The Finances Behind Kickstarter

Just how well does the recent Double Fine Adventure project on Kickstarter compare to the rest of the site's business? And how well does Kickstarter do on its own? Warning: Math ahead!

Basil Allen, Blogger

March 14, 2012

Now that the dust of the Double Fine Kickstarter has finally settled and the dust of the Wasteland 2 Kickstarter is just getting kicked up, I feel it’s time to put the sheer numbers of these projects into perspective.

Specifically, I’m curious as to how these numbers compare to Kickstarter’s normal budget.  Are these truly the groundbreaking events we perceive them to be, numerically speaking?  And just how well does Kickstarter benefit?

To start, here's some data on the Double Fine Adventure project:

\$3,336,371.00 pledged

Duration: ~1 month

For Kickstarter itself, I am taking data from October of last year.

According to this, Kickstarter is currently averaging ~\$2 million in pledges a week, though it is difficult to approximate, since Kickstarter merely states that it is averaging “more than” \$2 million a week.

However, this is likely only \$2 million in all pledges, both for successful and unsuccessful projects.  Since money changes hands only when a project is successful, we need a percentage of how much money pledged eventually goes to funded projects.

(Side note: Although Kickstarter notes that 44% of projects ultimately get funded, this does not take into account the monetary value of funded vs. unfunded projects, so we cannot use this figure for this purpose.)

Here are some more figures from the article concerning total pledges since the site’s inception:

Dollars Pledged: \$100,729,560

Dollars Collected (successful projects): \$84 million

This indicates a success rate of 84% for total money collected.  (This rough estimate can be corroborated by the figures that 89% of backers have funded a successful project, and 84% of total backers have only funded one project)

So, \$2 million x 84% = \$1.68 million successfully pledged per week

\$1.68 million per week x 52 weeks = \$87.36 million per year

\$87.36 million per year / 12 months = \$7.28 million per month

Now we can compare the total Kickstarter funding per month to the Double Fine Adventure funding per month.

\$3.34 million / \$7.28 million = .4588

In other words, the Double Fine Adventure project increased Kickstarter’s average monthly intake in February/March by 45.88%.

This is pretty damn incredible.

What is perhaps even more incredible, however, is just how well Kickstarter was doing before this project was even conceived.

Consider that the site takes 5% of all money successfully pledged.

\$7.28 million per month x 5% = \$364,000 per month profit.

To put this figure in easily-understood terms, let’s see if we can estimate the average yearly salary for an employee at Kickstarter.

Unfortunately, it is near impossible to determine what percentage of the site’s budget is dedicated to payroll.  Some estimate that a normal sustainable business should be aiming for at least 15%, but I have to wonder just how much overhead there is for an online company, one that acts purely as a facilitator of funding. For sake of estimation, let’s simply bite the bullet and take that low figure of 15%.

\$364,000 per month x 15% = \$54,600 per month for payroll

If we take the figure of Kickstarter having 12 full-time employees (or, as stated elsewhere, between 1-10 employees):

\$54,600 / 12 employees x 12 months = \$54,600 per year per employee.

Take into account that this figure is at the low end of possible payroll budgets.  By all accounts, the Kickstarter business was quite sustainable even before recent events.  And their business is only growing.

Given just how well the crowd-sourcing model of funding is doing, I wonder just how far the envelope will be pushed in the coming year.  A million-dollar project for Wasteland 2 has just begun for the next month, and seems on track to make its goal.  How many more projects of comparable size are likely to pop up, and how many will consumers be ready to support before we get tired/broke?

On the other hand, given how well Kickstarter is doing, is it likely that other crowd-sourcing sites will pop up, perhaps competing at a lower rate of take than 5%?

I certainly don’t know the answers to these questions.  Instead, I’ll leave you with this little tidbit from Kickstarter’s October blog post:

“Last week brought an additional milestone: Kickstarter backers have now pledged more than \$100 million to projects. To put this in some context, the 2011 fiscal year budget for the National Endowment for the Arts is \$154 million. At the current pace of more than \$2 million in pledges each week, Kickstarter backers are pledging more than \$100 million a year.”

Wow.