Crowdfunding

Market Problem

Crowdfunding has its own difficulties. After raising millions of dollars, many large projects either flopped, never kept their promises, or completely disappeared. As a result, a huge number of people lost their money along with their belief in crowdfunding. As many as 80-90% of crowdfunded projects never deliver their product. The main problem in crowdfunding is that backers are completely unprotected and there are no guarantees that they will not lose their money. Problems that campaign creators have to deal with are equally challenging. Launching a Kickstarter campaign requires a resident to be present in one of the countries of official work, and there is also a lot of paperwork to fill out.

As a result, many creators have no access to large crowdfunding platforms, limiting their fundraising opportunities, and narrowing the reach and diversity of the platforms.Crowdfunding is now dominated by astroturfing campaigns run by large, well-funded companies, rather than indie developers. This inversion of the intended purpose of crowdfunding happened for financial as well as legal reasons. The hidden costs associated with running a crowdfunding campaign are not commonly recognized:

  • 5% fee to the platform
  • 3-5% for payment processing costs of rewards for backersFee to a platform residence based intermediary (if the project is not based in the country
  • Professional PR services to promote the campaign
  • Taxes on funds raised

In the end, creators are only left with 60-80% of the funds raised. This is one reason so many crowdfunded projects fail to deliver on their promises; there is not enough money left over after paying the expenses of the campaign. Some crowdfunding campaigns even end up costing the creator more than they raise.