In 2013, Kickstarter was able to acquire over 1 billion dollars in pledges and funds for new projects and ventures. Not bad for a site and service that is primarily used to help artists, muscians, film producers, game developers, designers and other creative types to acquire funds for their projects!
The pledges provided can be as small as 100 dollars, and there is a very good opportunity for artists to engage their fans with innovative methods of connecting fans to creative types. However, if you are a retailer, manufacturer or tech start up looking for that 250000 dollars or more in funding, then Kickstarter may not be the best route for raising funds.
In addition, to concerns about registration of your offering of investmet opportunities or securities with the Securities and Exchange Commission-SEC, qualifying for a Reg D exemption and the need for a private placement memorandum-PPM; there is a disconnect between Kickstarter’s subscribers and the entrepreneurs for these types of projects. Many individuals on Kickstarter are not interested in getting equity or a percentage of the profits from the atists, game developers, authors, musicians or film producers for their new projects.
Also, if you lose a 100 dollars on a failed project and you may just be happy to walk away. You lose a 1000, 10000, or a 100000 dollars and it may be harder to walk away. Quite simply, there is a different mindset for individuals providing pledges for projects on Kickstarter: a) they are not as concerned with ROI, b) they are concerned with encouraging and supporting the crative arts, and c) they are looking for projects that inspire them and resonate with their creative and artistic preferences.
As a startup and venture capital attorney, I often get clients telling me that they will get funds from Kickstarter to fund their new projects, and I have to bring a dose of reality to their business plans. So, consider your audience, your ability to engage Kickstarter’s audience or subscribers and the social or creative contribution to the arts, film, books, music, and entertainment industries before making a pitch for funds on Kickstarter. For more on funding your startup or new venture try www.startupbusinessattorney.com or www.chicagoentrepreneursattorney.com