Heard of Kickstarter.com? Kickstarter is a place where anyone can launch a creative project to raise funding by pre-selling the product to the public and using the funds to actually build the product after the sales. You fill out the “start your project” application through their website and attach a video and project description. Unlike venture capital where the project creator / business owner needs to give up equity in the company to receive funds, kickstarter projects reward the “backers” with the product itself or other gifts. So the money received by the project creator will never need to be returned to the backer. It’s a great way for startups to receive funding, and a new method for backers to purchase cool, emerging products. Win, win.
The Pebble: E-Paper Watch for iPhone and Android project closed on Friday, May 18th with almost $10.3M raised making it the most funded project on Kickstarter to date. Prior to its close, Elevation Dock: The Best Dock for iPhone was the most funded raising just under $1.5M.
Pebble was supported by almost 70,000 backers, and all watches were sold out far in advance of the project close date. Eric Migicovsky, founder of Pebble Technology, and his crew have been routinely updating the Pebble backers, and highlighting news from their production factories which are accountable for Pebble deliveries to be made by September 2012.
KickStarter can change funding for Arizona Startups
Arizona Startups are notorious for not being able to raise capital, but sites like KickStarter can change the game. It’s great for the startup because they get to guage market interest before launching a company. Projects like Pebble show the potential of this site to be used from anywhere in the world to raise money for a project that is unique and interesting.
In 2011, Kickstarter had a 46% project success rate (projects that reached their funding goal before the close date), and the total dollars pledged was just shy of $100M. With over 80,000 visitors to Kickstarter.com each day, and essentially no risk in starting a project, KickStarter should be near the top of the list of funding options for local startup tech companies. YouPag.es (Extreme Pitch 2012 Company) who pitched on becoming the web’s multimedia platform is going live on Kickstarter in the next few days! So…to all AZ tech companies looking for funding, let’s see you on Kickstarter filling up the Technology section!
As for kickstarter, being the platform to which companies raise the money, they clip 5% in fees from the total funded amount (as they do for all successful projects). Amazon (their payments processor) also takes between 3% – 5% from the total.
So for a project like the Pebble, here are how the fees break down:
Kickstarter’s fees: $513,342.25
Amazon’s fees: $308,005.35 – $513,342.25
Pebble Technology’s Net Raised Amount: $9,753,502.75 – $9,958,839.65
But the amazing part is that Pebble was able to raise nearly $10 Million without giving up a single share of stock and THAT is a major game changer.