Deconstructing Kickstarter: Sell Your Product for $10,000 (or $99)
We amassed 13,695 data points on reward levels and backers from the most successful projects on Kickstarter (those that raised at least $100,000) and dissected them.
One surprising thing we found was the $10,000 pledge level is one of the highest revenue generators, and so was $99, even though a lot of campaigns ignored it. So among your pledge levels, try to include $99, as well as a pledge level for really wealthy (and excited) backers.
Secondly, the top campaigns limited their pledge levels to about 10. So remember to simplify what you offer, and avoid confusing your backers.
Top 10 highest revenue-generating pledge levels
The highest revenue-generating reward levels aren’t always the most popular. Some are the highest priced. The $10,000 level was the 5th-highest revenue generator. Getting this right depends on thinking about your demographics (in this case, wealthy fans) and how to appeal to them. At the $10,000 level, you’re not just selling them a product. Based on our data, you need to rally them around the success of your idea, sell them the experience of meeting you, and reward them with public recognition.
The last two are really a different business altogether. The Fitzroy film project raised almost a quarter of its 72,000 pounds in funding with pledge levels of 1,500 pounds ($2,400) or more, promising major backers a role as producers of the movie and a profile on IMDB. (Even more extreme, TechShop raised 91 percent of all funds for its Menlo Park branch through a $250,000 pledge from Intel on Indiegogo.)
Let's take a look at the pledge levels Kickstarter creators rely on most:
The 10 pledge levels most popular with project creators
What backers choose is something else. Interestingly, backers often choose the $99 reward level even though it doesn’t make the top 10 for project creators.
Anecdotally, we see most backers opting for the minimum price level that will bring them the product being made. Nearly 41,000 Pebble backers chose the $115 reward level, which was the lowest at which they could buy the watch. Project creators should think seriously about that minimum pledge level. Adding peripherals can boost it, and dialing up the most popular pledge levels by a few dollars can have a huge impact on total funds raised.
The 10 most backed pledge levels
Finally, let's look at how many pledge levels you should have. Projects with between 9 and 11 pledge levels belong to an elite group in terms of revenue raised. While it’s hard to draw definite conclusions from this, our hypothesis is that backers, like most people, have a hard time making choices. Decisions cost us time and energy. Our theory is that projects that simplify and reduce the number of pledge levels may be more successful at winning supporters over.
Number of Reward Levels vs Revenue Generated:
A few caveats: It's impossible to measure separately the diverse factors that make a Kickstarter project succeed. Pledge levels are just one piece, and here we are simply presenting choices made by some successful projects in cumulative fashion. So take it with a grain of salt. Salt tastes good.
On the high end, the long tail is massive since Pebble blew their campaign out of the water by raising $10.3 million. As often as possible, we’ve tried to offset such statistical outliers by using medians rather than means for our average numbers. (Thanks, Pebble.)
Our data is based on 841 Kickstarter projects that raised at least $100,000. Click here to see it.
Winners’ Averages
The median number of backers per project is 2,102.
Taken together, the top projects raised 985% of their initial goals.
The median market-validating project raises $171,009.
Successful projects have a median goal of $75,000.
The median reward level is $150.
Click here to learn about Airbrite, a YC 12 company. We make Celery, an easy way for startups to take pre-orders, as well as an order-processing API for developers.
What Is Crowdfunding Good For? Derisking With 'Venture Consumers'
If you’re a startup founder, crowdfunding serves several purposes.
Some people are looking for money to make stuff. Others want media attention before they sell. Almost everyone is searching for proof that they have a market. All three things — money, market and media — will help you build your business and win over later investors, if you need them.
First, crowdfunding backers agree to take a small piece of the risk by making a pledge. It’s easier to convince 1,000 buyers to clear a $100 hurdle than to persuade one seed investor to commit a few hundred thousand. Crowdfunding distributes the risk of a startup just like mutual funds distribute the risk of a public company.
Other people’s money is always a way to derisk. That's why, when a bunch of venture capitalists take 5 percent of a startup, and no one takes the lead, you know they're not convinced it will succeed. Crowdfunding backers are doing the same thing: they're "venture consumers." You just need to convince them the reward is worth the uncertainty.
Second, one of the biggest risks for any startup is finding a market. Hardware is called hard for a reason. With software, it’s fairly easy to make something, test market appetite, and make it again in tight iterative loops. Hardware is more like Hollywood — a long time goes into making anything, even flops.
But crowdfunding platforms give makers market validation before they actually make a thousand widgets, a priceless reassurance that their instincts are correct. Pre-orders extend that validation, which is extremely valuable in the eyes of venture capitalists. You can show them you’ve gone from throwing spaghetti at the wall to knowing exactly what people want, and cooking it.
Third, crowdfunding campaigns are media events par excellence. They’re a great excuse to drum up press around the adventure of entrepreneurship, prove the vitality of a local business scene, and stoke hometown pride in a local gal (or guy) done good.
Priming the media with your campaign is one essential piece of a marketing machine you’ll perfect over many months. Above all, remember that the media need you to do something before they can report it. That action is called a “hook.” A crowdfunding campaign is a perfect hook for a story, and perfect hooks won’t walk through your door every day.
Most startups that have built something good confront the risk of being ignored. They need to find their customers and make sure the right people know they exist, and when startups first begin, they face the world's deep indifference. Crowdfunding platforms like Kickstarter give you increased exposure, reducing the chances you’ll pass unnoticed. They get people excited about you, for a while. You need to seize that moment, and build on it, before you're forgotten. The more you can show you have a following, the more everyone will want a piece of you.
Crowdfunding is a strange mix of trade finance and performance art, and any campaign risks failure. But if you run its monthlong gauntlet and emerge a winner, you’ve established a track record that will show others how betting on you is a risk worth taking.
Click here to learn about Airbrite, a YC 12 company. We make Celery, an easy way for startups to take pre-orders, as well as an order-processing API for developers.
If (Developers == Decisionmakers) {They Buy Better Tools;}
B2D is a new series about winning developers as customers and keeping them happy. Well, maybe not happy … temporarily appeased.
Programmers will tell you the reason they're replacing chief information officers in choosing third-party software is because CIOs don’t understand what’s going on.
So let's talk scarcity. For the skilled labor force of Silicon Valley, it's a seller's market. The money gushing into tech means demand for developers is outstripping supply. Really good ones were rare to begin with, and now they are like elephants on the Serengeti. Only the big guns take them home.
The best can quit their jobs today and find new ones next week, or tomorrow. When those developers can make or break your startup, you try to give them what they want.
What they want, generally, are better tools. They want less agony. Less buggy, crappy, legacy code; less half-baked vaporware. They don't want tools limping along under technical debt that make them want to shoot themselves on a daily basis.
So third-party software with a lower agony rating — or god forbid, the capacity to delight — has an easier time finding a market, because that market, suddenly, has a voice.
It used to be you could throw together a minimum viable product, test on a few users, hire a huge marketing team, and pray for recurring sales. The marketing guys would badger and hound CIOs with glossy brochures and endless powerpoints and booze until they sold something that was probably suboptimal, and the CIOs would buy it because they heard it worked. They didn’t understand the pain or didn’t care.
But with the ongoing shift in power towards engineers, certain B2B businesses have to communicate and market their products in a different way -- or die.
Those companies used to win new customers buy writing puff-piece marketing copy, with the API documentation as an afterthought. Now the APIs convert customers, and the glossy marketing stuff is just there so the CIO can save face as he signs the check.
A new marketing model has developed. It’s not B2B or B2C — it’s B2D.
D stands for different. Developers are more critical than most end users. They don’t pay attention to promises and pathos. Go ahead and try that, and you'll see.
That's different from non-developers. Non-developers respond to ads that entertain, inspire and probably feature celebrities they aspire to be. You’re selling dreams and feelings.
They don’t really pay attention to specs and features. Sure, you can sell them on speed and volume. But it’s a mistake to talk to them about how you’re five times faster than the competition. All companies say that, and no one believes them, and most consumers don’t care anyway.
With developers, you do talk about product features. And you do more than talk about them. You make statements developers can test and prove to their satisfaction. They are deeply, deeply skeptical. When you show them something, their first thought is it doesn't work, and their second is they could have done it better.
So how do you deliver a gee-whiz moment with your product? You show developers what they can make with it.
The cynic might call these developer stunts. Build another Twitter in two screencasts to put yourself on the map. It's just a disguised form of advertising. Fine. No one promised you your product would sell just because it's good. You have to go out and sell it. Advertising is just a way of making sure people know about that good thing you just made. The only difference is that “buy me” gets translated as “look what you can build.”
Click here to learn about Airbrite, a YC 12 company offering an order-processing API for developers. We also make Celery, an easy way for startups to take pre-orders.
