Kickstarter’s Cut

Dec 10 2012 @ 7:23pm

Josh MacPhee considers the downsides to Kickstarter. He uses a successfully funded $10,000 campaign as an example:

Kickstarter and Amazon [Kickstarter’s exclusive money broker] take 10 percent right off the top, so now you are down to $9,000. If the money is coming in to you as an individual, Kickstarter treats you like a self-employed contractor, so it’s on you to figure out your tax burden and pay it, likely at least another 15 percent, so now you’re at $7,650. For a $10,000 campaign, you will have around 200 donors, of whom 150 will want rewards. If your rewards are physical objects, and you were generous in your offerings (a good idea when raising money), you’re going to have to wrap 150 packages, all of which need shipping supplies and postage to get to their destinations. On average, you’re likely spending $8 per package, so that’s another $1,200 off your total; so now you’re at $6,450. Within a few weeks a third of the money you raised is gone, and you haven’t begun to spend it on the project you were raising it for.

Nicholas Carr appraises MacPhee's complaints:

MacPhee goes on to argue that Kickstarter isn’t all that different from a Tupperware-style pyramid operation. It grows by infiltrating its members’ personal networks of friends and acquaintances, through which it recruits an ever growing number of project-launchers and project-funders eager to donate their time and their money to the cause. Maybe MacPhee, in formulating his lengthy indictment, is guilty of overreaching, of finding nefarious dealings in every nook and cranny of what is, at least at some level, a worthy, socially productive business. Then again, when you have venture capitalists and entrepreneurs selling charity to the masses, it’s probably a good idea to do a little digging, to see who’s doing the work and who’s getting the money.