CAREERS AND EDUCATION ISSUE: The ups and downs of entrepreneurship on Kickstarter
Johnny Travis, co-owner of the San Francisco t-shirt brand Fearless and Zealous Everyday (FAZE) Apparel, recently finished a successful Kickstarter campaign. FAZE has operated in San Francisco since 2007 and needed extra funding to make the jump beyond t-shirts to a fall-winter line including jackets and sweaters.
Travis says that, "with our particular project it was mostly family and friends. There were a few people from the Kickstarter community [who'd we'd never met] who donated, but the way we went about promoting the project was all electronic: email, Twitter, Facebook, MySpace, and telling coworkers and friends who would then tell others about the project. Kickstarter made a sort of camaraderie between us and the people who support us."
Travis says that in addition to widening his company's social base Kickstarter provided a way for FAZE to grow without giving up ownership or accruing debt by taking out loans. "Not giving up equity and ownership was really important to us. It's one of the reasons we chose the Kickstarter approach."
But there are significant risks involved in Kickstarter for both for the project owners and its backers. Kickstarter deducts five percent of a successfully funded project's funds, and the payment processor charges an additional three to five percent for credit card processing fees.
Owners often put a month's energy into a campaign only to fall a few hundred dollars short, gaining nothing. A little less than half of Kickstarter's proposed projects meet their needed goals.
"It's a nail biter," says Estrada. "We tried to make sure that we set a realistic goal."
In return for pledges, backers are promised a non-monetary item. Three Babes Bakeshop offered donors slices of pie, gift certificates for pie-in-a-jar up, even dinners for 10 (complete with a delicious dessert, of course). By giving non-monetary rewards the project owners maintain control of their money and avoid paying high-interest loans.
There has been speculation that business owners could have a difficult time fulfilling these reward promises during the initial start-up time after a project is funded. Kickstarter does not guarantee receipt of the rewards, nor does it ensure that projects will be completed once funded.
Like so many online sites it relies on member's own integrity and self-policing to ensure users are reputable. So far complaints have been minimal and the resulting funded projects satisfying for both owners and those who pledge.
"You need to know that what you promise is something you can reasonably follow through with," Lenore said. "If we thought, 'hey, we're just getting free money for our start-up and we don't have to repay anyone' we would be in trouble [as a business] even if we did meet our goal."
Travis agrees, "If you promise something and don't follow through, that just looks bad on you." All in all, he says using the site has been an affirmative experience for his business, giving FAZE the customer connection that defines many success stories.
"I would recommend it to many people, Kickstarter and the other sites like it. Just make sure it fits you and your brand," Travis says. "People have more satisfaction because they're behind something and they're getting a part of it in return. They're the evolution of our business."