Assessing The Advantages (& Disadvantages) of Kickstarter

Assessing The Advantages (& Disadvantages) of Kickstarter

 

Kickstarter is a modern entrepreneurial tool that has undoubtedly changed how startups are funded. People get tired of chasing around Kansas City or Tulsa angel capital investors to get their businesses off the ground, and instead look to crowdfunding as an alternative. Kickstarter is brought up regularly around BetaBlox; mostly in the form of questions.

-Does it work?

-Is it right for me?

-How much money should I tryand raise?

Questions like these are plentiful. Unfortunately there is no one-size-fits-all answer. Kickstarter has its problems and opportunities, much like every path an entrepreneur can take itself. This essay is our synopsis of the platform’s advantages and disadvantages.

Advantages Of Kickstarter

It Promotes Doing, Rather Than Talking

angel-capital-investorsBefore you start to assess any of the soon to be mentioned points, give this one more stock than anything else. We can sit around and opine about the merits of Kickstarter (or its potential for wasting time) until we’re blue in the face. But at the end of the day, an entrepreneur’s job is to have a penchant for action. Trying to fulfill a Kickstarter campaign is doing something. If ‘something’ doesn’t work, who cares? You’ll move on to the next test, and one day you’ll stumble on the long-term business model your startup needs.

It Helps You Test On Small Scales Before Major Investment Has Been Made

There are two burning questions that every entrepreneur needs to ask themselves, or more importantly, their market. First, do customers absolutely love, or find massive value in the benefit the business is providing [Value Hypothesis]? Second, can the business find a sustainable mechanism for capturing more-and-more market share [Growth Hypothesis]? Kickstarter can go a long ways towards helping prove the value hypothesis. If you spend months trying to get everyone you know to support your campaign, and no one does – you know very early on that something is off with the value your company is providing. How ‘off’ depends on the situation, but at least you won’t have to full-fledged launch your company into an inevitable disaster. On the opposite end of the spectrum, if you do successfully complete a campaign, you know you’re on to something. Your product has proven itself to be of enough value to spark action on behalf of a consumer. You’ll still have no idea how to answer the second hypothesis (the growth hypothesis), but at least you’ll be one step closer to the sustainable model.

It Allows You To Tap Into Friends/Family/Supporters Early On

Most of the people in our networks aren’t Tulsa angel capital investors. They’re employees at local firms. They’re coaches of our kids’ sports teams. They’re our parents. Our siblings. Our high school friends. These people love and care about us. They want to support us, but how? A Kickstarter campaign is a good way to tap into that support structure and take a little cream off the top. Just because someone can’t write you a $10K equity investment, doesn’t mean that you don’t have access to a 100 people that would donate a $100 a piece. They both add up to the same amount of money.

Angel Capital Investors Love The Story

To an investor, a successfully funded Kickstarter campaign is like hearing bells. It’s just one more notch in the story’s belt that proves the entrepreneur is on to something. It’s not the only thing they’re gonna want to know about, but it’s a start. It’s an appetizer that says, “this entrepreneur knows how to set a goal and see it through.”

Disadvantages of Kickstarter

People Have A Misconception About What Kickstarter Is

tulsa-capitalThe same in-experienced entrepreneurs that say “our marketing plan is going to be word-of-mouth,” are the same ones that nonchalantly say “we’re gonna fund the first round of prototypes with Kickstarter.” The keyword there is ‘nonchalantly’. What we mean is they think that Kickstarter is a ‘field of dreams’ tool for builders. As in, if they put the campaign up there, promote it a little, people will come and support it. But that’s not the case. Picture in your head right now how many people you think there are shopping around Kickstarter looking for cool things to buy and support….now divide that number by a 1,000…now you’re a little closer to the truth. Kickstarter is a tool for collecting money and organizing pre-production orders. Kickstarter is not a promoter. Although there are exceptions to this rule (such as their featured campaigns sections): the responsibility exclusively lies on the shoulders of the entrepreneur to put eyeballs on the page.  

It’s Going to Be A Borderline Full-Time Job, Or It Will Fail

This point is complementary to the last one, in that entrepreneurs underestimate exactly how hard they have to work, and how good of marketers they have to be, to successfully fund a campaign. There’s been a handful of decent ones in Kansas City and Tulsa throughout the last couple of years, such as Edge Up Sports, or Sock 101, but 99% of the rest of them failed. Why did Edge Up Sports and Socks 101 succeed? Because they’re connected, hard working, smart, marketers. They spent every hour of the time their campaigns were live promoting it. They hounded press. Sent out thousands of emails. Threw donation parties. The list goes on. They treated their campaigns as if the product was actually launched, and then promoted it as if their lives depended on it. Most people simply don’t have the skills or the work ethic to fulfill on this mission. So unless you plan on spending anything less than hundreds of hours promoting the campaign, one email and phone call at a time, you’re not prepared to launch a Kickstarter campaign.

Most Successfully Implemented Campaigns Are Done-So In A Way That Most Entrepreneurs Can’t, Or Won’t

Of the small percentage of successfully completed campaigns, a disproportionately large percentage of those did so through a pre-existing following, or ads. Let’s break that down. In other words, the entrepreneur raising capital was famous (or at least “Instagram Famous”), already had a large email database, or some other form of “owned media.” A large percentage of the others did so through Facebook/Twitter/Google/Instagram pay-per-click advertising. We’re not knocking people with owned media assets, and we’re definitely not knocking people that pay to send clicks to their products – all we’re doing is making sure potential Kickstarter users manage their expectations.

 

In reflection, if you want to successfully implement a Kickstarter campaign, be prepared to work your butt off, the whole time, use up every connection you have, and even spend money to send people to the campaign’s page.

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