Dec 10, 2015

Kickstarter Statistics #1 - 1 out of 10 Kickstarter Projects Fail to Deliver Rewards

(Image source)

With the recent hype on the failure of UK most funded Kickstarter project: Zano Drone and the recent coverage of the troubles by Singapore's most successful Kickstarter project: Pirate 3D  , the whole crowdfunding industry is cast in a negative light. The University of Pennsylvania recently published an independent study on the project's failure rate of delivery of rewards on Kickstarter and the results are pretty interesting:

- Only 9% of the Kickstarter projects fail to deliver the rewards.

- Failure Rates are consistent across all 15 creative categories.

- Projects that raised less than $1k have the highest chance of failure to deliver. Projects that raised 10k-50k have the lowest failure rate.

- If a creator/company fails to deliver the rewards, most backers will not back any projects initiated by the same creator. Only 19% of backers of failed projects indicate that they would back another project by the same creator whose project failed.

(Source: Kickstarter)
Implications for Backers

The idea of Kickstarter is simple, only the best ideas get funded and this Darwinian way of evaluating projects will eliminate most of the unprepared project creators who are trying to raise funds on Kickstarter. As a backer, as long as the project is funded, you will have a 90% chance of receiving the reward that you pledge for at the end of the day.

However, there is always an exception to the rule.

Projects which try to game the Kickstarter rule that backers will not be charged if the project funding is not met prompted will often set a low funding goal in order to cash in on the pledged funds. The low amount of funds raised will probably be insufficient to finance most of the creative projects should there be even no starting capital prepared by the creator and thus the failure rate soars as the funding goal gets lower.

(Source: Kickstarter)

On the other hand, should the project become immersely successful, the failure rate also soars as creators are not prepared to deliver the massive number of rewards.

Therefore, if you want your Kickstarter rewards to be delivered to you on time and in one piece, opt for moderate size projects in the 10k-50k zone.

Catch 22 Problem For Creators

Creators are faced with an enormous dilemma. We all want to have a massively successful project like the Pebble watch and become the next Unicorn startup. However, being a massive success will also lead to a higher chance of project failure as seen in projects such as Coolest Cooler and Pirate3D as they are unable to handle the huge amount of orders, which will lead to a loss of confidence by backers on future Kickstarter projects. Creators must know when they should pull the plug and start limiting the rewards number should their project become an unexpected runaway success. Delivering what you promised is probably more important as a determinate of Kickstarter success than how much money you raised.

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