How Does Kickstarter Work for Investors

Kickstarter for Investors (Backers): How and Why It Works

Key Concepts:

• Kickstarter, Indiegogo
• Backers vs. Investors
• Creators
• Patrons of the Arts
• Perks and Rewards (Limited Edition/Access)
• Early Adopters
• Storytelling
• Voting with Your Dollars

Terminology and Core Concepts

The video clarifies that individuals supporting Kickstarter campaigns are more accurately termed "backers" or "patrons," not "investors." The distinction lies in the absence of a securities exchange or ROI contract. Backers support creators and their projects, receiving "perks and rewards" in return, akin to patrons supporting artists.

Types of Projects and Backer Motivations

Kickstarter hosts diverse projects, including inventions, card games, films, and publishing ventures. Backer motivations vary:

• Perks and Rewards: Backers seek exclusive access or discounted pre-orders of the product being developed. These perks are often Kickstarter-exclusive editions or offered at significantly reduced prices (e.g., 20-50% off MSRP).
• Collectors: Some backers, particularly in film or collectible campaigns, value tangible tokens of the project, such as signed posters, props, or having their names in the credits.
• Early Adopters: Especially in the technology category, backers are often early adopters eager to experience new inventions before they become widely available. They admire the creator and want to participate in the invention process.

The Backing Process: A Step-by-Step Breakdown

1. Discovery: Potential backers find campaigns on Kickstarter, social media, or through recommendations (e.g., podcasts).
2. Evaluation: They review the campaign video and page to understand the project.
3. Pledging: Backers choose a reward tier or make a donation. They may add additional items ("add-ons").
4. Conditional Charge: The backer's credit card is not charged immediately.
5. Funding Goal: The creator must meet or exceed their funding goal for any backers to be charged.
6. Project Execution: If successful, the creator proceeds with production, and backers receive their rewards. If unsuccessful, no one is charged, and the project does not move forward.

This process allows backers to "vote with their dollars," supporting projects they want to see exist and empowering creators directly.

The Psychology of Backing: Beyond the Transaction

The video emphasizes the psychological factors driving backers:

• Early Adopter Status: The desire to be among the first to experience a new product or technology.
• Supporting Creators: A sense of patronage and contributing to the creation of something new.
• Voting with Dollars: Actively shaping the world by supporting projects aligned with their values.
• Storytelling: The narrative behind the inventor and the product is a crucial element. Compelling videos, campaign pages, and social media presence create a connection between creators and backers. People want to be part of a story.

Quote: "Stories are so incredibly powerful and engrossing, and we want to be a part of stories."

Category-Specific Considerations

The video highlights that the factors influencing campaign success vary across categories. For example, social media presence is less critical in the technology category, where early adopter appeal is paramount.

Conclusion

Kickstarter functions as a platform where backers, acting as patrons, support creators in bringing new ideas to life. The process involves a conditional pledge system, where funds are only collected if the project reaches its funding goal. Beyond the transactional aspect, psychological factors like the desire for exclusivity, supporting innovation, and connecting with a compelling story play a significant role in driving backer behavior. The presenter encourages viewers to take action and explore resources like his book, "The Kickstarter Launch Formula," and free Kickstarter course.