How Kickstarter Makes Money: A Comprehensive Revenue Model

Understanding how crowdfunding platforms like Kickstarter operate and generate revenue is crucial for both creators and potential backers. In this article, we will delve into the primary and secondary revenue streams generated by Kickstarter, ensuring a clear and detailed guide for those interested in crowdfunding.

Primary Revenue Streams: Platform Fees and Payment Processing Fees

Kickstarter’s primary sources of revenue are platform fees and payment processing fees. These fees are directly tied to the success of the projects hosted on its platform. Here’s a detailed look into each:

1. Platform Fee

Kickstarter charges a 5% platform fee from the total funds raised by a successful project. This fee is applied only if the project meets or exceeds its funding goal. This incentive structure encourages creators to set realistic and achievable funding targets, ensuring both financial security and project success.

Example: If a project raises $10,000 and meets its funding goal, Kickstarter will take $500 (5% of $10,000) as a platform fee.

2. Payment Processing Fees

In addition to the platform fee, Kickstarter also charges payment processing fees, which typically range from 3% to 5% of the total funds raised. These fees cover the cost of processing credit card transactions and are charged by third-party payment processors such as Stripe. Creators must consider these fees when calculating their campaign budgets.

Example: If a project raises $10,000 and a 4% processing fee is applied, the platform would take an additional $400 (4% of $10,000) for processing.

Secondary Revenue Streams: Optional Services

While platform fees and payment processing fees form the bulk of Kickstarter’s revenue, the platform may also offer additional services that can incur additional costs. These optional services may include marketing, distribution, and customer support. However, these services are less commonly utilized and not a major revenue driver.

Optimal Fundraising Strategy

To maximize chances of success, creators often consider raising funds on multiple platforms simultaneously. According to expert advice, launching campaigns on platforms such as Kickstarter, Upstoter, Mkfundhub, GoFundMe, and Indiegogo can significantly increase the likelihood of securing donations. The strategy of creating parallel campaigns allows creators to reach a broader audience and maximize their fundraising potential.

Benefits: Increased visibility, broader audience reach, and higher chances of meeting or exceeding funding goals.

Historical and Future Revenue Prospects

According to reports from 2019, Kickstarter has helped entrepreneurs raise approximately $4 billion since its inception. This means that over the past 10 years, Kickstarter has generated around $200 million in revenue, calculated as 5% fees on $4 billion in successful campaigns.

Their commitment to public benefit, as declared by Kickstarter’s designation as a Public Benefit Corporation (PBC), ensures that the platform prioritizes the benefits for creators and the greater good. However, the 5% fee from successful campaigns remains a significant revenue generator for the platform.

Conclusion

Kickstarter’s revenue model is designed to be both fair and incentive-driven. By charging a platform fee and payment processing fees, the platform ensures that both creators and backers remain engaged and satisfied. The inclusion of optional services further enhances the platform, though these are not a primary source of revenue.

Creating a successful crowdfunding campaign on Kickstarter involves understanding the fees and taking a comprehensive approach to fundraising. By considering multiple platforms and understanding the revenue streams, creators can maximize their chances of success and achieve their funding goals.

Key Takeaways:

Primary sources of revenue include platform fees and payment processing fees. Platform fees are 5% of successful campaigns. Payment processing fees typically range from 3% to 5%. Opting for parallel campaigns on multiple platforms can enhance fundraising success.

For creators looking to achieve their funding goals, understanding Kickstarter’s revenue model and strategies can be immensely valuable.