Kickstarter

Definition

Kickstarter is a crowdfunding platform that allows individuals and businesses to raise funds for creative projects and new ventures. It provides a way for entrepreneurs and innovators to connect with a community of backers who can financially support their ideas and bring them to life.

5 Must Know Facts For Your Next Test

1. Kickstarter operates on an all-or-nothing funding model, where projects must reach their funding goal within a set time frame or no money is collected.
2. Successful Kickstarter campaigns often offer backers exclusive rewards or early access to the product or service being developed.
3. Kickstarter is particularly popular among creative and innovative projects, such as new technology, design, and art-related ventures.
4. Entrepreneurs can use Kickstarter to validate their ideas, build a customer base, and generate initial funding for their new ventures.
5. Kickstarter has been used to fund a wide range of projects, from independent films and music albums to consumer electronics and new product designs.

Review Questions

• Explain how Kickstarter's crowdfunding model differs from traditional venture financing methods.
  • Kickstarter's crowdfunding model differs from traditional venture financing in several key ways. Instead of seeking funding from a small number of investors, such as angel investors or venture capitalists, Kickstarter allows entrepreneurs to raise funds from a large community of backers, often in the form of smaller individual contributions. This democratizes the funding process and enables innovators to bypass traditional gatekeepers. Additionally, Kickstarter operates on an all-or-nothing funding model, where projects must reach their goal within a set time frame to receive any of the pledged funds, unlike traditional financing where funds are typically disbursed regardless of the final amount raised.
• Describe how Kickstarter can help validate and build a customer base for new ventures.
  • Kickstarter provides a unique opportunity for entrepreneurs to validate their ideas and build a customer base for their new ventures. By launching a crowdfunding campaign, entrepreneurs can gauge the level of interest and demand for their product or service, as well as identify their target market. Successful Kickstarter campaigns often result in a community of engaged backers who become early adopters and brand advocates, providing valuable feedback and support for the venture's development. This can help entrepreneurs refine their offerings, build brand awareness, and establish a loyal customer base even before the product or service is fully launched.
• Analyze the potential benefits and challenges of using Kickstarter for new venture financing compared to traditional sources of funding.
  • The use of Kickstarter for new venture financing offers both potential benefits and challenges compared to traditional funding sources. On the positive side, Kickstarter allows entrepreneurs to tap into a large pool of individual backers, democratizing the funding process and potentially reducing the reliance on a small number of investors. This can also help validate the market demand for the venture and build a customer base early on. However, the all-or-nothing funding model and the need to create compelling rewards and marketing campaigns can present significant challenges for entrepreneurs. Additionally, the success of a Kickstarter campaign is not guaranteed, and failing to reach the funding goal can be a setback for the new venture. Ultimately, the decision to use Kickstarter or pursue traditional financing methods should be carefully evaluated based on the specific needs and circumstances of the new venture.

Related terms

Crowdfunding:

The practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the internet.

Backer: An individual who financially supports a project or venture on a crowdfunding platform like Kickstarter.

Rewards-based Crowdfunding: A type of crowdfunding where backers receive tangible rewards or products in exchange for their financial contributions.