Misleading headline. Here's a better summary:

$36,000 "raised"

$32,000 received after kickstarter fees

$12,000 spent on rewards

$2,000 spent on taxes because we didn't understand how LLCs work

$18,000 left for our company and game development (including $5,000 spent on incorporation, which seems a bit high for an LLC but not a total waste, and $3,000 attending PAX, which probably was a waste but you can't blame expensive lawyers for that)

You could be reasonably accurate and still sensational with a "How we lost 50% of our kickstarter funds to overhead" headline, but "ended up with $4k" is ridiculous and not supported by the article.

I don't understand this at all. If they hadn't figured out exactly how much it would cost to .. buy ipads, hire lawyers, have art and music created, buy t-shirts etc etc... they why did they go on kickstarter with that figure in the first place ? In fact the only unexpected / unknown I can see in the post was 2k in no-shows. I mean... even the tax element was foreseeable surely ??

Does the ease of asking for money on Kickstarter give too much incentive to not properly plan?

There isn't due diligence on the part of supporters, so supporters are ultimately funding based on piece of marketing material and not a cogent business plan. I couldn't imagine expecting someone to give me $36k for my business without that person having a somewhat realistic and truthful plan on how that money will be spent.

I don't follow Kickstarter projects, so I don't know how common situations like this are, but if I were a supporting Kickstarter projects, I'd be upset if money I pledged was being spent for things other than what was stated. Fees, taxes, and deadbeats are acceptable and should be expected by supports. But investing in lawyers, hardware, etc. isn't nearly as clear. If this wasn't mentioned in the "ask", I'd assume that this stuff has either already been taken care of or the people behind the project do not have their act together.

And why would you provide t-shirts are certain levels without getting a realistic estimate of what those t-shirts cost?

I feel like the title is a little misleading.

I expected an article about inadequate fulfillment on KickStarter's part, but it turns out that the 32k loss was more a result of tax laws and the project's spending decisions than anything else.

It's clear it's all in good faith but they were at least naive since their project page clearly states the funds were needed to:

- Hire extra talent for things like music, sound effects and additional platform development like Android

- Promote and market to help sell the game and fund future expansions and possible sequels

- Localize the game to other regions like Europe and Asia

nowhere did they write they needed money to set up a company and pay the related fees and buy iPads. I'd be pretty pissed off had I given them money for something specific and then discover the money was used for something else. no?

I could observe a recurring point in kickstarter postmortems here: t-shirts end up being way more expensive than you think they will be.

For me, if I got a "reward" for funding a project on Kickstarter and then found out the project itself was in dire straits because the rewards were unexpectedly more expensive, I'd be pretty tweaked at you. if I fund a kickstarter project, it's because I want the PROJECT to succeed. The reward is the icing on the cake. This goes doubly so in a project where the end result of the project is something that's available in seemingly limitless quantities like software. (edit: As opposed to a project for a physical item, where the "reward" for funding is some flavor of the item being produced.)

Fund the project. Apologize for shirts and posters if they can't happen, and offer a more reasonable alternative for rewards if you can and when you can. Most people, I think, would understand that, especially if you deliver on the project as a whole. But I'd rather have the software and no t-shirt advertising it than a t-shirt advertising a piece of software I might never see.

Also, using your kickstarter funds to go to PAX was the biggest waste of all the project money you got. Yes, I know the visibility you'd get at PAX, but no, don't do it with your project funding unless somewhere in your project plan you stated you were going to spend some of those funds going to PAX and advertising vaporware. Your project funders were funding the project, not the advertising and the free ride to PAX.

Remember what you were asking for funding for - the game. Not the rewards, not the business setup costs, not going to PAX, not anything but the software. I'd even excuse the use for taxes because you didn't understand how LLCs work, but that'd only be in the realm of making sure your project stayed in good graces with the IRS so you could... deliver the project.

    Hire extra talent for things like music, sound effects and additional platform development like Android
    Promote and market to help sell the game and fund future expansions and possible sequels
    Localize the game to other regions like Europe and Asia

Is there anyone specialized in kickstarter pledge handling? I could see a startup offering package of basic rewards production, handling and shipping (posters, tshirts, mugs, etc) to project owner.

Since it all look really time-consuming for someone not in the business of producing and shipping things.

I'd have hoped kickstarter would at least vet the rewards offered for viability on new projects. Seems not?

sounds like someone doesn't have the first clue about running a business, at least from a financial standpoint.