The Risks & Rewards of Crowdfunding

Many folks have reservations about backing a crowdfunding project. But many creators, including us, need crowdfunding to bring their projects to life. So let's talk about what Crowdfunding is and what the risks are.

What is Crowdfunding

Crowdfunding platforms are websites that provide individuals and businesses a space to promote and receive funding to complete their project(s). Most businesses on these platforms are smaller and couldn't do so without the help of those who back their campaigns. Crowdfunding support helps them turn their dreams into reality.

It is important to note that a site like Kickstarter is not a store, and the platform itself is not responsible for what individual creators do. The platform does have rules, requirements, and systems to help ensure creators are ethical and legitimate. If they let a bunch of folks come on and abuse the platform, it would fail, so they take that very seriously.

Commonly Used Crowdfunding Terms

Campaign - The campaign is the project the creator has launched on Kickstarter to raise funding.
Backer(s) - Anyone who contributes to the campaign/project through Kickstarter.
Backing - A way of saying that someone has contributed to the campaign or is supporting it through crowdfunding.
Funding Goal/Funded - The funding goal is the amount of money the campaign needs to be successful; the creator determines it. When the campaign has reached that goal, it is considered funded. Backers are not charged unless a campaign hits its Funding Goal.
Pledge - This can refer to a few things: the act of backing a campaign, the amount of money a backer has contributed, or the level they chose to contribute at. The creator determines the pledge levels and typically includes different rewards.
Rewards - What you receive from the campaign if it is funded, typically different depending on the pledge level you chose.
Stretch Goals - Bonuses unlocked as the campaign hits specific goals. These typically show up at a higher amount than the funding goal and will unlock a wide variety of things. Many pledge levels include stretch goals.
Add-ons - These are additional items backers can add to their pledge for an additional fee. Sometimes these are unlocked like stretch goals, but they don’t have to be. They are typically not included in a pledge level. They are available as add-ons during the campaign (by increasing your contribution amount) or after the campaign through a third-party platform.

Risks of Crowdfunding

The campaign may not successfully fund.

If a crowdfunding campaign does not meet its funding goal, you will not be charged, but the project will not be able to come to life. The creators may decide to return with a new campaign later to try again, especially if it is their first campaign, or the project may simply be abandoned. We have had a few campaigns fail for various reasons. We have learned from each one and relaunched to success. But sometimes what you learn is that a project just isn’t meant to be.

The project timeline may have to be extended.

It is possible that, due to unforeseen circumstances, a project's timeline may be delayed, which may delay the receipt of your pledge reward. While we always do our best to pad our timelines with estimates for possible delays, you can’t plan for everything. For instance, the global pandemic delayed hundreds of projects. There is no way of knowing how long a project could be delayed before it happens. This is one of the most common risks with successful crowdfunding campaigns. Since there isn’t already a product in hand ready to ship, there are a lot of steps in the process where things can get backed up or put on pause.

The creators may request additional funds.

Something we have seen, especially due to the pandemic, is that production and shipping rates have increased dramatically. Many creators who had successful crowdfunding campaigns in early 2020, before the pandemic, saw their quoted rates increase up to two to three times the original quote. This left the creators in a really tough spot. As a result, some requested additional shipping funds to help them deliver.

This is something every creator wants to avoid, because it understandably annoys the backers who have already given you money to make your product a reality. But sometimes events conspire against you. One way we avoid this is by not charging for shipping until we are very close to delivering the games, so you are charged only once and the rate reflects what it will actually cost.

The project may never be fulfilled.

This is the concern we hear most often from those unfamiliar with crowdfunding. They are worried they will give money to someone in exchange for a game, but then never receive it. While we can’t say this never happens, we can say that if we are ever in a situation where we can’t deliver what we’ve promised, we will ensure all backers get a refund.

We Absurdists have backed over 200 projects in a variety of industries, and we keep backing more! As of this writing, all of the campaigns we have backed have either delivered, refunded our money (which only happened once about six years ago), or are actively providing updates on the project's status. In general, those who launch crowdfunding campaigns are doing so because they are passionate about an idea and want to make it real. While delays and problems may arise, their goals are always to produce and deliver.

We have another blog post titled 8 Considerations to Make Before Backing a Kickstarter Campaign. Our goal is to provide you with an outline to follow so you can conduct due diligence and feel more comfortable and confident in the support you provide to companies on Kickstarter.

Rewards of Kickstarter

You get to support a small business.

Small businesses are extremely important for our economy. They are responsible for around ⅔ of all new jobs, account for about half of all employed individuals, and generate almost half of the economic activity in the US. You have a chance to help fulfill the dreams, hopes, and goals of these small business owners. If supporting a small, local business is important to you, most crowdfunding platforms even have a search filter to help you find them.

You get first access to the rewards

Once a crowdfunding campaign is funded, the product is created, and as soon as it is ready, it begins shipping. This means that the backers tend to be the first folx to receive them. There are a few exceptions to this, but for the most part, backers of a crowdfunding campaign typically get the product before everyone else.

You get a chance to receive stretch goals or add-ons.

Often, stretch goals or add-ons involve limited print runs, which means that once they sell out, the creator will not get another set manufactured or printed. The best way to ensure you can get these items is to back the campaign.

This may be the only way to be part of the project

In some cases, the creator will produce only enough to fulfill the pledges. This means that if you show up after the campaign has ended, you will not be able to purchase the product. At this point, we are grown enough to sell to distributors, and you can usually get your local game shop to order our games or order them from our website. But many smaller companies only ever do a single print run, and then their games are gone.

But in almost every case, without the support of backers, these projects would never get the chance to be made. The only way the creator’s dream can come alive is if the campaign is funded by folks who back and support it.

I find it very exciting to support a small business, watch their funding grow, and see them bring their goals and dreams to life. It's a great feeling, and to me, the rewards outweigh the risks.