How Does Kickstarter REALLY Make Money? Unmasking the Platform’s Revenue Streams

Kickstarter, the behemoth of crowdfunding platforms, isn’t just a facilitator of dreams. It’s a business. So, how does this engine of creativity fuel its own operations? The answer is surprisingly simple: Kickstarter primarily makes money by charging a 5% fee on successfully funded projects. If a project doesn’t reach its funding goal, no fee is collected. This ‘all-or-nothing’ model is core to their business.

Diving Deeper: The Revenue Model in Detail

That 5% success fee is the lifeblood of Kickstarter. It’s a straightforward approach that aligns the platform’s interests with those of creators: Kickstarter only gets paid when the project succeeds. This incentivizes them to provide resources and support that increase the likelihood of campaigns reaching their targets.

The 5% Success Fee: The Backbone of Kickstarter’s Income

Let’s break it down further. Imagine a creator launches a campaign on Kickstarter with a goal of $10,000. If they reach or exceed that goal, Kickstarter takes a 5% cut, which in this case would be $500. The remaining $9,500 goes to the creator (after payment processing fees, discussed later). If, however, the project only raises $9,999, the creator receives nothing, and Kickstarter earns nothing.

This success-based fee model is what distinguishes Kickstarter from other crowdfunding platforms that may charge upfront fees or collect a percentage regardless of whether a project reaches its goal.

Payment Processing Fees: A Necessary Component

While the 5% success fee is Kickstarter’s main source of revenue, it’s important to acknowledge payment processing fees. These fees aren’t directly revenue for Kickstarter, but they’re a necessary part of facilitating transactions. Kickstarter partners with payment processors like Stripe to handle the actual transfer of funds from backers to creators. These processors charge a fee, typically around 3-5% plus a small per-transaction fee. This fee is deducted from the pledged funds before Kickstarter takes its 5% cut.

Beyond the Basics: Other Potential Revenue Streams

While the 5% success fee and payment processing constitute the core revenue model, there are other, less significant, potential revenue streams. These might include:

• Interest earned on funds held in escrow: During the funding period, the pledged funds are held in an escrow account. While regulations limit how much interest can be earned and retained, it’s a possible source of minor income.
• Partnerships and sponsorships: Kickstarter occasionally partners with brands or organizations for specific campaigns or initiatives. While details of these arrangements are usually confidential, it’s plausible that these partnerships generate revenue through sponsorships or collaborations.
• Data analysis and insights: The platform collects a vast amount of data on crowdfunding trends, project performance, and backer behavior. While Kickstarter doesn’t explicitly sell this raw data, it could potentially offer anonymized insights and analysis to creators or other stakeholders for a fee.
• Affiliate marketing: Kickstarter may participate in affiliate marketing programs, earning commissions on sales generated through links on their platform.

However, it’s crucial to emphasize that these supplementary revenue streams are likely small compared to the core income generated from the 5% success fee. Kickstarter’s primary business is connecting creators with backers and facilitating successful funding campaigns.

Kickstarter’s Focus: More Than Just Profit

It’s important to remember that Kickstarter operates as a Public Benefit Corporation (PBC). This means that while it aims to generate profit, it also has a legally defined mission to benefit society. This mission influences how it operates and prioritizes its investments, often focusing on initiatives that support creators and foster creativity. They dedicate significant resources to platform development, community building, educational resources, and tools for creators. These investments, while not directly revenue-generating, contribute to the overall success of the platform and attract more creators and backers.

Frequently Asked Questions (FAQs) about Kickstarter’s Revenue

Here are some frequently asked questions to provide additional insights into how Kickstarter operates financially:

1. What happens if a project exceeds its funding goal? Does Kickstarter take a higher percentage?

No. Kickstarter’s 5% fee remains the same, regardless of how much a project exceeds its funding goal. This is beneficial for creators, as they retain a larger portion of the overfunding.

2. Are there any hidden fees on Kickstarter?

Generally, no. The 5% success fee and the payment processing fees are the primary costs associated with using Kickstarter. However, creators should also be aware of potential bank transfer fees or international transaction fees, depending on their location and the payment methods used by backers.

3. Does Kickstarter offer any discounts or special deals on its fees?

Generally, no. The 5% success fee is a standard rate applied to all successfully funded projects. There may be exceptions for specific partnerships or initiatives, but these are rare and typically involve pre-arranged agreements.

4. How does Kickstarter handle refunds for unsuccessful projects?

If a project fails to reach its funding goal, all pledges are automatically canceled, and backers are not charged. Kickstarter does not collect any fees in these cases. The backers receive a full refund because the credit cards were never actually charged, only authorized.

5. How does Kickstarter compare to other crowdfunding platforms in terms of fees?

Kickstarter’s 5% fee is generally considered competitive compared to other popular crowdfunding platforms. Some platforms may charge lower success fees but also have additional charges or require creators to meet specific criteria. It’s crucial to carefully compare the terms and conditions of different platforms before choosing one for your project.

6. Does Kickstarter offer any services to help creators increase their chances of success?

Yes. Kickstarter provides a wealth of resources for creators, including guides, tutorials, workshops, and community forums. They also offer project reviews and feedback to help creators refine their campaigns. While these resources are not guaranteed to lead to success, they are designed to empower creators and improve their chances of reaching their funding goals.

7. How transparent is Kickstarter about its financials?

Kickstarter operates as a Public Benefit Corporation (PBC), which requires a degree of transparency about its mission and impact. While they don’t publicly disclose detailed financial statements, they do publish reports on their overall performance and impact, as well as information about their governance and social mission.

8. What are the payment processing fees on Kickstarter?

The payment processing fees typically range from 3-5% plus a small per-transaction fee. These fees are charged by the payment processors (like Stripe) that Kickstarter uses to handle transactions. The specific fees may vary depending on the location of the creator and the payment methods used by backers.

9. Can a creator change their funding goal after launching a Kickstarter campaign?

No. Once a Kickstarter campaign is launched, the funding goal cannot be changed. This is to ensure fairness and transparency for backers. Creators should carefully calculate their funding needs before launching their campaign.

10. What happens if a backer’s payment fails after a project is successfully funded?

Kickstarter has a process for handling failed payments. They will typically attempt to collect the payment multiple times. If the payment ultimately fails, the pledge is canceled, and the creator receives less funding. Kickstarter does not cover the cost of failed payments.

11. Is Kickstarter profitable?

While precise profitability figures are not publicly available due to being a privately held company, Kickstarter has publicly stated that they operate sustainably and generate sufficient revenue to cover their expenses and invest in future development. As a Public Benefit Corporation, their focus extends beyond pure profit maximization.

12. Does Kickstarter charge fees for using their platform to browse and discover projects?

No. Browsing and discovering projects on Kickstarter is completely free for backers. Fees are only charged when a project is successfully funded, and only to the creator.

In conclusion, Kickstarter’s revenue model is built on a foundation of shared success. By charging a 5% fee only on successfully funded projects, they align their interests with those of creators and incentivize themselves to provide a valuable platform that facilitates creative projects. This transparent and straightforward approach has made Kickstarter a leader in the world of crowdfunding.