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A few weeks ago, I wrote an article about the primary forms of business crowdfunding — Rewards, Equity and Debt — and how they work. Well, forget what you know about business crowdfunding (temporarily at least!) because Kickfurther has come along to upset the apple cart.
“Finance your next inventory purchase with the people who <3 your brand.”
Launched in 2015 by Sean De Clercq, Kickfurther takes a unique approach to crowdfunding. It’s a platform for businesses that want to raise money to purchase inventory. With Kickfurther, instead of raising money from backers in return for gifts or equity, you, the retailer, offer people the chance to buy inventory on consignment. You then offer a specified rate of return and a timeframe in which you expect to sell your inventory and pay back your supporters with dividends. De Clercq explains the concept in the video below:
I’ll use a real-life example to further explain how it works. The Vaportini is an alcohol vaporizer that lets you deliver alcohol right into your bloodstream, bypassing all those silly mediating organs that never did anyone any good anyway. With their Kickfurther campaign, the company solicited funds from The Crowd for a period of 12 months, offering a 16% profit margin and a stipulation that 88% of the inventory must be sold before those who helped fund the inventory purchase could earn back their principal and payout.
One aspect of this unique crowdfunding arrangement is that all backers get their own Kickfurther store in which they can sell the product inventory they just helped to finance. Every backer of the Vaportini got the chance to sell Vaportinis via their own Kickfurther store and make a profit from each unit sold.
It’s a distinctive arrangement, to be sure, and one that makes sense if your company produces goods to sell, requires money to finance an inventory order, and has a brand that commands enough visibility and loyalty to inspire customers to become a part of the sales process.
In actual fact, this arrangement was initially found to be lacking — too many of these consignment ventures were failing, leaving backers high and dry. As a result, in 2017, Kickfurther introduced their ‘Pay As You Go’ financing system. Through the program, companies can raise funds as a percentage of their total income over the previous 12 months and sell through multiple sales channels. In general, customer feedback so far confirms that companies employing this system have been quite successful in their campaigns. Stricter vetting measures have also been implemented in an effort to make investing through Kickfurther a safer prospect.
Let’s delve further into Kickfurther’s unique brand of consignment crowdfunding.
Table of Contents
Kickfurther gives small businesses the ability to crowdfund inventory purchases. According to their website:
Have a strong brand but not enough cash to pay for your next order? Kickfurther helps you grow with inventory fundraising from your supporters and fans. When you sell your inventory successfully, you pay your buyers, not the bank.
Unlike some crowdfunding platforms, Kickfurther has a screening process to weed out companies that aren’t a good fit for the platform. Their vetting process includes:
- Sales history and reporting including revenue documentation
- A credit report
- Personal credit check for the business owner
- Verifying the business’s legal name with the Secretary of State in the state the business is located
- Verifying the soundness of the business’s supply chain
- An internet search for negative/criminal news associated with the business
- A BBB lookup of the business to check for complaints
- Any pertinent purchase orders or any other information listed in the Credibility Metrics on their Co-Op
Businesses using Kickfurther are also required to “adhere to different protections for our community depending on the dynamics of their supply chain.” They must also communicate with their backers at each stage of fulfilling a purchase order. Additionally, a business must have at least one successful production/sales run under its belt, and its inventory must have a shelf life of at least one year.
Clearly, launching a Kickfurther campaign isn’t something an entrepreneur can just do on a whim. It’s a narrow-casted service targeting a very particular slice of the market. Lots of preparation is required to use this platform.
Terms & Fees
Kickfurther’s crowdfunding campaigns are fundamentally different from Kickstarter and Indiegogo campaigns, so it’s hard to do a direct comparison. A Kickfurther crowdfunding campaign can last as long as the company desires, but once over, the company must specify a time frame for producing the goods, offer a specified rate of return, and lay out a schedule of payout dates on which the company must report on inventory levels and pay its backers (or “buyers”) for the products sold during the period covered by the payout date. The only point in the process where Kickfurther takes any fees out is during the sale of the consigned goods when a 1.5% service fee is assessed.
As I said, companies are extensively vetted before being allowed to use Kickfurther’s platform; they must have a demonstrated record of success and a product with a shelf life of at least one year. And although I warned against making direct comparisons between Kickfurther and other crowdfunding platforms, I’ll break my own rule to note that with competitors like Indiegogo and Patreon, there is no process to endure whatsoever — just set up your campaign and launch it.
On the other hand, once a company has their campaign up and running, the nature of the platform means that running a Kickfurther campaign requires much less of a business’s time than running a crowdfunding campaign on one of the big-name crowdfunding sites.
Sales & Advertising Transparency
Kickfurther is not particularly deceptive in its promotional materials.
Customer Service & Technical Support
Negative Reviews & Complaints
User reviews of Kickfurther reveal a number of investors who were burned by companies using the platform, with many investing in campaigns that ultimately faltered, paying out a negative ROI. However, many of these investor complaints arose from the time before Kickfurther enhanced their vetting procedures and refined its offerings.
One commenter made the point that investing on Kickfurther is a tax-inefficient proposition, as Kickfurther profits are taxable as ordinary income, not capital gains.
Kickfurther is currently rated an average of 4.7 out of 10 by users on Trustpilot, with the aforementioned backer complaints dragging down the average. One reviewer opined “this isn’t investing, it’s pure gambling.” Reviews from the business side are notably kinder, however, with many business owners reporting good experiences with the company and staff while vowing to use Kickfurther for future campaigns.
Positive Reviews & Testimonials
In their review of Kickfurther, Fitsmallbusiness.com noted that Kickfurther’s crowdfunding campaigns can make good business sense for small businesses:
If you get a short-term working capital loan from an online lender to purchase inventory, expect to pay around 40-80 % APR. In contrast, the annual interest rate on a Kickfurther loan ends up being around 20-30% on average.
The same review takes note of the fact that each buyer can sell your products in their own Kickfurther store, thereby promoting your brand and widening your sales channels.
For the business that finds itself in the platform’s sweet spot — popular brands that need $$$ to fund an inventory order — Kickfurther is an interesting value proposition. It’s not the most straightforward way to raise money, and it’s a platform that had teething problems as it established itself, but the platform has seen lots of retailers achieving funding success as of late.
That’s not to say that there’s no risk involved, however. Find yourself unable to properly compensate your buyers, and what remains of your inventory will be taken by Kickfurther, which may then liquidate it at discounted prices. We’re not playing touch football here. That said, the increasing success rate for retailers on the platform has led me to boost Kickfurther’s rating to four stars. Their conception of crowdfunding may be hard to explain succinctly, but it has begun to bear fruit.