How Does a Kickstarter Make Money?

Kickstarter makes money by taking 5% of the total amount of money that is funded on the site. It uses this money to turn a profit that pays for the costs of running the site, including advertisement and employee payment. Those who use Kickstarter to raise money earn their profits differently, however.

Those who want to be funded get a group of backers to donate to their project and then promise the backers with an incentive or reward. They may choose to repay backers with interest, a portion of the company they are creating, or even free products. The creative person or group will set an amount needed to fund the idea and then wait for the backers to meet the quota.

The Risks

This type of system comes with risks for the backers and creative minds behind the proposals as well. The backers may have someone take their money to do as they wish, and they aren’t guaranteed they will get the money back. The creative parties may find that they need more money than was initially projected, and despite receiving the funds they asked for, they have unfinished projects or plans, and aren’t able to refund their backers’ investments.

How Payments Are Collected

Kickstarter collects the payments entered by the backers through Amazon, and it takes its cut as soon as the goal for funds has been met. This is a great site for those with a talent or idea that needs funding to make the vision a reality, and it’s attracted more than a few creative individuals over the years; more than 180,000 projects have been funded since the site launched in 2009.