When a project does not meet its goal, Kickstarter does not charge anyone’s credit card, so no one loses their money. For those who did pledge, the funds will simply stay with them until they make another pledge.
This gives backers peace of mind that their hard earned cash will not be taken away by a failed venture. Additionally, if a project does not meet its funding goal but achieves at least 20% of its sought after pledges then all refunds are returned automatically back to backers’ debit/credit cards within two weeks of the failure date.
In summary, if a Kickstarter project fails then:
However, while it may appear at first glance that this is beneficial for investors – this system also has repercussions for entrepreneurs on Kickstarter as they may be missing out on potential customers who were hesitant to support them due their fear of having their finances misused should something go wrong with their intended investment.
To overcome this hesitation and maximize success rates of projects on crowdfunding websites such as Kickstarter it is always best to:
The success or failure of any given project has no effect on how much money its contributors have pledged. When a project fails to reach its goal, Kickstarter refunds all of the pledges in full without taking any fees. However, creators are responsible for processing refunds back to their original payment method or following up with any members who did not complete their pledge payments.
Kickstarter does provide some ways for creators whose projects failed to recoup some costs incurred during the campaign. Uniquely applicable backers may opt in for an “All-or-Nothing” model where additional rewards can be offered as incentive for additional funds even after their campaign has ended unsuccessfully.
Additionally, campaigns launched through Kickstarter may take advantage of other income resources such as:
Kickstarter is a popular crowd-funding platform that allows entrepreneurs to launch their project to the world. On Kickstarter you can create campaigns for any creative project, whether it be a new product, a service, or an event. Supporters pledge money to your project, and if the project reaches its goal, the money is transferred and the project is off the ground. But what happens if a Kickstarter project fails to reach its goal?
Let’s take a look at how Kickstarter works:
Kickstarter allows people to pledge money to projects as a way of supporting them, and in exchange for their pledges, backers receive various rewards or experiences. Project owners set a goal for how much money they hope to raise and participants give whatever amount of money they choose. When the project reaches its goal, the pledges become actual payments.
Kickstarter does not collect money unless the campaign is successful — if the project fails to reach or exceed its funding goal within a certain timeframe (usually 30 days) then no credit cards are charged and no funds are collected. Kickstarter takes 5% of the funds raised by successful campaigns while third-party payment processors take an additional 3-5%.
This means that it is possible for backers’ funds not to get used if a Kickstarter project fails as well as if it succeeds, although refunds may not be given immediately after failure or success. Generally speaking, creators should plan for roughly 8 weeks after a project’s completion date before refunds will start processing by way of customer service requests from backers who have failed to receive their rewards on time or at all.
When a project goal is not met by its stated deadline, the project is not funded and no money exchanges hands. This means that backers are never charged for pledges made to unsuccessful projects. If you pledged to a project that did not reach its goal, you’ll receive an email notification letting you know that it was unsuccessful.
Failing to meet a crowdfunding goal can still have positive outcomes. Projects that come close to their goals can often adjust the scope of the work and continue the endeavor even if they don’t receive all of their requested funds from backers. Kickstarter also recommends that project creators who don’t reach their goals:
Starting a Kickstarter project can be an exciting way to bring a new product or idea to life. But what happens to the money if the project fails? Most Kickstarter campaigns have a specific goal that must be met in order for the project to be funded. If the goal is not met, the money will be returned to the backers.
Let’s take a look at how this works and what other effects it can have:
If a Kickstarter project fails to meet its fundraising goal, the creators will not receive any of the funds pledged by backers. All of the money raised is safely stored in an escrow account and is only released if and when they reach their funding goal. If they fail to reach their goal, none of the pledges are debited from backers’ accounts and all money remains securely stored in escrow until it is returned to backers.
Backers are not creditors so they don’t have any legal rights or recourse when a project fails, but that doesn’t mean any risk associated with supporting a project isn’t real. Indeed, for those who pledge above a certain amount, there may be repercussions if the creators stop communicating or cease development altogether.
In some cases crowdsourcing platforms have offered refunds through their own resources but not all platforms do so. Backers may also be able to seek legal recourse on an individual basis depending on circumstances surrounding the project failure.
Ultimately, backing a Kickstarter project is inherently risky because you’re putting your faith in creators who may have never produced something like this before, alongside supporters who could potentially set unrealistic goals and expectations for delivery timelines and completed projects. It’s always best to go into each campaign with realistic expectations and research how projects similar to yours fared before giving your support.
When a Kickstarter project succeeds, the money that was pledged to the project goes directly to the creator of the project. When accepting these funds, the creator or organization must accept responsibility for fulfilling all rewards and paying any additional fees associated with their funding drive.
If you successfully reach your goal, Kickstarter applies a five percent fee on the total amount of funding received for your project — this includes any funds collected from additional pledges. Kickstarter also applies a payment processing fee of three to five percent per backer depending on their location. Any other fees associated with setting up and administering your funding campaign should be factored into your goal before launching the project.
It is important to remember that no matter whether you hit or miss your goal when it comes time to collect pledged funds, you will still be responsible for paying taxes such as:
depending on where you live or where your business is located. You should make sure you understand how taxes apply to fundraising before launching your project as taxes can affect whether or not you reach your goal.
Kickstarter Society has publicly stated that the money from unsuccessful projects simply goes back to the everybody who backed it.
However, due to reasons such as donation-style pledges,it is thought that some funds get lost in transit and are not returned. In addition, if someone pledges an amount over their limit on an unsuccessful project, their payment could have already been processed through a third party platform such as PayPal or Stripe prior to the project being canceled without any evidence of this displayed on Kickstarter.
Ultimately, we can conclude that because there is no reliable way of accurately tracking where all of the donated money goes when a Kickstarter campaign fails, it can be difficult to determine what amounts (if any) will actually be refunded back to original backers and supporters.
As always when participating in crowdfunding campaigns, backers should do their own due diligence by researching various campaigns in depth before donating and understand that there is still some risk associated with backing projects regardless of status and outcome: