Using Kickstarter to raise money for businesses

Earlier this week, my local newspaper ran an article about a beloved coffee shop launching a Kickstarter campaign to help fund its renovation. My immediate reaction was one of minor disgust. It seems wrong for an established business to crowdfund an investment in the business. And let’s be clear, that’s what this renovation is.

The Kickstarter rules don’t expressly prohibit this. In fact, they seem to invite it. And a neighborhood coffee shop is not the same as a national chain. Nonetheless, it’s counter to what I view as the intent of Kickstarter.

In my mind, Kickstarter and similar sites are for funding creative, independent works that the creator can’t get traditional funding for. An established business should be able to secure a loan if what they’re doing makes sense, no?

I am perhaps being a little hypocritical, though. The first Kickstarter project I backed was LeVar Burton’s revival of “Reading Rainbow”. That was certainly a business endeavor that he could have probably obtained money for (or perhaps he could have self-funded it). The nostalgia certainly helped open my wallet.

Kickstarter is a unique, though. A fully-funded project is not guaranteed to be successful. Many games and hardware projects have fizzled, leaving backers with little to show for their money. In that sense, it’s like an investment, except for the part where there’s no equity. Maybe it’s more like a donation. But why donate to a for-profit project?

Edited on January 12, 2018 at 12am EST: As Dave points out below, Greyhouse is a not-for-profit. This makes it more confusing, since donations would have tax benefits to the donor and enable Greyhouse to take advantage of employer matching. Using Kickstarter seems like a less-beneficial route for them. It’s also possible that Greyhouse is just saying they’re a not-for-profit without obtaining any IRS status. The Campus House organization that founded Greyhouse is a 501(c)(3), but it’s not immediately clear to me if Greyhouse is a legally-distinct entity or not.

3 thoughts on “Using Kickstarter to raise money for businesses

  1. The coffee shop in question is a not-for-profit organization. Read the about page.

    In general, I do agree with you on this. I also was “huh?” There’s just an odd wrinkle in this.

  2. Oh, I never knew that. The Campus House organization is a 501(c)(3), but it’s not clear if Greyhouse is a legally-distinct entity. If it’s not, using Kickstarter makes it more confusing, because going the traditional donation route allows donors to claim potential tax benefits (and they could still provide gifts) and would enable employer donation matching.

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