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This is an example of why Kickstarter can be a Poisoned Chalice for a small business...

Posted by John Marks (M) on December 13, 2017 at 05:23:11

In Reply to: ToneAudio print editions posted by audio_d on December 12, 2017 at 17:25:04:

The last time I had looked at that particular Kickstarter campaign, it was doing very poorly, but it seems from the link that you provided that they not only hit their goal of $20,000; they oversubscribed by 40%!!!

So, "Wha Happen?"

The usual. An undercapitalized business that has hobby-farm aspects once again apparently could not manage an influx of cash.

I am not saying that this situation is the moral equivalent of HP's taking the proceeds of a reputed "emergency loan" the lender thought was to print and mail the magazine, and instead buying himself a red Corvette (NB, don't waste your electrons defending HP--unless you are willing to defend Roy Moore in the same breath!!!).

I am not saying that there was "mens rea" (ill intent) in the inception or execution of this Kickstarter, but--small businesses (I am an expert on this...) are apt to suffer from:

Poor financial controls
Lack of real-time information
Rose-colored-glasses cost estimations*
Unrealistic revenue projections**
Doubling down on a bad strategy
Not answering the phone--it might be a complaint

# # #

* **Yes, the Tone Audio Kickstarter was a "success" in that it was oversubscribed. But... the fact that there appears to be no shortage of disappointed customers only means that the cost estimates that the Kickstarter was based on were unrealistic and therefore the revenue was: INADEQUATE.

And when I say inadequate, it is in the sense of the entire Gestalt of the business. Too many small businesses underestimate the cost of merely keeping the door open and the lights on. Focusing on the product or the project and ignoring overhead and contingencies means a high risk of running out of money.

I have at least two projects that would be potential Kickstarter projects, but I am very reluctant to go down that road. Between KS and Amazon Cash taking their cuts, there goes your top 20%, and then you have to buy and ship the thank-yous and then you have to go into production. So, at the end of the day, certain products can be kickstarted but the savings can be illusory. To play the Kickstarter game, you have to mark up the price of your product almost as much as... selling through a dealer.

So, sorry to all who got burned, but at least it was the cost of a bottle of wine, and not the cost of a luxury cruise.

jm

Edits: 12/13/17

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