Business Tools,  Entrepreneurs,  Finance,  Online Business

How Has Kickstarter Changed Startups?

kickstarter-logoIt can be argued that there is no better time than now to be involved in a start-up company. The business world is inundated with stories involving the rags-to-riches rise of a start-up entrepreneur or small business. Facebook started out in a dorm room, cellphone apps have been produced in people’s parents basements, etc. Back in the day, it used to be that a start-up company would have to seek funding from various investors, but now — with the rise of the internet — investment seeking is on a whole different level. Instead of going to certain influence peddlers, now a person can take their idea straight to the people and allow them to pitch in investments and give them something in return.

The company spearheading this endeavor is known as Kickstarter. This website allows anyone to pitch their idea and ask for a certain amount of funding from the public. In this case, the public can be anyone that is willing to pitch in some dough to help the start-up. Now, one project or start-up company can have hundreds- and, in some cases, thousands- of investors, and many of them may have no business experience at all, but are just interested in contributing to an idea for whatever reason.

For example, it has become increasingly popular for musicians to forego the record label process and instead petition the public for the funding to make an album. The band or musician will say that they need $10,000 to produce their album. Then investors will have options as to how much they want to donate to the cause in return for some kind of product. If a person donated $10 to the cause, then they would receive a copy of the album once it is finished, for example. Or, maybe a person will donate $1,000 for the project, and in return will get an autographed copy of the album as well as front row seats to their next concert in the area, as well as backstage passes. The only catch is that if the start-up, or band in this case, does not reach their goal of $10,000, then all of the money that has been donated will go back to the investors without any penalty. If the band does raise enough money for the album, then they get the money after Kickstarter takes a portion of it for their services.

This has obviously changed the whole landscape of the start-up standard operations. You do not need to appeal to the bigwigs any longer, now you just need to appeal to the people. And better yet, you are giving back to the people that help you out. It has, in one sense, become a more democratic way of starting a business. It is almost as if everyone can stake a claim in the company or the project, although they have nothing to do with the actual business practices or manufacturing of the project or product. The risk and financial burdens of a new business are, in a way, alleviated now thanks to sites like Kickstarter.

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Karl Stockton is a valued contributor for CosmoBC's BizBlog and TechBlog.

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