The book Crowd Start explained crowd funding perfectly.  There description took me back to when I was a kid and we would watch the crime stoppers telethon.  Locals would create video’s that were shown throughout the weekend and people would call in to donate money and challenge certain groups or people to donate.  Just like the book stated, at the last minute, they would show how much money was raised and everyone would celebrate.  Kickstarter began in 2009.  The idea is to have a platform for an entrepreneur to raise money to back their future or current endeavor.   My discussion on Kickstarter will show how one can raise funds for their future endeavors.

Fees to for Kickstarter

Kickstarter will get a flat 5% of the total money raised through the campaign.  Processing fees on average of 3% and .20 cents for each transaction will go to whomever is processing the payments.   The fees paid to Kickstarter will not be paid until the campaign has reached its goal.  What happens if your campaign does not reach its goal.  This is where Kickstarter gets you in my opinion.  You lose out! Everyone’s money is returned and you have no more than what you started with. 

Processing time of receiving your funds    

It takes 14 days after your campaign is over for your money to be transferred to your account.  You will receive your funds in one transaction.  Of course, your fees will already be deducted, so that is not something you will have to figure out later.

Restrictions

            You are not allowed to give to your own campaign. One aspect of Kickstarter I do not like is that you do not get the funds if you do not reach your goal. I mentioned this earlier and this can do one of a few things.  It can push you to work hard and really promote your idea, you can sit back and wait for people to catch on to your idea, or you may realize that even with hard work, this may not be something you need to pursue.   One can not raise money for charity to donate.  A nonprofit can launch a project, but the funds have to be used towards facilitating the project.   Investments are also not allowed on Kickstarter.  Below is a list of things not allowed on Kickstarter pulled directly from the Kickstarter website.

  1. Any item claiming to diagnose, cure, treat, or prevent an illness or condition (whether via a device, app, book, nutritional supplement, or other means).
  2. Contests, coupons, gambling, and raffles.
  3. Energy food and drinks.
  4. Offensive material (e.g., hate speech, encouraging violence against others, etc).
  5. Offering a genetically modified organism as a reward.
  6. Live animals. Projects cannot include live animals as a reward.
  7. Offering alcohol as a reward.
  8. Offering financial, money-processing, or credit services; financial intermediaries or cash-equivalent instruments; travel services (e.g., vacation packages); phone services (e.g., prepaid phone services, 900 numbers); and business marketing services.
  9. Political fundraising.
  10. Pornographic material.
  11. Projects that promote discrimination, bigotry, or intolerance towards marginalized groups
  12. Projects that share things that already exist, or repackage a previously-created product, without adding anything new or aiming to iterate on the idea in any way.
  13. Resale. All rewards must have been produced or designed by the project or one of its creators — no reselling things from elsewhere.
  14. Drugs, nicotine, tobacco, vaporizers and related paraphernalia.
  15. Weapons, replicas of weapons, and weapon accessories.

Reporting requirement

            Everyone needs to research their own territory to determine what the IRS requires you to report.  This is where it is important to have a good CPA, and do your research before you launch your campaign.  Money received from Kickstarter is considered income, so you will have to report the money.  You are also able to “offset” income with expenses and again, this is where a good CPA and Financial Advisor is beneficial.

Resources

Crowd Start, The Ultimate Guide To a Powerful & profitable Crowdfunding Campaign. Ariel Hyatt.

Kickstarter website; www.kickstarter.com

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