Kickstarter has revolutionized the way people and entrepreneurs bring their creative visions to life. It is a crowdfunding platform meant to empower creative innovators to seek financial support from a global community of backers. Creators can raise funds for projects through Kickstarter, ranging from innovative gadgets and artistic endeavors to groundbreaking inventions and social initiatives.

The significance of Kickstarter lies in its ability to connect creators with a passionate audience willing to invest in their ideas. This platform offers an opportunity to secure the funding necessary to turn dreams into reality, all while fostering a sense of community and engagement.

However, the journey from concept to completion on Kickstarter is filled with challenges and complexities. Entrepreneurs must navigate a labyrinth of legal and financial considerations that can significantly impact the success of their campaigns and the realization of their projects. From intellectual property protection and tax implications to fulfillment logistics and potential legal disputes, there are several factors that every Kickstarter creator must understand and manage effectively.

In this comprehensive guide, we will explore the multifaceted world of Kickstarter, its benefits as a crowdfunding platform and the legal and financial intricacies that creators must be well-versed in.

Legal considerations for Kickstarter creators

Launching a Kickstarter campaign can be exciting, but creators are advised to go through the legal requirements of crowdfunding on Kickstarter to ensure a smooth and successful campaign. The following are critical legal considerations that Kickstarter creators should be aware of:

1. Clear and concise project description

A well-crafted project description is the cornerstone of a successful Kickstarter campaign. This communicates your project’s vision and sets clear expectations for backers. Here’s why it’s important:

  • Offers transparency: Transparency builds trust with your backers. Ensure that your project description is accurate and represents your product or service, including features, benefits, and potential risks.
  • Avoids misrepresentation: Misleading backers with exaggerated claims or false information can lead to legal troubles that may damage your reputation. Be honest and transparent about your project’s status and limitations.

2. Clear terms and conditions

Defining clear terms and conditions for your campaign is essential to protect both you and your backers. These terms should include:

  • Shipping and delivery: State your plans for shipping, delivery times, and potential delays. Explain how you’ll handle refunds or replacements in case of issues.
  • Risks and challenges: Disclose potential risks or challenges associated with your project. Being upfront about these matters demonstrates transparency and can help manage backer expectations.

3. Compliance with laws and regulations

Kickstarter creators must adhere to a wide range of laws and regulations. Some key areas to focus on include:

  • Intellectual property laws: Ensure that your project does not infringe on any patents, trademarks, copyrights, or other intellectual property rights. This includes using original content or obtaining the necessary licenses for any third-party materials.
  • Consumer protection laws: Comply with consumer protection laws that govern product advertising and sales. Be honest in your product’s representation, pricing, and availability.
  • Taxation: Understand the tax implications of your campaign, both on the revenue you generate and the rewards you offer to backers. Consult a tax professional to navigate this complex area.

4. Legal review of your campaign

Before launching your Kickstarter campaign, involve a lawyer who specializes in crowdfunding and business law. They can provide valuable guidance on the legal aspects of your campaign, including reviewing your project description, terms and conditions, and compliance with applicable laws.

  • Risk mitigation: A lawyer can help you identify and mitigate legal risks associated with your project, potentially saving you from costly legal disputes down the road.
  • Contractual agreements: Legal experts can also draft or review any contracts or agreements with suppliers, manufacturers, or collaborators to ensure they protect your interests.

Kickstarter creators must prioritize legal considerations to protect themselves and build trust with their backers.

Financial considerations for Kickstarter creators

 In Kickstarter campaigns, managing your finances is an important aspect of securing the success and sustainability of your project. The following are various financial considerations that Kickstarter creators should find helpful:

1. Setting a realistic funding goal

One of the most fundamental financial decisions you’ll make as a Kickstarter creator is setting a funding goal for your campaign. It’s essential to strike a balance between what you need and what you think you can realistically raise. Here’s why it’s crucial:

  • Builds transparency and trust: Backers appreciate transparency. Setting an achievable funding goal and explaining how the funds will be used fosters trust with your supporters.
  • Sets realistic milestones: A realistic goal allows you to plan project milestones accurately. This ensures that you can deliver on your promises, avoiding potential setbacks.
  • Avoids overhead costs: Unrealistic funding goals can lead to underfunding, forcing creators to cover project expenses out of their pockets. Overhead costs can eat into your project’s success.

2. Developing backer rewards

Kickstarter creators entice backers with various rewards to encourage pledges. Here are some common types of rewards:

  • Early bird rewards: Offer backers who pledge early special discounts or exclusive perks to incentivize early support.
  • Product or service: Typically, this is your project’s main offering. Backers receive the product or service once it’s produced.
  • Limited editions: Create limited-run, exclusive items to make backers feel like part of an exclusive club.
  • Digital rewards: Offer digital downloads, access to online content, or virtual experiences.
  • Recognition: Acknowledge backers with credits, their names in the credits, or personalized thank-you messages.

3. Budgeting for all costs

A successful Kickstarter campaign involves more than raising funds. You also need to budget for all associated costs, including:

  • Production costs: Calculate expenses related to designing, manufacturing, or creating your project. Be thorough and consider contingencies for unexpected costs.
  • Shipping costs: Factor in shipping expenses, including packaging, postage, and international shipping if applicable.
  • Marketing costs: Promoting your campaign takes effort and resources. Consider the cost of advertising, social media promotion, graphic design, and video production.
  • Platform fees: Kickstarter charges fees for using its platform, usually a percentage of the funds raised, along with payment processing fees.

4. Managing funds after the campaign

Once your Kickstarter campaign concludes and you’ve successfully reached your funding goal, effective fund management is essential:

  • Finance tracking: Keep meticulous records of your campaign’s finances. Use accounting software or hire a professional if necessary.
  • Fulfillment planning: Allocate funds for the production and delivery of rewards. Plan for contingencies, delays, and any unforeseen issues.
  • Taxes and legal obligations: Understand the tax implications of your Kickstarter campaign and ensure you meet all legal obligations, including reporting income and fulfilling rewards.
  • Communication with backers: Maintain open and transparent communication with your backers regarding the project’s progress, challenges, and timelines.

Kickstarter creators should approach financial considerations with careful planning and transparency.

Kickstarter case studies

These case studies highlight Kickstarter’s successes, challenges faced, and how campaign creators navigated the legal and financial considerations inherent to Kickstarter campaigns.

Case study 1: Pebble Time

Success story: One of the popular Kickstarter success stories is Pebble Time, a smartwatch project that raised over $20 million in 2015. Pebble Time exceeded its initial funding goal within minutes and became one of the highest-funded Kickstarter campaigns at that time. The creators, Pebble Technology, leveraged the crowdfunding platform to generate both funding and buzz around their innovative product.

Challenges and solutions: Despite its tremendous success, Pebble Time faced several challenges. One notable challenge was meeting the increased production demands due to the overwhelming response. To overcome this, Pebble Technology had to scale up its manufacturing capabilities rapidly. Nevertheless, they faced some criticism and backlash from disappointed backers when product delivery faced delays. The lesson here is that managing expectations and delivering on promises is crucial to maintaining backers’ trust.

Legal and financial considerations: Pebble Time’s success underscores the importance of understanding the legal and financial aspects of Kickstarter campaigns. They had to navigate issues related to intellectual property, product liability, and fulfillment logistics. Therefore, Kickstarter creators should consult legal experts to ensure their projects comply with relevant laws and regulations, especially when dealing with technology and consumer products.

Case study 2: Exploding Kittens

Success Story: In 2015, Exploding Kittens, a card game designed by Elan Lee, Matthew Inman, and Shane Small, raised an astounding $8.7 million on Kickstarter. The creators’ quirky humour and unique concept resonated with backers which led to unprecedented success in the tabletop gaming category.

Challenges and solutions: The main challenge faced by Exploding Kittens was managing the logistics of producing and distributing a large volume of card games. They partnered with experienced manufacturers and fulfillment centers, ensuring timely delivery to backers to overcome it. Additionally, they communicated regularly with their backers, keeping them informed about the progress of the campaign.

Legal and financial considerations: Exploding Kittens also had to factor in legal considerations related to intellectual property, copyrights, and trademarks. This was especially crucial given the game’s humorous and potentially controversial content. They consulted legal experts to ensure their project’s compliance with relevant laws. This case underscores the importance of legal due diligence for creators of creative and potentially contentious content.

The bottom line

Neglecting these financial and legal considerations can lead to potential pitfalls and legal issues down the road. To ensure a successful Kickstarter campaign and long-term success, creators should seek legal counsel, consult with financial experts, and utilize resources such as Kickstarter’s guidelines, legal templates, and crowdfunding communities. By taking these proactive steps, creators can navigate the complexities, mitigate risks, and increase their chances of bringing their creative projects to life while protecting their interests.

How Pressfarm can help to promote your Kickstarter campaign

Do you need help generating publicity for your Kickstarter campaign? With a team of PR specialists, expert writers, and certified designers from Pressfarm, you can do just that!

With a professional press release, some winning guest posts, and an eye-catching media kit from Pressfarm, you can make a splash and stand out from other Kickstarter projects. Beyond creating quality content for you, Pressfarm can also help you put it in front of the right eyes.

By submitting your content to the right media outlets and startup directories, Pressfarm can help your startup rank in relevant search results across different search engines. Additionally, with custom media lists and access to a database of 1 million+ journalists, you can connect with the best journalists in your niche.

With a PR package from Pressfarm, you can generate publicity and win backers over to your Kickstarter project.