Kickstarter Funding Grows By 70% In Just 3 Months

The last time Kickstarter trumpeted its numbers was when it revealed stats through the end of 2011, by which time it had received more than $100 million in pledges for the various projects hosted on its site. Now, just three short months later, total pledge value has skyrocketed, growing by 70 percent to $170 million, the company told BetaKit.

A lot of that growth is due to the specific efforts of a few noteworthy projects, including the record-smashing funding drive by Tim Schafer’s Double Fine studios to help them pay for the development of their next game. Schafer, the creator of a variety of much-beloved video game titles and franchises including The Secret of Monkey Island and the more recent Brütal Legend, opted to go to Kickstarter. The use of the site ensures creative control rests with Schafer, and he and Double Fine initially sold the idea to potential backers as a way for gamers to not only have a look at, but also be actively involved in the game development process.

Double Fine’s success is a perfect example of what Kickstarter’s Justin Kazmark says is the way the Kickstarter model can be useful for startups – not as a general funding tool, but as a way to demo and fund specific creative works. “We’re still very much a funding platform for creative projects — meaning you can come to the site to fund a specific creative work with clearly defined goals and expectations, but you couldn’t come to the site to launch a business,” Kazmark said. “Certainly, there have been entrepreneurial people and businesses (like Double Fine) that have launched projects to create specific creative works, but we wouldn’t allow someone to launch a project to find seed capital for their ‘startup.’”

Even so, Kickstarter has helped launch some successful startups, like Scott Wilson’s LunaTik, which produces the LunaTik and TikTok line of iPod nano watchband accessories. The original LunaTik Kickstarter project broke records for the site back in 2010, and the accessories eventually made their way to Apple Store shelves. Late last year, Wilson decided to go back to the Kickstarter well to fund another project, the LunaTik Touch Pen, which also easily exceeded its funding goals.

Independent comics creator and small business owner Rich Burlew, whose project to fund a reprint of one of his The Order of the Stick comics collections recently raised $1,254,120 (far in excess of the original $57,750 goal), says the idea is great for startups and small businesses because it alleviates risk – for entrepreneurs and investors alike.

“What really attracted me to Kickstarter was its all-or-nothing philosophy, and the way that minimized the risks for my business,” Burlew said in an interview. “I liked that if I only reached, say, half my goal, I wasn’t on the hook to print the books at a loss for those people who had pledged. The whole thing would be called off automatically, and I wouldn’t have to worry about a lot of refunds. It gave me the freedom to just sort of throw it out there and see what response I got.”

Kickstarter provided the benefit of acting not only as a funding mechanism, but also as a sort of rudimentary focus group. “I went into thinking that either I was going to get my books reprinted, or I was going to have something tangible to point to when people asked me why I hadn’t reprinted the books—so either way, I came out ahead,” Burlew explained.

The site isn’t without its downsides. Though relatively uncommon, there have been projects that have gone south, resulting in backers who are either stuck waiting for their product for a long time, or who are ultimately disappointed in the product that results from the project. The Cregle iPen, for instance, was plagued by delays because it had to pass Apple’s MFI program for approving accessories designed to work with the iPad, and once it did eventually ship, users were disappointed in its performance, prompting a response from the backer’s creators that promised improvements in the next version. Long story short, while there may be less risk for investors via Kickstarter since funding only goes through if a project is successful, sometimes projections and expectations still don’t match up with reality.

Some have suggested that a way to limit the effect of this kind of shortfall would be to cut off Kickstarter funding once a project reaches its goal – project creators have set their goals according to their needs, after all, and anything above that is arguably gravy (though many project creators do go out of their way to add more to rewards/projects depending on how much additional money they raise beyond their goals).

For now, though, there’s no real incentive for Kickstarter to cap project funding limits. The site takes a five percent cut of all money raised, meaning that for the more than $170 million its raised so far, it has brought in over $8,500,000 in revenue. And though there are exceptions, people seem overall to be happy with their Kickstarter experience, as the site’s growth trajectory indicates. With just shy of 20,000 successfully projects, including roughly 10 percent of the films showing at Sundance this year, it looks like Kickstarter is here to stay – which could be very good news for product-focused startups growing tired of demo days, road shows and VC pitches.

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