Kickstarter & Busted Knuckle Car Guy Hot Sauce

Crowd funding has become a popular way for entrepreneurs who are full of creative ideas but not enough illustrious track records to attract industry investors to raise funds for their projects. Among the available crowd funding platforms out there, Kickstarter is the largest.

Launched in 2009, Kickstarter has reportedly raised millions of dollars of funding for entrepreneurs who listed their projects on the website. Projects can be listed in any of the 13 categories: art, comics, dance, design, fashion, film & video, food, games, music, photography, publishing, technology, and theatre.

http://www.kickstarter.com/projects/1818935492/car-guy-hot-sauce-from-the-busted-knuckle-garage

How does it work?

When an entrepreneur comes up with an idea, he or she proposes it on the Kickstarter website. For example, Busted Knuckle Garage has passions for both cars and hot sauce. He came up with an idea that would allow him to combine his passions. He designed a set of hot sauces that are packaged in car guy style gift box and he called it the “Tri-Power” set. He proposed this idea to the Kickstarter community team who reviewed the proposal to make sure that it fits the Kickstarter guidelines.

There are basically 3 guidelines that entrepreneurs have to adhere to when they propose their projects on Kickstarter:

1) Specific – The project must have a clearly defined goal and expectation. For example, Busted Knuckle Garage’s goal was to produce and market the “Tri-Power” set of hot sauces.

2) Creative – The project must fit into one of the 13 categories available on Kickstarter. In the case of Busted Knuckle Garage, its project fit into the “Food” category.

3) Tangible – The backers of the project must receive something tangible in return. For example, backers of Busted Knuckle Garage’s project would receive t-shirts, coffee mugs, baseball caps, etc in return.

The Kickstarter community team usually accepts a project if it fits these guidelines.

Once a project is accepted, the project creator can launch it. At this stage, project creators tell the world what their projects are and how much funding they need to get their projects going. They also determine how long they need to raise funds. The maximum duration is 60 days. For Busted Knuckle Garage, his funding goal was to raise $2,000 in 30 days.

The Funding Model

Kickstarter employs the “all or nothing” funding model. If a project reaches its funding goal by the end of the fund-raising period, the project creator receives the funds raised. On the other hand, if the funding goal isn’t met, even if it is just $1 short, the project creator receives nothing and the backers of the project are not charged for their pledges. This “all or nothing” funding model reduces the risks of the backers and at the same time motivates the project creators to work hard to promote their projects.

For each project that reaches its funding goal, Kickstarter takes 5% of the funds raised. Other than that, Kickstarter does not claim ownership over anything the projects produce.

One word of caution is that Kickstarter does not guarantee that project creators will deliver their promises. Backers of projects should use their own judgment when they decide to support a project.