Recently, many companies and products that funded by kickstarter community has failed. There are a lot of reasons for that, but I am going to explain the main reason for that is happening.
What is kickstarter?
Kickstarter is a funding site which is aiming for independent designers and those who has an idea but no money, to be funded. The type of projects has many variations, from projects that are just idea and the projects that are finished but can’t be distributed because of financial situations.
How does it works?
Founder of the project creates a kickstarter page for his/her project, where he/she explains the project, tells the community how it will be done, and status of project. Page also contains how much money needed and how much money donated. If aimed money can be raised, money goes to developer, if it couldn’t it won’t. Also there is a rewarding system for donators. If someone donates certain amount of money, they will get the product when it’s done.
What is wrong with it?
The reason companies and products can’t survive when they land on market is because of kickstarter’s pre-pay system. Usually when developer raises money, they hire some people so they can develop a better product faster. They set up a company. Hire more people, rent an office, make deals, hire more people. Remember when I told you there is a rewarding system? Yeah, that is the problem here. People give money to developers, and they expect product in return. But until the company finishes product, they are going bankruptcy already. They are spending the money that isn’t their own. Kickstarter’s system is like a loan. When companies will send their products to users, the profit margin that is left from whole money won’t be enough to survive, so they will take more loan from someone else or bank. And to pay that loan they have to sell more product. So this cycle usually doesn’t happen. Usually companies reschedule landing constantly and then end the project.
But There İs One More Problem
The other problem is, when a project is just about an idea, it may be impossible or so hard to accomplish. So, sometimes developer realizes that they can never be able to do what they have promised, they reschedule landing over and over again. And then they dissappear.
So this was the first chapter of “TechShorts” and I hope you enjoyed it. See you next time.