Kickstarter

Definition

Kickstarter is a popular crowdfunding platform that enables creators to raise funds for their projects by soliciting small contributions from a large number of people. It serves as a bridge between innovators and potential backers, allowing individuals or teams to pitch their ideas, set funding goals, and offer rewards to supporters. This platform democratizes access to capital, especially for startups and creative projects that may not have traditional financing options.

5 Must Know Facts For Your Next Test

1. Kickstarter was launched in 2009 and has since helped fund over 200,000 projects across various categories including technology, art, design, and film.
2. The platform operates on an all-or-nothing funding model, meaning that projects only receive funds if they meet their specified funding goals within a set timeframe.
3. Creators can set different reward tiers for backers, incentivizing higher contributions with unique perks or early access to the finished product.
4. Kickstarter has a community-oriented approach, allowing backers to connect with creators and follow the progress of the funded projects.
5. The platform takes a 5% fee from successfully funded projects, which helps maintain its operations and service offerings.

Review Questions

• How does Kickstarter's all-or-nothing funding model impact the behavior of creators and backers?
  • Kickstarter's all-or-nothing funding model encourages creators to carefully plan their campaigns and set realistic funding goals. This approach creates urgency among backers since they know their contributions will only be charged if the project meets its goal. It also fosters a sense of community as backers feel they are part of a collective effort to bring a project to life, motivating them to share the campaign and attract more supporters.
• Discuss the advantages and disadvantages of using Kickstarter compared to traditional financing methods for startups.
  • Using Kickstarter offers startups advantages such as access to capital without giving up equity or taking on debt. It also provides valuable market validation and feedback before launching products. However, disadvantages include the intense competition for attention on the platform and the time-consuming nature of running a successful campaign. Moreover, if a project fails to reach its funding goal, it can be disheartening for creators who may lose momentum in their ventures.
• Evaluate the long-term implications of crowdfunding platforms like Kickstarter on traditional venture capital investment models.
  • Crowdfunding platforms like Kickstarter are reshaping the landscape of startup financing by democratizing access to capital and enabling entrepreneurs to test ideas with direct consumer engagement. This shift challenges traditional venture capital investment models, which often rely on large sums from a few investors. As more creators successfully fund projects through crowdfunding, there may be less reliance on venture capitalists for initial funding stages. This evolution could lead to a more diverse range of projects receiving support while also pushing traditional investors to adapt by incorporating crowdfunding strategies into their investment processes.

Related terms

Crowdfunding: A method of raising capital where funds are collected from a large number of people, typically via the internet, to support a project or venture.

Reward-based funding: A crowdfunding model where backers receive non-financial rewards, such as products or services, in exchange for their financial contributions.

Equity crowdfunding: A form of crowdfunding that allows investors to purchase shares in a company, providing them with equity ownership and potential financial returns.