Understanding the All-or-Nothing Funding Model on Kickstarter

Kickstarter is a popular platform for crowdfunding projects. One of the key features of Kickstarter is its all-or-nothing funding model. This means that if a project fails to reach its funding goal, no money is released to the creator. However, many creators and potential backers often wonder how Kickstarter handles the money collected during the campaign period if the funding goal is not met.

How Kickstarter Handles Money Before and After the Campaign

Kickstarter does not release money in tranches throughout the campaign. Instead, the model is designed to be binary: if the campaign meets the funding goal, all the money collected (minus fees) is released to the creator at once. If the goal is not met, nothing is processed, and no money changes hands.

This process can be slightly confusing for backers and creators alike, so it's important to understand the logistics of how the money is managed until the final outcome is determined.

The Funding Release Process

Here's a breakdown of what happens to the funds collected during a Kickstarter campaign:

Hit Funding Goal: If a project reaches its funding goal, Kickstarter releases the money minus its fees (5%) to the creator as one lump sum. This release occurs once the campaign has ended. Unprocessed Credit Cards: Some backers' credit cards may fail to process the payment. These backers are referred to as “errored backers.” Week of Correction: Kickstarter gives the errored backers a week to update their credit card information. Dropped Backers: If an errored backer does not update their information, they become “dropped backers,” and the funds are not transferred to the creator. This typically happens two weeks after the campaign ends.

FAQ on the All-or-Nothing Model

Q: What happens if the campaign fails to meet the funding goal?

A: If the campaign does not meet the funding goal, none of the funds raised (including future chargebacks for errored backers) are released to the project creator. All at once, up to a week after the funded project has ended, Kickstarter refunds the money back to the backers' credit cards.

Q: Do any fees apply during this waiting period?

A: Kickstarter's payment processing fee of 5% applies to all funds collected, even if the funding goal is not met. This fee is deducted from the total amount collected.

Q: Can creators access the collected funds at any point during the campaign?

A: No. Creators cannot access funds until the end of the campaign, and only if the funding goal is reached. Prior to this, the funds are held in escrow and cannot be withdrawn.

What’s Next for Your Kickstarter Campaign

Knowing how Kickstarter manages funds can help you plan your campaign more effectively. Here are some steps to take:

Set Clear, Achievable Goals: Choose a funding goal that is specific and realistic to ensure the project can be completed successfully. Prep for Errors: Have a strategy in place to handle errored backers and provide a clear timeline for them to update their credit card information. Keep Backers Informed: Provide regular updates on your campaign progress and communicate any updates or changes to backers promptly.

Need More Help?

For more questions and detailed insights on how to maximize your Kickstarter campaign, my Quora answers can provide you with a wealth of information on Kickstarter, Indiegogo, and entrepreneurship.

Good luck with your campaign!

- Mark