Kickstarter Companies: “Kicking” it with the Government

Posted in Featured Post on by .

Kickstarter is a crowdfunding platform for financing business projects. It’s based in the United States and is currently the largest such platform. The term “Kickstarter company” is often used generically to describe any business venture that’s financed through crowdfunding. Kickstarter projects are available in a variety of categories, with technology being the most useful category for government procurement. The current trends in defense spending frequently favor Kickstarter companies, which typically have a smaller budget than traditional government contractors.

Overview

Kickstarter allows a business to circumvent the usual methods of procuring investment capital, which is often prohibitively time-consuming. A project creator specifies the minimum funding goal and a deadline, and no funds are collected if the project fails to meet the funding goal by the deadline. This system helps assure backers that the project won’t proceed without adequate funding. Kickstarter project creators must live in Australia, Canada, New Zealand, the United Kingdom or the United States, while backers may live anywhere in the world.

Kickstarter collects 5 percent of the total funds raised for the project, and Amazon collects another 3 to 5 percent, depending on the terms of the project. Information on a project remains accessible to the public after the funding is completed, and Kickstarter does not claim any ownership of the project. Backers have no guarantee that project leaders will deliver on any promises, although leaders may be liable for monetary damages.

History

Kickstarter businesses seeking to do business with the government should carefully consider recent history when evaluating their opportunities. For example, the demand for services has increased much more quickly than those for products or research and development. However, this growth was also restricted by combat operations in the Middle East over the past 20 years. These operations account for the general increase in the Army’s share of contract awards along with a corresponding decrease in Air Force and Navy shares.

The top five defense contractors have remained unchanged for the past 15 years, although the top 20 contractors changed significantly during this period. Health care experienced the greatest change in the top contractors for services while vehicle manufacturers and energy providers accounted for the greatest changes in products. These results indicate a steady turnover in the top positions rather than a small number of contractors dominating their fields.

Trends

Kickstarter companies also need to anticipate future changes in order to maximize their opportunities in government contracting. The current trend in the awarding of U.S. Department of Defense contracts is toward increasing competition as opposed to contracts awarded on a noncompetitive basis. Fixed-price contracts are also becoming more common than cost-based contracts. Contracts that combine fixed prices with cost-based spending have been virtually nonexistent since 2010 and aren’t unexpected to make a comeback in the near future. This trend favors small contractors like Kickstarters, since combined contracts tend to obfuscate the actual allocation of funds.

Spending on infinite-delivery contracts is rising sharply in the DOD, with a corresponding drop in definitive contracts. This trend is a disadvantage for Kickstarters, since indefinite contracts are less efficient than definitive contracts. Despite this recent development, small DOD contractors can still be expected to gain ground against medium-sized contractors.

Check out some options for starting your own, or see what others have done here: https://www.kickstarter.com/

Sources:

http://csis.org/publication/defense-contract-trends-0, https://www.kickstarter.com/help/search?utf8=%E2%9C%93&term=amazon

Articles published on ACDi’s site are a compilation of various authors, from employees to professionals in the industry that come from a range of backgrounds and skillsets to provide you the most reading satisfaction.

Leave a Reply

Your email address will not be published. Required fields are marked *