Kickstarter makes money by taking 5% of the total amount of money that is funded on the site. It uses this money to turn a profit that pays for the costs of running the site, including advertisem*nt and employee payment. Those who use Kickstarter to raise money earn their profits differently, however.
Those who want to be funded get a group of backers to donate to their project and then promise the backers with an incentive or reward. They may choose to repay backers with interest, a portion of the company they are creating, or even free products. The creative person or group will set an amount needed to fund the idea and then wait for the backers to meet the quota.
The Risks
This type of system comes with risks for the backers and creative minds behind the proposals as well. The backers may have someone take their money to do as they wish, and they aren’t guaranteed they will get the money back. The creative parties may find that they need more money than was initially projected, and despite receiving the funds they asked for, they have unfinished projects or plans, and aren’t able to refund their backers' investments.
How Payments Are Collected
Kickstarter collects the payments entered by the backers through Amazon, and it takes its cut as soon as the goal for funds has been met. This is a great site for those with a talent or idea that needs funding to make the vision a reality, and it's attracted more than a few creative individuals over the years; more than 180,000 projects have been funded since the site launched in 2009.
As a seasoned enthusiast with a deep understanding of crowdfunding platforms and financial models, I can confidently delve into the mechanics of Kickstarter, shedding light on both its revenue model and the intricacies of how users navigate the platform to bring their creative projects to life.
Kickstarter operates on a unique business model, sustaining itself by taking a 5% cut from the total funds raised on the platform. This revenue-generating strategy enables Kickstarter to cover its operational expenses, encompassing the costs associated with site maintenance, advertising efforts, and compensating its employees. My knowledge extends beyond the surface, allowing me to underscore the critical role of such funding mechanisms in fostering creativity and innovation.
On the flip side, those seeking funding on Kickstarter employ a distinct approach to monetize their ventures. Entrepreneurs, artists, and innovators leverage the platform to connect with a community of backers who contribute financially to their projects. These backers are enticed by a range of incentives or rewards offered by the project creators. The compensation can take various forms, such as interest on the investment, a share in the created company, or even the resulting products for free.
The underlying risks inherent in this crowdfunding model are multifaceted. Backers face the possibility of unscrupulous individuals misusing their funds, with no guarantee of reimbursem*nt. Simultaneously, creative minds may encounter challenges, such as underestimating the required funds or struggling to fulfill promises made to backers despite successfully reaching their funding goals.
One distinctive feature of Kickstarter is its payment collection process. The platform utilizes Amazon to collect payments from backers, and the 5% cut is deducted promptly once the funding goal is achieved. This streamlined system ensures a seamless financial transaction process, contributing to the overall appeal of Kickstarter as a go-to platform for turning creative visions into reality.
Since its inception in 2009, Kickstarter has emerged as a powerhouse in the crowdfunding arena, facilitating the funding of over 180,000 projects. This success is a testament to the platform's effectiveness in connecting creators with a supportive community willing to contribute to the realization of innovative ideas.
In essence, Kickstarter serves as a symbiotic ecosystem where creators find financial support, backers engage in unique investment opportunities, and the platform itself thrives by facilitating these creative collaborations. The interplay of these elements forms the backbone of Kickstarter's enduring success in the dynamic landscape of crowdfunding.
