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 Star Command  dev shares realities of costs after Kickstarter funding
Star Command dev shares realities of costs after Kickstarter funding
April 16, 2012 | By Eric Caoili




Though indie game developer War Balloon surpassed its Kickstarter funding goal for Star Command, an honest breakdown of its costs reveals that a fraction of those donations went toward the actual game.

Last October, War Balloon joined a fast-growing list of small companies that crowd-funded their game projects on Kickstarter, but that didn't mean the company was financially set to complete its anticipated iOS and Android title Star Command.

When its Kickstarter campaign ended, the studio counted $36,967 in pledges, almost double the $20,000 it initially hoped to bring in to fund the Star Trek-esque sim RPG. However, around $2,000 of those pledges failed to transfer.

Kickstarter and Amazon Payments took their $3,000 cut from that amount, and then the company spent $10,000 on producing the incentives War Balloon promised backers, such as posters and shirts.

With $22,000 remaining, it spent $6,000 on Star Command's music, $4,000 on setting up the company (attorneys, start-up fees, etc.), $2,000 on poster art, $1,000 on iPads, and $3,000 on its PAX East presence two weeks ago.

War Balloon was left with $6,000 after all that, which counted as income, so it gave up a third of that to taxes. The studio has actually taken on more than $50,000 in debt while working on Star Command, which releases to iOS and Android devices this summer.

In a post offering an update for those who backed the project, War Balloon said that if it could do anything different, the team would have not involved attorneys to register its LLCs and get operating agreements, as it would've preferred to handle those matters itself without spending extra money.

Offering insight to other developers interested in Kickstarter, War Balloon also warned that costs for rewards can get out of hand. "We just didn't fully appreciate the cost of printing 200 posters, shirts, and more than anything shipping," the team admitted.


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Comments


Eric Adams
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I love this game and actually wanted to help fund. :-)

Robert Boyd
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Wow, this just seems like really bad planning on their part. On the face of it, it was a very successful kickstarter but in actuality, only about a third of the money they raised, they actually spent on the game.

Kenneth Blaney
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About 2/3rds. They raised roughly $35,000 then spent $10,000 on the products they sold to raise that money and $3,000 on services rendered to them. All of the other costs were directly related to improving the game and its ability to sell.

Robert Boyd
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They raised about $34k and then spent $12k on the kickstarter rewards ($10k + $2k). They spent WAY too much money on legal stuff and I'd say the PAX East presence was a case of misguided use of money as well (advertising doesn't do you a lot of good if you're low on funds to actually make the game).

So that means that $13k of their $34k was actually used directly on the game (music, iPads, and salaries).

In any case, spending a third of your funding on physical incentives was very poor planning. They made the mistake of giving something physical at a low tier (thus resulting in shipping fees for just about every donation) and they gave two big things at the $100 tier when a single (T-Shirt or Poster) would have been plenty.

Kenneth Blaney
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Agreed on the rewards point. That shows that they didn't really plan the cost/price of the shirt too well. Additionally, they definitely overpaid their legal fees.

Herbert Fowler
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Sounds about right to me. I think people have this vision of indie devs working out of their basement and just using the money to live on until they get the game out. I would say the shirts and PAX booth would have been the only eyebrow raising bits had I contributed to this one.

Matthew Mouras
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Thanks for the breakdown. I appreciated seeing the numbers. That does seem high for representation in setting up an LLC. It depends on your state, but it was < $300 for me to setup an LLC on my own in North Carolina.

Looking forward to the game.

Kenneth Blaney
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There is a really important lesson here. Namely that just because we see a 2-man indie team that sells 100,000 copies at $20, that doesn't mean that everyone involved is a millionaire now. This doesn't count what taxes will take out, publishing/distributing fees (for instance through Steam), technology licencing fees (publishing on iOS? That'll be $100+30%. Using UDK? That's another $100+25%), fees associated with accepting credit cards... and so on.

The good news is that these percentages are all taken out sequentially instead of concurrently, so you will never accidentally end up in a situation where you owe 110% of your sales.

Josh Fairhurst
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They're doing their taxes wrong! Mighty Rabbit Studios' first year of operation resulted in a loss of $9,000 which carried over to the next year - which resulted in a loss of $13,000. At this point we don't have to pay taxes on any of our profit until we cross that $13k threshold.

If they claim those iPads and depreciate the cost, claim the travel expense, claim the license costs of their software, etc. they don't have to pay ANY taxes on that $6k (and likely won't have to pay any of their next $6k of profits). If they think they need to pay taxes on it, they really need to consult a CPA (or get one that knows what they are doing!).

Aaron San Filippo
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Yeah on the surface it seems like they need a good accountant :)

Paul Forest
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Really they need more than an accountant, they need a CFO. I'm no expert, but from what I hear, businesses are made and broken by their cash flow and it's a full-time job to bean count correctly.

Best of luck guys, the game looks fantastic.

Jacob Germany
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This seems less of a revelation of the costs behind Kickstarter and more a revelation of proper decision making and responsible financial considerations. I personally don't see why they promised the most expensive of their rewards, posters and shirts, so many months before release. Why not simply wait until after release, so the money can be spent directly on the game and post-release profits can feed back into the reward system, like many other Kickstarter projects do?

Harry Fields
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If the concept looks promising, you don't need to promote it with T-shirts and coffee cups. Reward donors in ways that don't generate any cost other than your time.

Alan Youngblood
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Time could potentially be more valuable. In most cases, if you are qualified and able to make games, it is.

E Zachary Knight
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$4000 for setting up the company? They could have had all the attorney stuff they needed for $300 from Tom Buscaglia: http://www.gamedevkit.com/

Dan Mueller
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If providing capital injection to actually build your company and/or IP, I would want a piece, meaning, my kickstarter buy-in should give me shares in the company. Sure, the developer wants to "own it all" but the reality is, who's paying for it??? If we all share in building it, why do we not all share in owning it? After all, we are participating post founder-shares and supporting WELL before profit (if that ever comes). The reward is not just the product, it's the success of the company. Further, as investors in your idea, it's BETTER if we actually BUY your product when it comes out, as we want the company to do well, not just "get my game" (if it comes out). And if the game doesn't come out with current funding, I can review company performance and position to decide if I want to participate further (since I have a vested interest in company success). That puts true meaning to our relationship... not just the quick-love state where I fall for your vision and/or dream-team, but, where the realities of the journey (as noted in article) are taken on together... we are likely stronger as a team in the long run.

The market is dynamic and a LOT happens quickly these days, which easily takes down even proven enterprises, so what you promise up front may need adjustment down the road (even if just from poor analysis up front). If you agree in some form (prefer sharing it all vs. just a pre-sell with perks), then there is one big hurdle, as you know, the government which claims to support small business and startups. Even their new bill is a slap in the face (Obama, Dodd & Frank, fix this already or get out!!!... really!!!!): http://www.facebook.com/#!/My.Right.To.Invest

Kenneth Blaney
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I'm unsure about specific rules kickstarter has, but I guess nothing would actually prevent a group from giving shares as a reward for funding at certain levels. That said, they would likely need to be incorporated before running the kickstarter to pull this off in any legal manner.

Josh Fairhurst
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Kickstarter forbids direct exchange of shares for pledges. It raises all sorts of problems with the SEC.

E Zachary Knight
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Its not just Kickstarter though. That kind of revenue generation in exchange for equity is illegal in the US. So even if Kickstarter wanted to allow it, it would not legally be allowed to.

There are some efforts currently in Congress to relax those rules, but they are taking their time.

Kyle Redd
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EDIT: Never mind. I had questioned the money they spent on PAX instead of making the game, but they specifically mentioned marketing costs on the project page, so it's not such an issue. Would love to see a "Delete Comment" option on Gamasutra sometime.

Jeremy Reaban
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Probably would have helped to generate more funds if the game had been on the PC as well. An X-com style space game? I'd have been all over that, if I could play it.

But yeah, it sounds like they didn't have a solid business plan and didn't spend their money wisely. They got taken by their lawyer, too.

Tyler Forsythe
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Thanks for sharing, War Balloon. This sort of info is gold for anyone considering doing a Kickstarter of their own.


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