I read an article in The Verge on how Kickstarter may be laying off up to 45 percent of Kickstarter employees.
New projects on the website are down by 35 percent since the start of the whole COVID-19 and Corona virus mess.
Since Kickstarter’s platform relies on the revenue from their 5% fee to fund their operating costs, less projects means less revenue!
I’ve gotten a lot of questions on my coaching calls, on KickstarterForum, and through emails asking whether or not it’s a good time to launch a Kickstarter or crowdfunding campaign given the current condition of the world.
In this post, I wanted to share my analysis of the situation, as well as draw on my experience from 8 years in the crowdfunding industry. I hope you find it to be informative, useful, and practical.
Kickstarter Has 140 Employees
It’s pretty amazing, given the huge impact of the platform, that the core company only has 140 employees.
That being said, that is a lot of mouths to feed and makes up a big annual payroll. In particular, with their headquarters in NYC, a lot of these employees incur high living costs. NYC has also been hit pretty hard by the entire pandemic.
The problem is that with a 35 percent decrease in projects on the website, their anticipated monthly profit is way down, and not able to support the costs of bankrolling this payroll.
There is a 35 percent decrease in projects on the website.
The management team has been making cuts in salaries, but it seems as though it may not be enough.
“The truth is, these measures aren’t enough for us to continue to serve creators during this crisis and beyond. We must look more broadly at ways to restructure the business, including potential layoffs across teams and at all levels of staff” – Source.
Kickstarter earns $1.27 Million in Annual After-Tax Profit
While this is a lot of after-tax profit, the company is quoted as saying that that money earned from 2019 has already been re-invested in the business in 2020.
“All of the approximately $1.27 million in after-tax profit we earned last year has already been reinvested back into the business during the first four months of this year” – Source.
This tells me that unless:
- The founders or investors want to inject cash
- There are cash reserves on the books
Then the only way the website will manage to weather the crisis is if they are able to cut back on payroll expenses.
The good news is that, for the most part, that is going to be their biggest expense. The great thing about a technology business is that, aside from servers and maintenance, there aren’t terribly many other costs.
For example, Kickstarter doesn’t have to invest in marketing as heavily as other companies because it has that covered. It’s a brand name, and it’s a marketplace. Instead, they need to turn their focus inward in getting existing creators to start more projects.
They have already begun this with a new initiative called Inside Voices.
This program is designed to get creators to start more projects. It’s an invitation to get creators to participate with their community at home, particularly though micro-projects.
If you join the program, you have the possibility of getting your project tagged, so that you stand out.
According to the staff, there are a lot of ways that creators can begin these micro projects, doing things like:
- recording a new album
- shooting and editing a short film
- launching a game
- producing digital products like PDFs
- live streaming performances
- creating training videos.
If you’re a creative type and you’ve never produced a project like this before, I recommend checking out this new guide: The Artist’s Guide to Crowdfunding Domination by Ian Anderson, which has some really epic content!
What Kickstarter Creators Have Told Me Behind the Scenes
As you might know, I regularly interview Kickstarter creators on my podcast, Crowdfunding Demystified. In fact, I think we have almost 300 episodes out there now!
I started the podcast to give you a glimpse behind the scenes of wildly successful Kickstarter projects. I wanted to show you exactly what they’re doing to drive traffic, pledges, and backers to their campaigns.
So, are you wondering if creators are impacted by the Corona Virus?
You can listen to my most recent episodes and hear for yourself.
The short answer is… surprising.
Believe it or not… it’s the best time to launch a project.
In fact, I’d say it’s far easier to get funding now than any other point during the year.
Here’s why.
There is so much less competition!
A thriving community of Kickstarter super backers still exists. People are still funding projects. There just aren’t that many projects that are being launched.
This means that if you launch a project during this time of uncertainty, you’ll be going up against less competition. You won’t have to stand out among as many other crowdfunding campaigns.
It might seem like a gamble, but just based on what other creators and entrepreneurs are sharing on my show, it’s one that could pay off big time!
Now…. I will say that there is one part of the Kickstarter launch process that actually is impacted by COVID-19, and that is shipping & fulfillment.
You can listen to an expert talk about this on my podcast here.
Basically, because medical supplies are being crammed into planes to get to the places that need them, it’s making it harder for smaller businesses to get decent rates on air freight costs.
This is leading to delaying on shipping times. It’s also causing unanticipated costs to arise. This is something you should be aware of as a Kickstarter creator.
I also think that it’s a good opportunity to start a project because there’s not much else to do. You can use this time to hyper focus on your upcoming campaign.
I talked a bit about this on my YouTube video, but basically, this is a golden opportunity for any entrepreneur, artist, or inventor. You finally have a good stretch of runway to get this thing up in the air. Get to work!
Why Aren’t Projects Being Affected?
I think part of it is the actual demographics of the Kickstarter backer marketplace. Put simply, many backers and super backers earn decent income.
There are a lot of programmers who support crowdfunding projects, and other knowledge-based office workers who have maintained their jobs. They are now just working at home.
A lot of my friends in New York City who have good jobs are just working at home now. It’s really the service industry and lower wage workers who are struggling.
Now, that’s a blanket statement, but from my own estimations, it helps to explain why projects are still getting funding. Keep in mind that I don’t believe everyone falls into these strict black and white categories.
I think we should be extremely grateful for the crowdfunding community. I certainly am.
These backers are heroes! They enable creators to do what they love, and as an entrepreneur or artist, make sure you over deliver on your promises when you do start your project.
If you’d like to learn more about creating your first creative-style project under this new Kickstarter initiative, I’d pick up a copy of the Artist’s Guide to Crowdfunding Domination. It’s some of the best tactics, hacks, and techniques I’ve ever come across.
