And we made it! It’s a bit surreal that we hit our goal since we were still just over halfway there going into last weekend, but thanks to all our supporters, a few angel high reward investors, and a great push from all our friends/family, we were able to make our goal! Wooohaaaa!!!!!!!
With the $8800 target, we hit $9733 in the end, and after Kickstarter took their 5% share and Amazon Payments took their 3.19% (up to 5% depending on types of pledges you get), we ended up with $8935, before taxes. From what I understand with discussions with my accountant though, is that while this is technically considered income, we balance against the capital equipment we will need to purchase for the business, depreciated over multiple years. And since LLCs have to pay quarterly taxes, it means we plan to do some shopping this quarter! What will we do with the extra? We’re likely to upgrade our trailer to make the height adjustable and more ergonomic so that we don’t have to bend over/crouch down to look into the oven and watch to ensure the pies don’t burn.
A percentage geek and out of just plain old curiosity for potentially future Kickstarter planning, I did a percentage calculation to see where our funding came from (in dollars) broken down into three tiers: Close friends and family, friends/acquaintances, complete strangers.
Family/Close Friends 57.90%
Complete Strangers 13.39%
In terms of funding came from (just source wise, not dollars), we had the following stats:
Family/Close Friends 21.15%
Complete Strangers 35.58%
While this our first Kickstarter, and we’re a very local concept (really, not much point in someone from LA or NY investing unless they like our concept and want to support us, since they won’t be able to eat pies unless they’re visiting!), we were just happy to hit our goal! Since the beginning of pushing out the Kickstarter, I’ve always looked at the stats with some mixed feelings… the idea of crowd source funding is not only to help get funds to start the business, but also to get the word out to strangers and folks you don’t normally have access to and build a fanbase around the business as well. Since a good chunk of the funding came from close friends and family, the mixed emotions comes from the 10% cut that KS and Amazon takes from their pledges… I’m a firm believer in cutting out the middle man whenever possible, especially with family. The question we always received from close friends/family was whether we would prefer to get the support outside of Kickstarter or in it, since KS/Amazon payments takes up to 10% of funds. While we continued to be low, I consistently told everyone to contribute through KS, for two reasons:
1. It will help us reach our goal and get access to the funds overall.
2. It legitimizes the process of us pursuing the business, and looks far better than us going to our family and friends holding out our money and just asking for monetary support.
The key is the 2nd reason really… Even in family/friends situations, it’s typically far better to legitimize the fact we’re pursuing a business through KS and demonstrates that we’ve taken the time to set up a KS, plan our business, etc. rather than asking for money and having them doubt whether you’ll actually use the money for intended purposes. KS was definitely the way to go… a 10% loss, but a small price to pay to maintain trust and sanity with those relationships.
I’d by lying to you if I told you that things have been crazy hectic since then… ever since we were within $1500 of the kickstarter, things were starting to get crazy as I started to sign up for food manager safety training classes, putting in the order for the oven and trailer, and finding food liability insurance. To be honest, we had discussed the “what if you’re close” situation around Kickstarter funds and at what level we’d want to fund the rest just to have access to the capital. After all, with the pledges that came in, a good percentage of them we would likely not be able to access again if the Kickstarter failed and we decided to do this without the process. I firmly believe a lot of KS projects have this approach, based especially on how so many projects end with just over 100% funding (the overage is likely backers who waited for the last minute to pledge). In fact, I wondered sometimes if KS would end up funding some of the projects just to improve their own financial situation… take our project as an example: if we were at $8600 with one hour to go, I would imagine the owners of KS would think about chipping in the $200. From an economic standpoint, the success of our project would allow KS to earn $440 (5% of $8800), so what’s $200 when you get make $240 of net profit? Interesting right?
Finally, after our successful funding, I had received a few messages from folks who just kicked off their own KS asking about tips on being successful. Here’s my thoughts: there are two types of projects on KS, those that are “feel good” charity style projects that people want to fund out of the kindness of their hearts, and “product” style projects where people want to fund for various reason – to be one of the first to have the item being produced or to have access to a great discount (think Groupon) through the KS. Our project, while focused on using local ingredients and focused on sustainability, fell more squarely in the 2nd category for most people. This meant that we needed to provide a good value for those folks that weren’t going to fund us just out of the kindness of their hearts. Perhaps one of the first lessons I learned from researching hundreds of successful vs. unsuccessful kickstarters is that while the KS community is great, just like any person, they want to get a deal on whatever you’re offering since their reward is delayed compared to a typical consumer and the risk is far higher. (What if you never succeed with your KS? You technically have no obligation to fulfill rewards… but could face individual lawsuits from pledges). Unless you’re a charity/feel good project that just tugs on the heart strings of everyone, you’ll need to create a tier of rewards that appropriately gives your pledges a deal that appeals to their sense of value. At it’s simplest, if I plan to charge $7 for a margherita pie at market, no one from the value perspective is going to want to pledge $8 to help us start our business… they can just wait for the success (or failure) of the market and buy the pie for $7! This impacts the decision of all the “complete strangers” category above, and likely around 50% of the “friends/acquaintances” category as well. Moral of the story: If you want your KS to succeed, plan your reward tiers carefully.
So while our KS success isn’t a flagship for success, here’s the few lessons I’d suggest you consider if you decide to go the KS route:
1. Figure out your minimum that you need for your goal/operations, and plan in a 10% take from Amazon/KS.
2. Unless your project is impactful on a nationwide perspective (a product that can be shipped and has mass appeal), expect a large percentage of the funding to come from your close friends/family.
3. Be okay with funding coming from close friends/family through KS. It shows that you’re really pursuing the project, as opposed to just asking for a handout.
4. Plan your “what if” situations in advance, especially around at what point you may just want to ask your spouse or partner(s) to pony up the rest and cover the gap for the close of KS. Assuming you made the decision from a financially sound standpoint, stick to the decision and don’t waiver, and be sure to wait until the last day to close the gap if appropriate.
5. Really think out your project and decide which category it may fall into… and then plan your reward tiers appropriately. Bad tier rewards = no support from your average joe on KS, and can easily be the cause of your failed project on KS.
Alright, time to go plant some grass in our front yard, get a workout in to stay sane, and make some pies for lunch. And in other exciting news, the oven is scheduled to arrive in separate pieces on Tuesday! It’s like Xmas in spring! (Except it was literally snowing in the Midwest last Friday still!) I can’t wait to start curing this bad boy… pics to follow!