Crowdfunding: Kickstarter Evolving as Important Force for Tech Start-Ups

  • New York City–based Kickstarter was initially developed to support creative projects, but has emerged as a significant force in financing technology start-ups.
  • “Entrepreneurs have used the site to raise hundreds of thousands of dollars at a time to develop and produce products, including a networked home sensing system and a kit that prints three-dimensional objects,” notes MIT’s Technology Review.
  • Kickstarter has become a viable alternative to venture capital funding. Last year, it funded some $99 million, equivalent to 10 percent of all seed investment.
  • In April, ETCentric highlighted a report suggesting that Kickstarter funding was expected to triple this year to around $300 million. At that time, the top projects seeking funding involved film, music, design, art, publishing, games, and technology.
  • Typical requests for funding are modest, but some projects have attracted more than $1 million. Angel stakes are typically less than $600K. And through Kickstarter the founders retain creative control and attract committed followers and customers.
  • “If crowdfunding sites start offering equity shares, it will make a few dozen VC firms disappear,” suggests Paul Kedrosky, senior fellow at the Kauffman Foundation.

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