thousands of people were visiting the site daily, and by the end of the year, more than 3,900 projects had been successfully funded. These early projects include films, music albums, art installations, and gadgets.

One of Kickstarter’s foremost successes is the Pebble smartwatch. In 2012, the Pebble team launched a Kickstarter campaign to raise $100,000 to produce their smartwatch. The campaign was a massive success, raising over $10 million in just 37 days, establishing Kickstarter as a viable platform for tech startups and other innovative projects. Over the years, Kickstarter has continued to evolve and grow. In 2014, the platform introduced a new category called “Design and Technology,” specifically designed to support hardware projects. This category quickly became one of the most popular on the site. It has helped fund many innovative products, including the Oculus Rift virtual reality headset.

Asides from supporting creative projects, Kickstarter has been involved in social and political causes. In 2017, the platform launched a campaign to raise funds for the American Civil Liberties Union (ACLU) following the introduction of a controversial travel ban by the Trump administration. The campaign raised more than $24 million, making it one of the most extensive crowdfunding campaigns in history.

Despite its success, Kickstarter has had its failures. Some have argued that the platform needs to become more commercialized, with large companies and established brands using it to launch new products rather than supporting independent creators. Additionally, there have been concerns about the platform’s lack of regulation and oversight, leading to some projects failing to deliver on their promises. However, Kickstarter remains one of the world’s most popular and successful crowdfunding platforms. As of 2021, the platform had raised over $5 billion for more than 200,000 projects. From films and music albums to innovative gadgets and social causes, Kickstarter has helped to bring countless creative projects to life.

Who Owns Kickstarter

Kickstarter is currently owned by Kickstarter PBC, a public benefit corporation based in Brooklyn, New York. It was founded in 2009 by Perry Chen, Yancey Strickler, and Charles Adler and has since grown to become one of the most popular crowdfunding platforms in the world. Although the founders initially ran the company, they eventually stepped down, with Chen leaving in 2013 and Strickler stepping down as CEO in 2017. Today, the company is run by a team of executives and employees, with Everette Taylor as the Chief Executive Officer, and owned by its shareholders.

Kickstarter Mission Statement

Kickstarter’s mission statement is “to help bring creative projects to life,” reflecting the company’s commitment to supporting independent creators and fostering creativity and innovation across various fields, including art, design, technology, music, film, and more. In addition to its core mission, Kickstarter strives to positively impact society and the environment through its operations as a public benefit corporation. Specifically, the company aims to promote creativity, inclusivity, transparency, and sustainability while supporting causes and initiatives that align with these values.

How Kickstarter Works

Kickstarter serves as an avenue for creators to raise funds for their creative projects from many people online. First, the creator comes up with a project idea and creates a campaign on Kickstarter. They set a funding goal and a deadline for the campaign. After, people interested in supporting the project can pledge by backing the campaign at various levels, each offering different rewards. These supporters are called backers.

If the project reaches its funding goal before the deadline, it is considered successful, and the funds are collected from backers’ credit cards. If the project does not reach its funding goal, no funds are collected, and the project does not move forward. Once the funds are collected, the creator completes the project and delivers the rewards to backers within the agreed-upon timeline. Kickstarter takes a 5% fee from the funds raised, asides the additional fees charged by payment processors. Any type of project can be supported on Kickstarter, from films, music albums, art installations, games, and inventions.

How Kickstarter Makes Money

Kickstarter has become a go-to source for thousands of innovative ideas by funding everything from films and music albums to new products and technologies. However, many people do not know how Kickstarter makes money. Here is how the company generates revenue:

Funding Fees

The primary way that Kickstarter makes money is through funding fees. When a project is successfully funded, Kickstarter charges a 5% fee on the funds raised. This is deducted from the project’s final funding total. For example, if a project raises $10,000, Kickstarter takes a fee of $500.

Payment Processing Fees

Asides from funding fees, Kickstarter also charges payment processing fees, which cover the cost of processing credit card payments and other financial transactions. Payment processing fees are typically around 3-5% of the total amount raised and are charged on top of the funding fee. For instance, if a project raises $10,000, the payment processing fee is $300-$500. However, it’s important to note that Kickstarter only charges fees on successfully funded projects. No fees are charged if a project does not meet its funding goal. As such, project creators can use Kickstarter to raise funds without incurring any costs upfront and only pay fees if their project is successful.

Advertising

Even though funding and payment processing fees are Kickstarter’s primary revenue sources, the platform also generates revenue through advertising. Kickstarter allows project creators to advertise their projects on the platform and charges a fee for this service. Advertisers can pay per click or impression, depending on their advertising goals.

Kickstarter Business Model Canvas

The Kickstarter Business Model can be explained in the following business model canvas:

Kickstarter Customer Segments

Kickstarter’s customer segments are:

• Project Creators
• Backers
• Investors
• Journalists
• Industry professionals 

Kickstarter Value Propositions

Kickstarter’s value propositions are listed as follows:

Value Propositions for Project Creators:

• Access to a large community of potential backers: Kickstarter offers project creators access to a large, engaged community of potential backers interested in supporting creative projects. This allows project creators to reach a wider audience than they might be able to through other fundraising channels;
• Exposure and marketing opportunities: Kickstarter provides project creators with exposure and marketing opportunities through its website and social media channels. This can help project creators build awareness and buzz for their projects and attract more backers;
• No upfront costs: Kickstarter does not charge project creators any upfront fees to use the platform. Instead, the platform charges a fee on the funds raised if the project is successfully funded. This means that project creators can use Kickstarter to raise funds without incurring any costs upfront;
• Creative control: Kickstarter allows project creators to maintain creative control over their projects. This means that project creators can set funding goals, decide on the rewards they offer backers, and maintain intellectual property ownership;
• Feedback and community engagement: Kickstarter allows project creators to engage with their backers and receive project feedback. This can help project creators refine their ideas and build a community around their projects.

Value Propositions for Backers:

• Support innovative projects: Kickstarter offers backers the opportunity to discover and support unique and innovative projects that might not be available through other channels. Backers can explore various creative projects and choose to support those that resonate with their interests and values;
• Access to exclusive rewards and experiences: Kickstarter offers backers access to exclusive rewards and experiences not available elsewhere. These rewards include early access to products or services, personalized experiences with project creators, etc.;
• Direct connection to project creators: Kickstarter allows backers to directly connect to project creators and ask questions about the project. This helps backers feel more engaged and invested in the project and provides valuable feedback to project creators;
• Community engagement: Kickstarter allows backers to connect with like-minded backers, creating a community that celebrates creativity and innovation;
• Low risk: Kickstarter offers backers a low-risk way to support creative projects. Backers are only charged if the project is successfully funded, and Kickstarter assures that project creators will deliver on their promises.

Value Propositions for Investors:

• Early access to innovative projects and products: Investors may have the opportunity to invest in innovative projects and products before they become available through traditional channels. This can provide investors with a potential competitive advantage and higher returns;
• Access to a diverse portfolio of investment opportunities: Kickstarter offers investors access to a diverse range of investment opportunities in the creative industries, helping them build a portfolio of investments in a growing and dynamic sector;
• Exposure to new trends and technologies: Investing in creative projects through Kickstarter can expose investors to recent trends and technologies in the creative industries. This helps investors stay ahead of the curve and identify new investment opportunities;
• Potential for social impact: Many creative Kickstarter projects promote social causes. Investing in these projects provides investors the potential to achieve social and environmental goals alongside financial returns;
• Low investment minimums: Investors can participate in Kickstarter campaigns with relatively low investment minimums, making them accessible to a wider range of investors.

Value Propositions for Journalists:

• Access to unique and innovative projects: Journalists can discover and cover unique and innovative projects that may not be available through traditional channels on Kickstarter, serving as interesting and engaging content for their audiences;
• Exposure to emerging trends and technologies: Covering creative projects on Kickstarter can expose journalists to emerging trends and technologies in the creative industries. This helps journalists stay ahead of the curve and identify new and exciting stories to cover;
• Opportunities for collaboration and partnerships: Journalists can collaborate with project creators, backers, and other stakeholders in the creative industries. This helps journalists build relationships and partnerships that can lead to new and unique content opportunities;
• Social impact: Many creative projects on Kickstarter have a social impact. Covering these projects can allow journalists to highlight critical social issues and positive change;
• Access to a community of professionals: Journalists covering Kickstarter projects can connect with a community of creative professionals, including project creators, backers, and other stakeholders. As such, journalists build relationships and network with professionals in the creative industries.

Value Propositions for Industry Professionals:

• Funding: Kickstarter allows industry professionals to raise funds for their projects without relying solely on traditional funding sources like banks or venture capitalists. This is good for projects that are risky or unproven by traditional investors;
• Market Validation: On Kickstarter, industry professionals test the market for their products or services before committing significant resources to production. By seeing how much interest and support their project generates, professionals can gain valuable insights into the level of demand for their products;
• Community Building: Kickstarter provides a platform for industry professionals to connect with potential customers and build a community around their brand or project. This helps professionals who are just starting and must establish a loyal following;
• Publicity: Kickstarter campaigns generate significant media attention and buzz, helping industry professionals raise awareness of their brand or project. Therefore, professionals can easily break into a crowded market or establish themselves as thought leaders.

Kickstarter Channels

Kickstarter’s channels are:

• Website
• Live Chat
• Mobile app (Android and iOS apps)
• Social Media
• Email

Kickstarter Customer Relationships

Kickstarter’s customer relationships comprise:

• Social media
• Email
• Customer Support Center
• Backer updates
• Events
• Community forums

Kickstarter Revenue Streams

Kickstarter’s revenue streams are:

• Advertising
• Funding fees
• Payment processing fees

Kickstarter Key Resources

Kickstarter’s key resources include:

• Technological infrastructure
• User data
• Partnerships
• Community
• Brand reputation
• Staff

Kickstarter Key Activities

Kickstarter’s key activities include:

• Marketing and promotion
• Customer support
• Platform maintenance
• Curating and promoting projects
• Facilitating payments
• Analyzing user data

Kickstarter Key Partners

Kickstarter’s key partners include:

• Project creators
• Organizations
• Media outlets
• Payment processors
• Creative communities
• Software providers
• Backers

Kickstarter Cost Structure

Kickstarter’s cost structure includes the following:

• Administrative costs
• Legal compliance
• Marketing and advertising
• Personnel management 
• Technology management
• Payment processing

Kickstarter Competitors

Primarily, Kickstarter’s competitors are other crowdfunding platforms. They include: 

• Indiegogo: Indiegogo is one of the most popular crowdfunding platforms and is similar to Kickstarter in many ways. It offers various projects, from creative ideas to social causes. Unlike Kickstarter, it offers flexible funding, meaning the project can still receive the funds raised even if the campaign doesn’t reach its goal. Indiegogo also offers additional features like InDemand, allowing campaigns to continue raising funds after the campaign has ended;

• Patreon: Patreon is a membership platform that allows creators to receive ongoing funding from their fans or patrons. It is popular among YouTubers, podcasters, writers, and other creatives who rely on their fans for financial support. Unlike Kickstarter, which is project-based, Patreon allows creators to receive recurring payments in exchange for exclusive content, behind-the-scenes access, and other rewards;

• GoFundMe: GoFundMe is a crowdfunding platform primarily focused on personal and charitable causes, such as medical expenses, education, and disaster relief. It allows individuals to create and share fundraising campaigns with their social network. Unlike Kickstarter, GoFundMe does not require a specific project to be funded, and the funds can be withdrawn immediately. GoFundMe also guarantees that the funds will be transferred to the intended recipient;

• Crowd Supply: Specializing in hardware projects, Crowd Supply offers various products, from electronics to outdoor gear. Unlike Kickstarter, which is open to all projects, Crowd Supply focuses on hardware projects and offers additional services like supply chain management and fulfillment. Crowd Supply also has a more curated approach to project selection and offers higher support;

• Seedrs: Seedrs is a crowdfunding platform that specializes in equity crowdfunding. It allows investors to buy shares in startups and other private companies. Unlike Kickstarter, which focuses on rewards-based crowdfunding, Seedrs offers a way for investors to become shareholders in the companies they fund. Seedrs also offers additional services like secondary market trading, which allows investors to buy and sell shares in private companies.

Kickstarter SWOT Analysis

Below, there is a detailed swot analysis of Kickstarter:

Kickstarter Strengths

Below, there are some advantages that culminate in Kickstarter’s strong brand reputation and profitability:

• Access to Funding: Kickstarter offers a platform for entrepreneurs, artists, and other creatives to raise funds for their projects without the need for traditional funding sources. This has helped many individuals who may not have had access to capital to launch their projects and has democratized the funding process;
• Exposure to a Large Audience: Kickstarter has a large and diverse user base, which can be leveraged to gain exposure for projects. This can be especially useful for projects with a niche audience, but can still find support from a larger community;
• Community Building: Kickstarter is more than just a funding platform — it is a community of like-minded individuals interested in supporting creative projects. This community can offer feedback, advice, and support throughout the project’s development, which can be invaluable to creators;
• Validation of Ideas: Kickstarter is a valuable tool for market validation. If a project is successfully funded, it can be seen as a sign of a market for the product or idea. This can be helpful for entrepreneurs and creatives who are unsure if their idea will be successful;
• Flexibility: Kickstarter offers a flexible funding model, where projects can be funded through either an “all-or-nothing” or a “flexible funding” model. This allows creators to choose the funding model that best suits their needs and project goals.

Kickstarter Weaknesses

Below, there are some of Kickstarter’s weaknesses:

• Risk of Failure: While Kickstarter offers access to funding, there is also a risk of failure. If a project does not reach its funding goal, it will not receive any of the pledged funds. This can be challenging for entrepreneurs and creatives who rely on Kickstarter as their primary funding source;
• Competition: Kickstarter is a highly competitive platform, with many projects vying for attention and funding. It can be challenging to stand out in such a crowded space, especially if a project does not have a large existing following or social media presence;
• Fees and Costs: Kickstarter charges a 5% fee on all successfully funded projects, in addition to payment processing fees. This can add up quickly, especially for larger projects. Additionally, there are other costs associated with campaign videos and other marketing materials, which can also be quite significant;
• Intellectual Property Issues: There have been some concerns around intellectual property issues on Kickstarter, particularly regarding product design and innovation. Some creators have reported having their ideas stolen or copied by other companies or individuals, which can be frustrating and financially damaging. While Kickstarter does have some protections in place, it is not enough. As such, creators must be aware of these risks and take steps to protect their ideas.

Kickstarter Opportunities

Here are some of the opportunities Kickstarter can leverage on:

• Diversifying into new product categories: Kickstarter has primarily been focused on funding creative projects such as films, music, art, and technology. However, they could explore expanding into new categories such as healthcare, social impact, or sustainability to attract a wider range of creators and backers;
• Integrating blockchain technology: Kickstarter could explore incorporating blockchain technology to provide transparency and security for transactions and to reward backers and creators;
• Offering additional support and services: Kickstarter could offer other services to creators, such as marketing and promotion, manufacturing and fulfillment, and mentorship or coaching to help ensure the success of their projects;
• Expand into new markets: While Kickstarter is available in many countries, it can expand its presence in new markets to tap into different cultures and creative communities and provide more opportunities for backers to support projects worldwide.

Kickstarter Threats

Here are some of the threats Kickstarter faces:

• Project Failure: One of the biggest threats to Kickstarter is project failure. Some projects on the platform may not be fully developed or lack the necessary resources to succeed. If a project fails to meet its goals, backers may lose their investments, losing trust and credibility for Kickstarter;
• Competition: Another threat to Kickstarter is competition. Crowdfunding platforms like Indiegogo and GoFundMe offer similar services, and Kickstarter needs to differentiate itself to stay relevant. Additionally, traditional funding sources like venture capitalists and angel investors compete for investment opportunities, making it challenging for Kickstarter to attract projects and investors;
• Legal and Regulatory Issues: Kickstarter operates in different countries with varying laws and regulations. Compliance with these laws can be a significant challenge for Kickstarter, especially regarding intellectual property, consumer protection, and taxation. Violating these laws can lead to legal and financial consequences for the company;
• Reputation and Brand Image: Kickstarter’s reputation and brand image are also significant threats. A few high-profile cases of fraud or failed projects can tarnish the company’s reputation and affect its brand image. This can lead to a loss of trust from investors and backers, resulting in reduced investments and projects on the platform.

Conclusion

In conclusion, Kickstarter has been a game-changer in the crowdfunding industry, providing a platform for entrepreneurs to turn their ideas into reality. However, it faces several threats, including project failure, competition, legal and regulatory issues, and reputation damage. To remain successful, Kickstarter must address these challenges and adapt to changing market conditions, ensuring it continues providing value to project creators and backers.