Can I raise money for my startup on Kickstarter ?

Since its creation in 2009, Kickstarter has raised about $540 million for about 38,000 projects. This is around 45 percent of the projects that were submitted. The great majority of successful projects raise $10,000 or less. The funding deadline for a project can be up to 60 days, but setting a limit of 30 days to raise the money is often more successful.

Kickstarter raises money for projects – activities that have a beginning and an end, and will produce something. Writing a book or preparing a music video is a project. Starting a business is not a project and doesn’t qualify for Kickstarter.

What kinds of projects can we submit for funding ?

Kickstarter’s current categories are art, comics, dance, design, fashion, film, food, games, music, photography, publishing, technology and theater. Art projects, comics, dance videos, iPhone docks, movies, window farms, video games, music albums, photography books, and 3D printers have all been successfully funded.

Are there other restrictions ?

The list of ‘prohibited projects’ is really long. Charity or cause funding projects are not accepted (see Indiegogo). They won’t accept requests to pay tuition or bills (not a project). Projects involving cosmetics, energy drinks, firearms or other weapons, personal care or medical products, nutritional supplements, real estate, or projects endorsing or opposing a political candidate are also prohibited. Check their web site for the complete list.

And Kickstarter can’t be used to solicit investments or loans.

Is that all ?

There’s more. People who submit projects in the US must be permanent US residents, at least 18 years of age, with a social security number (or EIN), a US bank account, US address, US state-issued ID (driver’s license), and major US credit or debit card. You will also need to create an Amazon Payments account.

People who pledge money to Kickstarter projects can live anywhere as long as they have a major credit or debit card.

What does it cost to submit a project on Kickstarter ?

Submitting a project to Kickstarter is free … that is, Kickstarter doesn’t charge a fee to submit a project. You will probably need to invest in a video explaining your project, and other  development or promotional material.

If you receive the pledge amount that you targeted, Kickstarter will charge you 5 percent. Payment processing fees are generally between 3 and 5 percent. On the other hand, if you don’t reach your targeted amount, you won’t receive any money and Kickstarter will charge you nothing. Kickstarter does not take any ownership position in your project.

People who fund your project expect a reward if your project is successfully funded. You define the rewards in your project description. Rewards are usually a product of the project –  for example, a copy of the CD, a print of the photograph, or a copy of the book. Donors may also be offered a chance to participate in the project by being a member of the crew, an extra in the cast, or to have their names listed in the book.

By the way, you can’t charge extra for postage or delivery charges. Keep that in mind when you are creating your rewards.

What happens if the project is funded ?

In the US, if your project is successfully funded, money goes from the backers’ (donors’) credit cards to your Amazon Payments account. Amazon Payments allows 14 days to collect and process pledges. After that, you can transfer money from your Amazon account to your bank account.

Is the project originator legally obliged to fulfill the promises of their project ?

Yes. Kickstarter’s Terms of Use require creators to fulfill all rewards of their project or refund any backer whose reward they do not or cannot fulfill. Kickstarter created these terms to create a legal requirement for creators to follow through on their projects, and to give backers a recourse if they don’t.

It’s pretty common for the project to take longer than expected. There can always be technical problems, and no one can anticipate all of the difficulties that can arise. Project originators are expected to keep the backers up to date, and if the project team is making a good-faith effort, donors will usually be patient. If the project team can’t finish the project (this happens too), the project team may be able to offer some refunds, or give an accounting of how they spent the donors’ money.

Anyone who donates to a Kickstarter project is rolling the money dice to some extent. Be prepared.

Oh! Who decides if a project is worthwhile and will be completed successfully ?

On Kickstarter, backers (donors) have to decide for themselves whether a project will be successful before they make the decision to contribute. Kickstarter doesn’t investigate a project team’s ability to complete the project.

Donors should focus on project creators who have a clear plan tor completing their project and have some experience with this kind of project. The project description should include background information on the development team and links to previous projects or existing businesses. If the project doesn’t have this kind of information, it’s probably high risk. As they say in Latin, caveat emptor.

Where can I go for more information ?

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