Ben Bose, founder of Mavens of London, crunches some Kickstarter data to help budding entrepreneurs formulate strategies for successfully raising money on the web’s hottest crowd-funding site.
A head start for a kick start
Crowd funding in general, and Kickstarter in particular, has been very much in the public eye in the last twelve months. High profile projects like the e-paper watch Pebble ($10m+ funding), the videogame Wasteland 2 ($2.9m), and games console Ouya ($6.9m when this article was written) have been part of a success story that has seen Kickstarter’s brand awareness increase fivefold¹, and its website traffic quadruple², since 2011. As the brand launches in the UK, what lessons can potential entrepreneurs learn from their predecessors?
We looked at 27,491 Kickstarter projects, of which 86% met their goals, to try and understand some of the factors that drive success on the platform. The first thing we noticed is that not all categories are equal. In terms of overall amounts pledged, product design, documentaries, video games, music and short films lead the way (all having broken the $10m mark). However, that only tells part of the story; for several of those categories (documentaries, music, and short films), it is the number of projects, not their size that drives their overall success. Looking instead at average project size, we found that product design, video games, technology, open hardware, and board and card games come out top (with an average amount pledged of $24k or higher). Lastly, the really big successes are rare: only seven projects broke the $1m mark (and none had asked for that much), and a total of 137 projects had passed $100k.
What does this mean to the budding entrepreneur? Firstly, Kickstarter is not yet a true alternative to more traditional funding, regardless of the sector. Secondly, funding targets need to be matched to the sector – for technology, that might mean $50k to $100k, while for films $10k to $25k is more realistic. And some sectors might just not be the right place to go for a Kickstarter – poetry, crafts, and conceptual art hover around the $2k to $5k mark.
Making a pledge
Once fundraising goals have been set, the next step is to think about how a pledge structure might work. Data suggests some interesting approaches. On Kickstarter it seems that leveraging a relatively small number of consumers is key to maximising value. By value (that is, the number of backers at each level, multiplied by the value of the pledge level), the $10k, $5k, and $1k levels are the most valuable – in fact, these made up 48% of the total amounts pledged. The remaining key pledge levels, covering around 80% of total observed value, were $500, $2,500, $2k, $3k, $1,500, $250, and $100. Getting your rewards right at each of these levels will be key to delivering significant pledges.
Alongside this, understanding the potential numbers of people willing to pay is also important – as is getting as much attention as is possible. Large numbers of pledges are rare – games developer Double Fine currently holds the record with 87,142 but only another 12 projects broke the 10,000-pledges mark. Category plays a part: video games seem to do better than most, with average pledgers per project of 1,556 being twice that of product design, the next best. Outside of those categories, a few hundred backers seems to be par for the course – and areas like photography, poetry, and theatre all average in mid-double-digits.
To maximise the chances of success, an entrepreneur either needs to use their existing audience, or the mainstream media, to bring their project to broader attention. For the projects we examined, Facebook sharing seemed to be a good mechanism for this (rather than Likes or tweets). Project updates also seem to help. The top ten projects by pledged amount average 22 updates; the top 100 have 18.
No examination of Kickstarter would be complete without noting a few of the projects that have bucked trends. The documentary Inside the World of Stenography raised $15,151 from just nine backers, an average of $1,683 per person. The Order of the Stick comic books made $1.2m after asking for just $57k, 12 times as much as the next most successful comic project, and over 100 times that category’s average. $781k was raised for a board game about zombies, $291k for men’s underwear, and $257k for vertical food gardens.
But here’s cautionary note to end on: be careful about financial and logistic planning. Both Kickstarter and Amazon will take a cut of the final funds³ raised (8-10% total), and fulfilling pledges can also be costly, in terms of both time and money.
Ben Bose is founder of Mavens of London, a digital research, measurement and strategy agency.