6 Kickstarter nightmares, and how to prevent them

For tens of thousands of entrepreneurs frustrated by Washington’s arcane legal rules for raising business capital, Kickstarter has been nothing short of a red-tape weed whacker. The crowd-funding website lets individual investors pledge money directly to inventors and artists, handily upending the complex and often impossible process of raising financing one person at a time.

If you succeed, that is.

Since its launch in 2009, Kickstarter has hosted more than 76,000 projects. About 32,000 of them, or 44 percent, have been successfully funded, with a total of $345 million raised.

The road to success on Kickstarter is far from assured, and Kickstarter's own statistics show that Kickstarter projects have about a 56 percent failure rate. And that’s only counting projects that Kickstarter accepts. Countless additional projects have never even made it off the launching pad.

How do you avoid having your project become a statistic while others succeed? Here are some of the most common pitfalls other Kickstarter users have encountered, and ways you can overcome them.

All of the information below comes courtesy of entrepreneurs who’ve experienced failure, success, or both, at the hands of the Kickstarter system. Kickstarter declined to participate in this story.

When IoSafe got the boot from Kickstarter, it jumped to IndieGoGo to seek funding.

1. Problem: Kickstarter rejects your project

It’s impossible to tell how many Kickstarter projects never even get a chance, because there aren’t any statistics on how many are rejected outright by the company.

It is in Kickstarter’s interest to accept only projects that are reasonably likely to succeed, because Kickstarter gets paid (5 percent of your total funding) only if you reach your stated funding goal. Miss the goal, and Kickstarter collects nothing—but it still has to do all the legwork of running your funding campaign and hosting your project.

The reasons for rejecting a proposal are numerous and often cryptic. Kickstarter’s guidelines establish rules for what qualifies for Kickstarter funding, but these aren’t always clear and can even be contradictory. The fundamental rule—that funding is for “projects only”—is at odds with entrepreneurs who want to use funds to build a physical product that they hope to sell on an ongoing basis, or to use as the basis for the beginnings of a startup. No one is getting into the Kickstarter game to create a limited run of iPad keyboards that, once produced, will never be sold again.

Kickstarter seems to understand this, and it judges projects individually, so if the language in your description is rejected for not describing a “project,” try revising it and resubmitting. (Kickstarter does have an appeals process, but, as Brett Callow of ioSafe told us, “Their web form limits [appeals] submissions to 500 characters, making it impossible to make a detailed case.” To raise financing for its latest NAS device, IoSafe eventually turned to Kickstarter competitor IndieGoGo—a common solution to Kickstarter rejection.

Other users report that they didn’t receive a reason for their project’s rejection by Kickstarter. Jennifer Chu’s Silver Linings shoe liners idea was rejected by Kickstarter, she says, without explanation. Says Chu, “From what I have heard, Kickstarter gives reasons for declines if they are things you can change. For other issues, they just give the canned response.” Rather than attempt to figure out what happened, Chu also jumped to IndieGoGo.

When the first funding round didn’t succeed, Nectar and Elixir retrenched and asked for less money. Second time was a charm.

2. Problem: Your project didn’t reach its goal

Once Kickstarter has accepted your project, you’re hardly out of the woods. A vast number of projects never get off the ground because they don’t meet their funding goal. Remember: If your campaign falls short of goal, you receive none of the funds you’ve raised.

This is a universal problem with no easy diagnosis. Your rewards may be out of line with expectations—a free baseball hat or DVD in exchange for a $50 donation may not engender much success —or your promotion of your own project may have fallen short. (Kickstarter prohibits spam but encourages “smart outreach.”)

Successful campaigns have lots of supporting information—including things like photos of prototypes and regular updates—proving that the project's founders aren’t going to flake out or run off with the cash—whether due to incompetence or outright scam. Having a video can boost your credibility and funding immeasurably. On IndieGoGo, campaigns with a pitch video raise 114 percent more cash than those without one.

If you try your hardest and still don’t hit your goal, then what can you do? Try again, preferably with a smaller goal. In its initial form, Nectar and Elixir’s quirky bicycle seat clamp-meets-bottle opener raised only $1291 of its original $15,000 goal, an ambitious sum for a simple product. The designers tried again a few weeks later with a $2,500 goal…and successfully raised $4403. Check out The Kickstarter Handbook for an interview with that team for more details.

A Greg Louganis movie earned over $55,000 in donations, but that still wasn’t enough to finish production.

3. Problem: The cash didn’t come through

This is a hopefully rare but troubling problem. Stacy Davidson was seeking $56,000 for a video game project, and he hit his goal. But when Kickstarter ran the investors' credit cards, a few of the pledges turned out to be bogus, including one whopping $10,000 one. Kickstarter funds projects based on pledges, not actual cash collected, so that left Davidson with a significant shortfall to cover. But since completed Kickstarter campaigns can’t be reopened or added to, Davidson ended up asking for private donations to help fill in the gap.

Lesson learned: Don’t rest on your laurels just because you’ve hit your goal. Keep promoting your project until the time is up, no matter how far over goal you are.

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