EcommerceBytes-Update, Number 325 - December 16, 2012 - ISSN 1528-6703     4 of 7

Using Kickstarter to Raise Funds or Invest in the Next Big Thing

By Mark O'Neill

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Are you the 2012 version of Professor Honeydew with your own amazing invention idea that you are convinced will sell well online, but you just don't have the funds? Or maybe you are an investor with some money to spare, looking for the "Next Big Thing"? If so, then the website Kickstarter is designed to come to the rescue, and so far, it is making a huge impact, both online and offline.

In case you are unfamiliar with the concept, Kickstarter provides a platform for people to present their ideas and ask other people to invest. In return for investing, the owner of the idea offers benefits and perks. This can range from a simple thank you, all the way up to a copy of the actual item, along with other gifts. However, the catch is that the person seeking investment has to state up-front how much they want in investment money and if, at the end of the listing, they haven't reached that amount, then the project is deemed to have failed, and the investors pay nothing. It's an "all or nothing" kind of system.

If the person states at the start of the listing that they want $5,000 and at the end, they only get $2,000, they can't say "OK, I'll make do with that." It's a bit like gambling at the roulette table in Las Vegas. You name your figure, take the chance and you either walk away with everything or you walk away with nothing. It's your call. Winner takes all.

This explains why Kickstarter is so popular, and why projects that normally wouldn't receive investor funding via the usual channels are getting funded. It's forcing traditional investment brokers and firms to re-evaluate how they do business. The Next Big Idea could very well come through Kickstarter because, instead of one venture capital firm putting up all the money in what could be a risky investment, it could instead be funded by say 500 investors who are willing to invest smaller sums.

If you want to get involved in some great Internet projects, such as a computer game which shows a lot of promise, or if you want to see a cool new piece of software come to life, Kickstarter is the place to look. Investments can be as low as $5 (the person seeking investment sets the different investment amounts, with perks to match), so anyone can really take part in the investment game and have the satisfaction of seeing unique, off-the-wall esoteric projects come to life.

On the flip-side of the coin, if you are someone who wants their great idea funded, Kickstarter is a great place to try. Maybe you have a great business idea that needs up-front investment money? Or perhaps you are crazy to see your computer game vision come to life? Then use Kickstarter to see if anyone bites. All you need to do is make a convincing pitch. Videos are your best bet, images a close second.

As with any other presentation, make it as professional as possible. Appearances are everything, and no-one is going to give you money if you pitch them wearing your pajamas.

On a final note, before you go all Kickstarter-crazy, you might want to contemplate this recent article from Wired that details projects that got over-funded and led to big headaches for the project owners. In other words, beware of getting too much money and too many investors. Otherwise you might end up with more than you bargained for with cost overruns and irate investors.

Be cautious, be realistic and be communicative. Then your Kickstarter experience will hopefully be a positive one.


About the author:

Mark O'Neill is Managing Editor of the popular tech blog, MakeUseOf.com. He is a Scotsman, now living the ex-pat life in Wurzburg, Germany. You can also find him on MarkO'Neill.org.


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