How could Kickstarter be improved?

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The relatively new phenomenon of crowdfunding began its triumphal march in 2003 with the ArtistShare platform. In the years 2008 and 2009, the now decisive platforms Indiegogo and Kickstarter were finally established. Both crowdfunding platforms offer the opportunity to put innovative products or ideas into practice with the help of crowd financing.

However, crowdfunding is by no means the same as online shopping - because there are a number of risks involved in "buying" products on Kickstarter and Indiegogo. Therefore, you should make a few considerations before making the transfer. We took a look at both crowdfunding platforms and tell you what to look out for.

How Kickstarter works

Kickstarter is widely regarded as the most successful crowdfunding platform. Here you will find numerous products that no other website - let alone a Brick & Mortar store - has on offer. When you first visit Kickstarter, you could get the impression that the process is the same as on Amazon, Ebay and Co. - but that's not the case. On the contrary. In the case of Kickstarter, however, it usually doesn't take too long until the eye has identified the first interesting product - regardless of whether it's the smallest bicycle smartlock in the world, a Japanese cat Bible or a new confectionery in the neighborhood. However, before you invest, here are some things to look out for:

  • What amount is spent as a campaign goal?

  • What is the current status of target achievement?

  • How much time is there until the end of the campaign?

After all, all products on Kickstarter are still in the development phase: You are not buying a finished product here, but are investing in the implementation of a product idea. While this is a good way to find new, interesting and innovative products, it also carries some risks from an investor's point of view.

Kickstarter - shopping with risks

The most common adversities you can expect when investing in a Kickstarter project are:

  • consistently disappointing end products (e.g. due to unforeseen changes in the production process)

  • Products that are not implemented despite the achievement of objectives (for example because the company is already bankrupt or other problems arise)

A prominent example that combines both failures is the ZANO drone. The project generated a total of three million dollars in investment - the creators, however, were not able to produce a working product before the mountain of debt grew immeasurably. A few investors received drones, but their usability was not that good. The majority of investors came away empty-handed:

As The Guardian reports, the percentage of project failures on Kickstarter is around nine percent. Conversely, this would mean that 91 percent of all projects make it onto the market. Not a bad cut - until you take the end consumer perspective: How tempting would be a probability of 1 in 10 that the product you have ordered and paid for will ever reach you? And even when it arrives: In times of next and same day delivery you have to be prepared for the fact that it can take several days or even months before you can hold your object of desire in your hands.

A reimbursement of investments is also not provided at Kickstarter - at least not on the part of the platform itself. The transactions take place directly between the investor and the provider. The respective providers alone decide whether payments already made can be (partially) refunded. Projects that take longer than advertised are not uncommon - but not a reason for a refund. Only if a project does not achieve its financing goal will your account not be debited in the first place - the providers are not allowed to use capital from ongoing campaigns.

How Indiegogo works

As with Kickstarter, Indiegogo is also about swarm financing for new, innovative products. Another similarity to the main crowdfunding competition is that you do not purchase finished products through Indiegogo, but invest in ambitious projects. In return, you (ideally) get the product yourself - and depending on how much you invest, special, project-specific benefits. Compared to Kickstarter, Indiegogo covers an even broader product and project portfolio. Here you will find, for example, the smallest mobile color printer in the world, massage guns, comics, music projects or special coffee machines.

In the case of Indiegogo, too, you should consider the following aspects of interesting products or projects:

  • What amount is spent as a campaign goal?

  • What is the current status of target achievement?

  • How much time is there until the end of the campaign?

In addition, Indiegogo differentiates between flexible and rigid financing: With a flexible financing goal, if this goal is not achieved, all investments made up to that point will still flow into the project. The fixed financing model, on the other hand, returns all funds to the investors if the financing target is not achieved. This is an important point, because if the financing target is flexible and not achieved at the same time, the chances of a market launch or realization of the product or project decrease considerably.

Indiegogo - not without crowdfunding risks

Indiegogo also refuses to take action itself to initiate refunds. However, there are also exceptions to this crowdfunding platform - insofar as:

  • the investment amount has not yet been paid out to the campaign owner,

  • the campaign has not yet ended,

  • and the product is not yet in the delivery phase.

So if you change your mind while a campaign is still running, Indiegogo has the option of a refund. You would then have to enter into individual negotiations with the owner of the campaign on the matter. However, if the production process is already underway, the chances of success in these negotiations are reduced to a minimum.

Kickstarter vs. Indiegogo - what now?

The differences for investors are - apart from the financing options on Indiegogo - very limited. On the supplier side, the whole thing looks different. For anyone planning their own crowd finance campaign, the following list of the key differences between Kickstarter and Indiegogo will certainly be helpful:

Kickstarter:

  • Your own crowdfunding campaigns can be created in various countries - including Germany;

  • All campaigns are checked before activation;

  • Fees: 3% to 5% processing fee and 5% of the campaign goal actually achieved;

Indiegogo:

  • Available internationally;

  • No review of campaigns;

  • Flexible financing option;

  • Fees: 4% for campaigns with target achievement, 9% for non-achievement;

Finally, anyone who would like to participate in innovations here should know that the platforms for crowd finance also have to contend with criticism:

This post is based in part on an article from our UK sister publication TechAdvisor (fm).