5 ms·

What the hell these game developers did with your kickstarter money

113 points by Liu 14y ago

tptacek 14y ago
As they said: they clearly overpaid on company formation ($4000 for legal and accounting, which could have been accomplished to the same effect for around $500 if they were frugal, including filing quarterly estimated returns). But still, they'd have ended up with ~$9000 gross instead of $6000; the point still stands. Some of these Kickstarter numbers look more game-changing than they really are. But whatever, I'm not a games industry person; I'm really just here to chime my recurring bell about "don't put your company together on a napkin, get the LLC done; it doesn't have to be expensive and it will help you down the road."
- jay_kyburz 14y ago
  I'm in the indie games business and I can say they overpaid for everything. 6K for music should be 1-2k at most! Poster Art - What's wrong with those awesome sprites that Kotaku used. Should be 0. IPads? More that one? PAX East? - That's a holiday not a legitimate business expense. This is why they say so many people don't make their money back in the App Store any more. You can't spend indie money like you work for a AAA studio.
  - tptacek 14y ago
    Not to disagree (I don't know enough about the industry to disagree) but they got the iPads to show the game teaser at PAX.
  - jay_kyburz 14y ago
    Actually, now that I read my own comment I realize it makes me sound like a cheap and grumpy old man. Perhaps they want to make a big budget game with really great music from their favorite artist, really awesome posters, and I know of course that each dev should have an iPad. You might even need all the different kinds.
  - InclinedPlane 14y ago
    "PAX East? - That's a holiday not a legitimate business expense." For a game developer? No, it's a fantastic way to raise the profile of your game. You get the most avid gamers interested in your game (who will spread the word if they like the game) and you get press coverage too. For an exhibitor PAX isn't a 3 day vacation, it's 5 or 6 days of working 12+ hours days, most of them staying chained to their booth in their expo hall.
    - jay_kyburz 14y ago
      Nar, a game as great looking as theirs would get the press anyhow. The press are dying for more interesting games to write about. You raise another good point though, not only is it 3k, but its 5-6 days at 12+ hours. A whole week of dev time lost to the event. Events are great fun, but if you don't have money you don't know what to do with, I don't think they are a very good investment. Not much bang for the buck I don't think.
      - corin_ 14y ago
        I've been in the fairly unique situation of seeing the results a wide range of companies in the extended games industry (from top games publishers to indies to gaming hardware... etc.) got from exhibiting their products and I couldn't disagree more about it being a good investment.
        jay_kyburz 14y ago
        Hey Corin, I'd love to hear more about why you think so. I'm always trying to work out how to best spend my marketing money (and energy). Do you have any metrics you can share about how an appearance at a show relate to final game sales? Or even press coverage? For example, if they were to spend that money on banner advertising they could generate say 6-10k clicks through to their website.
        corin_ 14y ago
        Press coverage - not metrics, but I've seen an awful lot of stories come out of events, and most importantly an awful lot of journalists meeting exhibitors, from bloggers to mainstream websites or newspapers. Obviously this doesn't guarantee coverage, but it puts the ball in your hands, once you're stood talking to a journalist while standing over your product it's time to knock it out of the park. I don't really have any customer data I can share with you, the sort of selling points generally used are more vague - such as "The average spend per visitor at last year's event on products sourced at the show was £767, a total audience spend of £79.8m" (taken from the sales pitch of a 2012 event). The overall focus of selling - though I'm not actually in sales so this isn't my direct area - is about the size of the audience, and what sort of demographic they are. I don't know if events are a good use of your money when it's as tight as that, i.e. if you can chose between $3k on an event or $3k on a PR company, but only one, as I can't think of any exhibitor I've ever had that paid that little, or that was small enough not to have marketing budget around it. The single biggest argument I can give, I think, is that if you go to PAX you're going to get more people looking at your game than you'd get clicks for $3k online - and when it comes down to it, are you going to sell your game better by having somebody look at your website, or stand in front of you try out your game? Incidentally, what adverts are giving you that click-rate, and do you have any calculated CPA figures? edit: I just want to note that like I said above, my experience comes more from big budget companies like big studio publishers rather than indies, so I can't necessarily say events are or aren't a great idea for people like you, just that they do offer bang for buck.
  - EricDeb 14y ago
    Agreed. It's not that these weren't legitimate business expenses but if you are trying to start a company on a shoe-string budget you should really spend considerable time trying to get the best deal possible and limit all expenses to the bare minimum.
  - phaus 14y ago
    "IPads? More than one?" A better question might be, "iPads? Why are these people soliciting money from people to make an iPad game when they don't have any experience developing for the iPad?"
    - sukuriant 14y ago
      Theirs broke? They've done iPhone development?
  - marquis 14y ago
    >6K for music should be 1-2k at most! For good music? For music that you don't want to turn off the second time you play it? Don't undervalue good production values.
    - jaems33 14y ago
      Seriously. Oh development can be 5k and above but something also important like music? Pssh, screw that...
      - marquis 14y ago
        The developers still get to sell their product right? This is a Kickstarter - they get to keep making a profit. If they want to bootstrap then sure, use the most cost effective method but if someone has given you $20k to get a beautiful game made, make that beautiful game. I love good music in my media experiences and I'll pay for those games that have that.
- guelo 14y ago
  I think I disagree, for a $30k investment all the paperwork is useless and distracting from getting things done. Just do a handshake agreement with your partners and get down to doing the real work. After the $30k is gone, which will happen surprisingly quickly, you can look at your business more honestly and see if figuring out the paperwork is even worth it. I wouldn't even bother thinking about taxes, screw the IRS, there is no way for them to know about that $6k salary if you don't tell them, if you're successful later you can have an accountant figure out the mess. $30k is a short window to actually get something out the door, don't let anything else distract you.
  - tptacek 14y ago
    "there is no way for them to know about that $6k salary if you don't tell them" Best advice ever.
  - shuzchen 14y ago
    I don't entirely disagree with your position, but considering the publicity and press coverage they've received (both before and after the kickstarter funding), it's harder from their position to feel like they can safely slip under the radar. Also, from the IRS pov it's not a $6k salary, it's $30k+ income. It's only after you deduct all the business expenses does it come down to $6k profit. I'm not entirely certain how kickstarter works, but I would be surprised if they didn't file paperwork with the IRS when they transfer the $32k-fee to the developers. Vegas casinos report winnings to the IRS at a cut-off point way below that.
    - tptacek 14y ago
      They file 1099's like everybody else does. If you don't file, the IRS will just impute taxes to you at the least favorable possible rate, and probably not tell you about it until after you've incurred penalties.
egypturnash 14y ago
"Now, right off the top you had $10,000 for prize fulfillment." The lesson to be learnt here? Very carefully consider your bonus goods. Will making and shipping them cost more than the extra profit they make over the base price? Price 'em out beforehand. And build in a healthy margin of error in case you are wrong.
- andypants 14y ago
  Kickstarter recommends providing intangible rewards. Some people just don't listen to that advice. To me, it just indicates a lack of creativity. There are so many ways to reward people when making a game, such as allowing funders to name in-game characters or locations, or to have a say in some of the game design. Posters and t-shirts seem like very lazy rewards. And costly of course.
benologist 14y ago
Direct link instead of Gawker's shallow little summary wrapped around a giant quote from the direct link: http://www.kickstarter.com/projects/starcommand/star-command-sci-fi-meets-gamedev-story-for-ios-an/posts/208395 http://www.kickstarter.com/projects/starcommand/star-command...
aristus 14y ago
"Offering labor-intensive rewards that do not move your project forward are a net loss." http://carlos.bueno.org/2012/03/rocking-kickstarter.html http://carlos.bueno.org/2012/03/rocking-kickstarter.html
- jrockway 14y ago
  But remember, people on Kickstarter are pledging money, not investing money. So if you don't offer good rewards, you won't get any money, and your project will never happen.
  - waterlesscloud 14y ago
    Unless of course the project itself is the real reward. I think the tiered award thing hurts a lot of projects by distracting from the basic fact that what you're really contributing to is making the project real.
  - danneu 14y ago
    I'd wager that people pledge because they want your product, not because they get t-shirts and mugs.
guelo 14y ago
We keep hearing kickstarter projects complaining about tshirt costs, maybe kickstarter should start warning people about this.
- hack_edu 14y ago
  Or someone should make a startup that helps startups sell shirts on Kickstartr, a startup!
  - harlanlewis 14y ago
    Kickstarter isn't far from its own optimization industry - like SEO and social media consultants, but guidance for presenting fiscally impossible idea as plausible and tantalizingly close. Then just make a slick concept video, keyword that baby up, and astroturf some buzz. It can't miss!
- waterlesscloud 14y ago
  This is the same story that was on here a few weeks ago.
- andypants 14y ago
  Kickstarter does warn people about this. People should read the text on kickstarter more, or listen to advice more often.
MengYuanLong 14y ago
I am starting to love kickstarter more and more. It seems like it will be full of business 101 case studies before the year is out.
wilfra 14y ago
Ignoring the suspiciously round numbers and the fact that they grossly overpaid for basically everything as an indie dev on a tight budget, here is what they raised money for: "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" Several of the things they spent money on have nothing to do with any of those and thus the money they spent on them should not come from the money they raised on Kickstarter. IMO.
- FuzzyDunlop 14y ago
  "Promote and market to help sell the game and fund future expansions and possible sequels" Funding the game in development may have been more prudent.
bstar77 14y ago
I personally do not understand why they would have paid for all of the promotional material before the game was near completion. But I will say... that demo is amazing and I am ready to throw money at them.
forrestthewoods 14y ago
Damnit people. I've lost track of how many times the Star Command Kickstarter story has been misrepresented. The implication is that only $4000 (post tax) was spent on the game and that's an outright lie. They spent 6k on music, 5k on marketing (poster + pax), and 1k to development/demo hardware. That's not necessarily ideal but it's not entirely unreasonable either. You can argue the marketing/hardware issue perhaps, but 6k went directly into the game in the form of music. The real lesson to take away from Star Command is their under-estimation of time and money required to create, package, and ship backer rewards. That's the real danger that other projects should be wary of.
- mattmanser 14y ago
  Huh, seems like a perfect representation that very little money actually went to development to me! Sounds like they didn't do their sums. Also how did they spend so much money on incorporation, costs about £25 ($40) over here.
  - mparlane 14y ago
    One pluralised word: Lawyers.
    - mparlane 14y ago
      I didn't expect this comment to get so much downvoting. My guess is merely that any mention of them is bad. I was just trying to say that they didn't spend 40$ on opening their business, they spent $4000 by getting a lawyer to make sure they opened it correctly.
  - forrestthewoods 14y ago
    They are a three man team working without any pay. What did you expect the money to go to? Proper salaries and benefits for the team would be a few hundred thousand dollars, not 36k. Spending $6000 on music counts 100% as "to development" and is perfectly reasonable. For PAX if anything they should have spent more money to create a bigger presence.
ChuckMcM 14y ago
Interesting post. I wrote an article on comp.sys.amiga about why software costs so much as a way to try to illuminate the unseen costs in development and support. I really do think that folks should create the LLC first, get that setup and a copy of Quickbooks or what ever and "practice" running a company first. Seriously, go out and create an LLC right now. Not only will you learn a lot but the cost is moderate. Read the nolo press books, etc. Do that and the rest is much easier.
zephjc 14y ago
All I can think of is either complete amateur hour, or a Kickstart project inspired by Mel Brooks' "The Producers"
macspoofing 14y ago
>Leaving us with around $6000, which is income, so that was taxed That's just bad accounting. Making a game costs more than $35k. There should be nothing left to tax.
- scott_s 14y ago
  And why does making a game cost more than $35k? Because you need to pay the people making the game so they can eat and pay rent. And what do we call the money that we give people for that purpose? Income. Which is taxed.
jbellis 14y ago
Link to last month's discussion of this story: http://news.ycombinator.com/item?id=3847373 http://news.ycombinator.com/item?id=3847373
patio11 14y ago
Software development on a budget of $30k getting described as lavish. Ahh, gamers, they're so cute. Poorly-informed over-entitled misanthropes, but cute. "You're doing your shoestring budget wrong! You should listen to me! I've never shipped anything longer than a blog comment but my years of experience as a pir^H^H^H consumer mean I really know this job well!" P.S. A business where the successful outcome is the principals end up in personal debt is neither a business nor successful.
- elithrar 14y ago
  > Ahh, gamers, they're so cute. Poorly-informed over-entitled misanthropes, but cute. As a gamer, I completely agree with you here. The entitlement has grown rapidly over the past 2-3 years, and in my opinion is only hurting those in the industry looking to be adventurous. Something like Minecraft might be the exception, but look at the shenanigans surrounding the Mass Effect 3 ending (which was not as bad as some would have you believe)—BioWare is releasing DLC to re-work something that was just a clash between (entitled) gamers who interpreted advertising in their own way, and the artistic direction of those who made the game. Considering the backlash, do these gamers think a studio like BioWare (or publisher like EA) will risk a game that isn't just a Call of Duty sequel again? Sure, but the chances are less, and the resultant game is going to tread a significantly less-risky path. The comments regarding the $1000 (nothing!) spent on iPad hardware are just inane.
  - sesqu 14y ago
    The third installment of a series that has received universal critical acclaim and inspired several spinoffs, books and movies is hardly a risk, no matter what ending you put on it. I have no idea what the meat of the argument was over, but it seems like the fans complained about the ending taking it too safe. I don't see how that supports your argument.
  - danilocampos 14y ago
    The Mass Effect 3 ending was shit. Not artistic, not creative. Shit. A piece of storytelling so completely divorced from the previous narrative tapestry as to make even professors of English literature wince with disappointment. Its only explanations are rushed development or a lapse in creative oversight. On top of being shit, it was not at all what was described by the project leads in interviews or in advertising. Game consumers are "entitled" to receive what is advertised – return policies don't let them vote with their dollars once a deception is unmasked. You sound like you're parroting the narrative of an industry-captured press, rather than detailing first-hand knowledge of the situation.
damian2000 14y ago
Reading this it wouldn't surprise me if the whole kickstarter idea came from some shady t-shirt manufacturers as a way to drum up more business. ;-)
robomartin 14y ago
I don't know these guys. My comment isn't aimed at them at all. I see a lot of projects on Kickstarter where I find myself immediately questioning the numbers. Having the scars to prove that I've run a business or two I generally have a good sense for costs, process and other elements of typical projects. In so many cases on Kickstarter the numbers are so awfully low that you have to wonder what will happen if the project reaches the stated goal and is funded. It is very easy to end-up working weeks-upon-weeks for $0.75 per hour and have nothing to show for it but a huge loss at the end of the process. My recommendation: If you are thinking about posting a project to Kickstarter and don't know much about business (profit, loss, fixed costs, variable costs, development costs, tooling costs, regulatory requirements, etc.) spend a few hundred bucks to get advise from someone who does. I would run your numbers by a CPA and some of the other stuff by, perhaps, an attorney with experience in the field. If it is manufacturing related, there might be regulatory issues (UL, CSA, TUV, CE) that an experienced manufacturing engineer might be able to help you with. Be careful, regulatory testing alone can easily get into the tens of thousands of dollars. In general, don't post a project to a site like Kickstarter unless and until you have had the financial model for your project verified by those best-qualified to do so.
mlguenther 14y ago
Any good accountant will tell you that you don't have to pay tax on money that has not yet been earned. I've seen two of these article for two different game devs, and they both take into account tax, which should not be part of the equation until the game is actually released.
- teamonkey 14y ago
  Kickstarter funds count as earnings.
  - mlguenther 14y ago
    I'm sorry, but you are wrong, any basic accounting knowledge (I am a CPA) will tell you that income can be recognized when EARNED, not when received. This is something the IRS agrees with. Kickstarter funds have not been earned until the product is delivered
    - lusr 14y ago
      Aside from determining earned vs. received, surely the Kickstarter revenue must still be offset against expenses before tax can be calculated?
      - mlguenther 14y ago
        Yes, there are many ways to offset the income with expenses. Though what most Kickstarter video game devs are finding out is that they may not use all of the money as expenses in the first year. If you are accounting on a "cash" system, you would have to pay tax, if you are accounting on an "accrual" system, you would not have to pay tax until the game is released, regardless of how many expenses you have.
gavanwoolery 14y ago
$30,000 can take you a long way. I stretched $5000 for 6 months producing a game, living like a peasant (in California, no less). These people just spent their money foolishly on a number of items. Salary is number one, whatever you have left after that can be used for other stuff. Why they did not budget salary first, I have no freaking idea. What is annoying is that it gives Kickstarter projects a bad rep, when there are those (such as myself) looking to use Kickstarter for legitimate/better thought-out purposes. And for the record, I looked forward to this game in particular, even tried to donate money to them outside of kickstarter... But please don't get me started on YogVentures (ugh)... http://www.kickstarter.com/projects/winterkewlgames/yogventures http://www.kickstarter.com/projects/winterkewlgames/yogventu...
- ricardobeat 14y ago
  What's your opinion of YogVentures? I have a suspicion that developing an open-world game not based on voxels is a very challenging thing, but then I don't work in game dev. edit: should've read the full description. Are the interpolated lines also used for collision/physics?
  - epaik 14y ago
    Just wanted to clarify, they are actually using voxels. The technique used to achieve a smooth voxel world is called Marching Cubes. Although the voxels are cube in nature, the marching cubes algorithm smooths out the appearance of these cubes depending on their proximity to other cubes. This allows for a smooth world, while allowing for dynamic manipulation of the environment.
    - deleted 14y ago
      [deleted]
  - gavanwoolery 14y ago
    My opinion is that it is kind of a scam. If they can pull it off, I would love to be proven wrong. But so far all they have is a no-name development team that does not even have a website, and it looks like they just used a prefab engine like Unity to produce their demo video. I've developed with voxels for over 10 years...Marching cubes is nothing new (in fact, I "invented" it on my own without knowing that the algorithm existed) - and how they model the world is the least of their concerns. Making an open world game of any sort is very challenging, and no one has done it that successfully to date (even Minecraft is still more of just a sandbox than a game, although I respect it nonetheless). Not that I would recommend against developing this type of game, it just probably not the first type of thing you want to tackle without sufficient experience (I should know, I've scrapped over 8 engines working on open world games). Again, I have nothing against the YogCast people, but if they fail miserably it makes raising money for other Kickstarter projects more difficult.
jay_kyburz 14y ago
OK, I had another thought on this topic, another perspective as to whether this money was well spent. When you win Kickstarter and get 20-30k as an indie dev, that money is yours. It's in the bank. You're expected to spend it to make sure the game is as good as it can possibly be, sure, but it's now your money to _risk_. I balk at spending 6K on music, because to me that sound like taking 6k out of my family's bank account, going down to the casino and betting it all on black. But in reality, that's what I do every day. I sit down at my computer and I bet 1 days salary I can earn it back selling my game directly to players. My games only have a budget of around 100k each. Most of that my salary. Would 6k on music make 6k more over the life of the game? I don't know? Perhaps. Perhaps I should grow some balls and spend and extra 6K of my family's money on music for my next game as see what happens. Those risks, those bets, are a lot easier to make when they are somebody else's money. When you have an investor willing to share risks, or a publisher who will own the game when it's done anyhow.
skore 14y ago
Since they asked for 20k, I have real doubts they made a good business calculation. Especially if they note that "PayPal and Amazon take their portions" - I'm pretty sure that Kickstarter tells you to adjust for that. Had they received only the 20k that they asked for, they would now (adjusting for less money necessary for rewards etc.) be left with almost no money at all. That's simply not good business calculation.
gonzo 14y ago
Now do the math on building and shipping 85,000 watches. Hint: Pebble have $117 each to get it done.

113 points by Liu 14y ago

As they said: they clearly overpaid on company formation ($4000 for legal and accounting, which could have been accomplished to the same effect for around $500 if they were frugal, including filing quarterly estimated returns). But still, they'd have ended up with ~$9000 gross instead of $6000; the point still stands. Some of these Kickstarter numbers look more game-changing than they really are. But whatever, I'm not a games industry person; I'm really just here to chime my recurring bell about "don't put your company together on a napkin, get the LLC done; it doesn't have to be expensive and it will help you down the road."

jay_kyburz 14y ago
I'm in the indie games business and I can say they overpaid for everything. 6K for music should be 1-2k at most! Poster Art - What's wrong with those awesome sprites that Kotaku used. Should be 0. IPads? More that one? PAX East? - That's a holiday not a legitimate business expense. This is why they say so many people don't make their money back in the App Store any more. You can't spend indie money like you work for a AAA studio.
- tptacek 14y ago
  Not to disagree (I don't know enough about the industry to disagree) but they got the iPads to show the game teaser at PAX.
- jay_kyburz 14y ago
  Actually, now that I read my own comment I realize it makes me sound like a cheap and grumpy old man. Perhaps they want to make a big budget game with really great music from their favorite artist, really awesome posters, and I know of course that each dev should have an iPad. You might even need all the different kinds.
- InclinedPlane 14y ago
  "PAX East? - That's a holiday not a legitimate business expense." For a game developer? No, it's a fantastic way to raise the profile of your game. You get the most avid gamers interested in your game (who will spread the word if they like the game) and you get press coverage too. For an exhibitor PAX isn't a 3 day vacation, it's 5 or 6 days of working 12+ hours days, most of them staying chained to their booth in their expo hall.
  - jay_kyburz 14y ago
    Nar, a game as great looking as theirs would get the press anyhow. The press are dying for more interesting games to write about. You raise another good point though, not only is it 3k, but its 5-6 days at 12+ hours. A whole week of dev time lost to the event. Events are great fun, but if you don't have money you don't know what to do with, I don't think they are a very good investment. Not much bang for the buck I don't think.
    - corin_ 14y ago
      I've been in the fairly unique situation of seeing the results a wide range of companies in the extended games industry (from top games publishers to indies to gaming hardware... etc.) got from exhibiting their products and I couldn't disagree more about it being a good investment.
      - jay_kyburz 14y ago
        Hey Corin, I'd love to hear more about why you think so. I'm always trying to work out how to best spend my marketing money (and energy). Do you have any metrics you can share about how an appearance at a show relate to final game sales? Or even press coverage? For example, if they were to spend that money on banner advertising they could generate say 6-10k clicks through to their website.
        corin_ 14y ago
        Press coverage - not metrics, but I've seen an awful lot of stories come out of events, and most importantly an awful lot of journalists meeting exhibitors, from bloggers to mainstream websites or newspapers. Obviously this doesn't guarantee coverage, but it puts the ball in your hands, once you're stood talking to a journalist while standing over your product it's time to knock it out of the park. I don't really have any customer data I can share with you, the sort of selling points generally used are more vague - such as "The average spend per visitor at last year's event on products sourced at the show was £767, a total audience spend of £79.8m" (taken from the sales pitch of a 2012 event). The overall focus of selling - though I'm not actually in sales so this isn't my direct area - is about the size of the audience, and what sort of demographic they are. I don't know if events are a good use of your money when it's as tight as that, i.e. if you can chose between $3k on an event or $3k on a PR company, but only one, as I can't think of any exhibitor I've ever had that paid that little, or that was small enough not to have marketing budget around it. The single biggest argument I can give, I think, is that if you go to PAX you're going to get more people looking at your game than you'd get clicks for $3k online - and when it comes down to it, are you going to sell your game better by having somebody look at your website, or stand in front of you try out your game? Incidentally, what adverts are giving you that click-rate, and do you have any calculated CPA figures? edit: I just want to note that like I said above, my experience comes more from big budget companies like big studio publishers rather than indies, so I can't necessarily say events are or aren't a great idea for people like you, just that they do offer bang for buck.
- EricDeb 14y ago
  Agreed. It's not that these weren't legitimate business expenses but if you are trying to start a company on a shoe-string budget you should really spend considerable time trying to get the best deal possible and limit all expenses to the bare minimum.
- phaus 14y ago
  "IPads? More than one?" A better question might be, "iPads? Why are these people soliciting money from people to make an iPad game when they don't have any experience developing for the iPad?"
  - sukuriant 14y ago
    Theirs broke? They've done iPhone development?
- marquis 14y ago
  >6K for music should be 1-2k at most! For good music? For music that you don't want to turn off the second time you play it? Don't undervalue good production values.
  - jaems33 14y ago
    Seriously. Oh development can be 5k and above but something also important like music? Pssh, screw that...
    - marquis 14y ago
      The developers still get to sell their product right? This is a Kickstarter - they get to keep making a profit. If they want to bootstrap then sure, use the most cost effective method but if someone has given you $20k to get a beautiful game made, make that beautiful game. I love good music in my media experiences and I'll pay for those games that have that.
guelo 14y ago
I think I disagree, for a $30k investment all the paperwork is useless and distracting from getting things done. Just do a handshake agreement with your partners and get down to doing the real work. After the $30k is gone, which will happen surprisingly quickly, you can look at your business more honestly and see if figuring out the paperwork is even worth it. I wouldn't even bother thinking about taxes, screw the IRS, there is no way for them to know about that $6k salary if you don't tell them, if you're successful later you can have an accountant figure out the mess. $30k is a short window to actually get something out the door, don't let anything else distract you.
- tptacek 14y ago
  "there is no way for them to know about that $6k salary if you don't tell them" Best advice ever.
- shuzchen 14y ago
  I don't entirely disagree with your position, but considering the publicity and press coverage they've received (both before and after the kickstarter funding), it's harder from their position to feel like they can safely slip under the radar. Also, from the IRS pov it's not a $6k salary, it's $30k+ income. It's only after you deduct all the business expenses does it come down to $6k profit. I'm not entirely certain how kickstarter works, but I would be surprised if they didn't file paperwork with the IRS when they transfer the $32k-fee to the developers. Vegas casinos report winnings to the IRS at a cut-off point way below that.
  - tptacek 14y ago
    They file 1099's like everybody else does. If you don't file, the IRS will just impute taxes to you at the least favorable possible rate, and probably not tell you about it until after you've incurred penalties.

egypturnash 14y ago

"Now, right off the top you had $10,000 for prize fulfillment." The lesson to be learnt here? Very carefully consider your bonus goods. Will making and shipping them cost more than the extra profit they make over the base price? Price 'em out beforehand. And build in a healthy margin of error in case you are wrong.

andypants 14y ago
Kickstarter recommends providing intangible rewards. Some people just don't listen to that advice. To me, it just indicates a lack of creativity. There are so many ways to reward people when making a game, such as allowing funders to name in-game characters or locations, or to have a say in some of the game design. Posters and t-shirts seem like very lazy rewards. And costly of course.

benologist 14y ago

Direct link instead of Gawker's shallow little summary wrapped around a giant quote from the direct link: http://www.kickstarter.com/projects/starcommand/star-command-sci-fi-meets-gamedev-story-for-ios-an/posts/208395 http://www.kickstarter.com/projects/starcommand/star-command...

aristus 14y ago

"Offering labor-intensive rewards that do not move your project forward are a net loss." http://carlos.bueno.org/2012/03/rocking-kickstarter.html http://carlos.bueno.org/2012/03/rocking-kickstarter.html

jrockway 14y ago
But remember, people on Kickstarter are pledging money, not investing money. So if you don't offer good rewards, you won't get any money, and your project will never happen.
- waterlesscloud 14y ago
  Unless of course the project itself is the real reward. I think the tiered award thing hurts a lot of projects by distracting from the basic fact that what you're really contributing to is making the project real.
- danneu 14y ago
  I'd wager that people pledge because they want your product, not because they get t-shirts and mugs.

guelo 14y ago

We keep hearing kickstarter projects complaining about tshirt costs, maybe kickstarter should start warning people about this.

hack_edu 14y ago
Or someone should make a startup that helps startups sell shirts on Kickstartr, a startup!
- harlanlewis 14y ago
  Kickstarter isn't far from its own optimization industry - like SEO and social media consultants, but guidance for presenting fiscally impossible idea as plausible and tantalizingly close. Then just make a slick concept video, keyword that baby up, and astroturf some buzz. It can't miss!
waterlesscloud 14y ago
This is the same story that was on here a few weeks ago.
andypants 14y ago
Kickstarter does warn people about this. People should read the text on kickstarter more, or listen to advice more often.

MengYuanLong 14y ago

I am starting to love kickstarter more and more. It seems like it will be full of business 101 case studies before the year is out.

wilfra 14y ago

Ignoring the suspiciously round numbers and the fact that they grossly overpaid for basically everything as an indie dev on a tight budget, here is what they raised money for: "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" Several of the things they spent money on have nothing to do with any of those and thus the money they spent on them should not come from the money they raised on Kickstarter. IMO.

FuzzyDunlop 14y ago
"Promote and market to help sell the game and fund future expansions and possible sequels" Funding the game in development may have been more prudent.

bstar77 14y ago

I personally do not understand why they would have paid for all of the promotional material before the game was near completion. But I will say... that demo is amazing and I am ready to throw money at them.

forrestthewoods 14y ago

Damnit people. I've lost track of how many times the Star Command Kickstarter story has been misrepresented. The implication is that only $4000 (post tax) was spent on the game and that's an outright lie. They spent 6k on music, 5k on marketing (poster + pax), and 1k to development/demo hardware. That's not necessarily ideal but it's not entirely unreasonable either. You can argue the marketing/hardware issue perhaps, but 6k went directly into the game in the form of music. The real lesson to take away from Star Command is their under-estimation of time and money required to create, package, and ship backer rewards. That's the real danger that other projects should be wary of.

mattmanser 14y ago
Huh, seems like a perfect representation that very little money actually went to development to me! Sounds like they didn't do their sums. Also how did they spend so much money on incorporation, costs about £25 ($40) over here.
- mparlane 14y ago
  One pluralised word: Lawyers.
  - mparlane 14y ago
    I didn't expect this comment to get so much downvoting. My guess is merely that any mention of them is bad. I was just trying to say that they didn't spend 40$ on opening their business, they spent $4000 by getting a lawyer to make sure they opened it correctly.
- forrestthewoods 14y ago
  They are a three man team working without any pay. What did you expect the money to go to? Proper salaries and benefits for the team would be a few hundred thousand dollars, not 36k. Spending $6000 on music counts 100% as "to development" and is perfectly reasonable. For PAX if anything they should have spent more money to create a bigger presence.

ChuckMcM 14y ago

Interesting post. I wrote an article on comp.sys.amiga about why software costs so much as a way to try to illuminate the unseen costs in development and support. I really do think that folks should create the LLC first, get that setup and a copy of Quickbooks or what ever and "practice" running a company first. Seriously, go out and create an LLC right now. Not only will you learn a lot but the cost is moderate. Read the nolo press books, etc. Do that and the rest is much easier.

zephjc 14y ago

All I can think of is either complete amateur hour, or a Kickstart project inspired by Mel Brooks' "The Producers"

macspoofing 14y ago

>Leaving us with around $6000, which is income, so that was taxed That's just bad accounting. Making a game costs more than $35k. There should be nothing left to tax.

scott_s 14y ago
And why does making a game cost more than $35k? Because you need to pay the people making the game so they can eat and pay rent. And what do we call the money that we give people for that purpose? Income. Which is taxed.

jbellis 14y ago

Link to last month's discussion of this story: http://news.ycombinator.com/item?id=3847373 http://news.ycombinator.com/item?id=3847373

patio11 14y ago

Software development on a budget of $30k getting described as lavish. Ahh, gamers, they're so cute. Poorly-informed over-entitled misanthropes, but cute. "You're doing your shoestring budget wrong! You should listen to me! I've never shipped anything longer than a blog comment but my years of experience as a pir^H^H^H consumer mean I really know this job well!" P.S. A business where the successful outcome is the principals end up in personal debt is neither a business nor successful.

elithrar 14y ago
> Ahh, gamers, they're so cute. Poorly-informed over-entitled misanthropes, but cute. As a gamer, I completely agree with you here. The entitlement has grown rapidly over the past 2-3 years, and in my opinion is only hurting those in the industry looking to be adventurous. Something like Minecraft might be the exception, but look at the shenanigans surrounding the Mass Effect 3 ending (which was not as bad as some would have you believe)—BioWare is releasing DLC to re-work something that was just a clash between (entitled) gamers who interpreted advertising in their own way, and the artistic direction of those who made the game. Considering the backlash, do these gamers think a studio like BioWare (or publisher like EA) will risk a game that isn't just a Call of Duty sequel again? Sure, but the chances are less, and the resultant game is going to tread a significantly less-risky path. The comments regarding the $1000 (nothing!) spent on iPad hardware are just inane.
- sesqu 14y ago
  The third installment of a series that has received universal critical acclaim and inspired several spinoffs, books and movies is hardly a risk, no matter what ending you put on it. I have no idea what the meat of the argument was over, but it seems like the fans complained about the ending taking it too safe. I don't see how that supports your argument.
- danilocampos 14y ago
  The Mass Effect 3 ending was shit. Not artistic, not creative. Shit. A piece of storytelling so completely divorced from the previous narrative tapestry as to make even professors of English literature wince with disappointment. Its only explanations are rushed development or a lapse in creative oversight. On top of being shit, it was not at all what was described by the project leads in interviews or in advertising. Game consumers are "entitled" to receive what is advertised – return policies don't let them vote with their dollars once a deception is unmasked. You sound like you're parroting the narrative of an industry-captured press, rather than detailing first-hand knowledge of the situation.

damian2000 14y ago

Reading this it wouldn't surprise me if the whole kickstarter idea came from some shady t-shirt manufacturers as a way to drum up more business. ;-)

robomartin 14y ago

I don't know these guys. My comment isn't aimed at them at all. I see a lot of projects on Kickstarter where I find myself immediately questioning the numbers. Having the scars to prove that I've run a business or two I generally have a good sense for costs, process and other elements of typical projects. In so many cases on Kickstarter the numbers are so awfully low that you have to wonder what will happen if the project reaches the stated goal and is funded. It is very easy to end-up working weeks-upon-weeks for $0.75 per hour and have nothing to show for it but a huge loss at the end of the process. My recommendation: If you are thinking about posting a project to Kickstarter and don't know much about business (profit, loss, fixed costs, variable costs, development costs, tooling costs, regulatory requirements, etc.) spend a few hundred bucks to get advise from someone who does. I would run your numbers by a CPA and some of the other stuff by, perhaps, an attorney with experience in the field. If it is manufacturing related, there might be regulatory issues (UL, CSA, TUV, CE) that an experienced manufacturing engineer might be able to help you with. Be careful, regulatory testing alone can easily get into the tens of thousands of dollars. In general, don't post a project to a site like Kickstarter unless and until you have had the financial model for your project verified by those best-qualified to do so.

mlguenther 14y ago

Any good accountant will tell you that you don't have to pay tax on money that has not yet been earned. I've seen two of these article for two different game devs, and they both take into account tax, which should not be part of the equation until the game is actually released.

teamonkey 14y ago
Kickstarter funds count as earnings.
- mlguenther 14y ago
  I'm sorry, but you are wrong, any basic accounting knowledge (I am a CPA) will tell you that income can be recognized when EARNED, not when received. This is something the IRS agrees with. Kickstarter funds have not been earned until the product is delivered
  - lusr 14y ago
    Aside from determining earned vs. received, surely the Kickstarter revenue must still be offset against expenses before tax can be calculated?
    - mlguenther 14y ago
      Yes, there are many ways to offset the income with expenses. Though what most Kickstarter video game devs are finding out is that they may not use all of the money as expenses in the first year. If you are accounting on a "cash" system, you would have to pay tax, if you are accounting on an "accrual" system, you would not have to pay tax until the game is released, regardless of how many expenses you have.

gavanwoolery 14y ago

$30,000 can take you a long way. I stretched $5000 for 6 months producing a game, living like a peasant (in California, no less). These people just spent their money foolishly on a number of items. Salary is number one, whatever you have left after that can be used for other stuff. Why they did not budget salary first, I have no freaking idea. What is annoying is that it gives Kickstarter projects a bad rep, when there are those (such as myself) looking to use Kickstarter for legitimate/better thought-out purposes. And for the record, I looked forward to this game in particular, even tried to donate money to them outside of kickstarter... But please don't get me started on YogVentures (ugh)... http://www.kickstarter.com/projects/winterkewlgames/yogventures http://www.kickstarter.com/projects/winterkewlgames/yogventu...

ricardobeat 14y ago
What's your opinion of YogVentures? I have a suspicion that developing an open-world game not based on voxels is a very challenging thing, but then I don't work in game dev. edit: should've read the full description. Are the interpolated lines also used for collision/physics?
- epaik 14y ago
  Just wanted to clarify, they are actually using voxels. The technique used to achieve a smooth voxel world is called Marching Cubes. Although the voxels are cube in nature, the marching cubes algorithm smooths out the appearance of these cubes depending on their proximity to other cubes. This allows for a smooth world, while allowing for dynamic manipulation of the environment.
  - deleted 14y ago
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- gavanwoolery 14y ago
  My opinion is that it is kind of a scam. If they can pull it off, I would love to be proven wrong. But so far all they have is a no-name development team that does not even have a website, and it looks like they just used a prefab engine like Unity to produce their demo video. I've developed with voxels for over 10 years...Marching cubes is nothing new (in fact, I "invented" it on my own without knowing that the algorithm existed) - and how they model the world is the least of their concerns. Making an open world game of any sort is very challenging, and no one has done it that successfully to date (even Minecraft is still more of just a sandbox than a game, although I respect it nonetheless). Not that I would recommend against developing this type of game, it just probably not the first type of thing you want to tackle without sufficient experience (I should know, I've scrapped over 8 engines working on open world games). Again, I have nothing against the YogCast people, but if they fail miserably it makes raising money for other Kickstarter projects more difficult.

jay_kyburz 14y ago

OK, I had another thought on this topic, another perspective as to whether this money was well spent. When you win Kickstarter and get 20-30k as an indie dev, that money is yours. It's in the bank. You're expected to spend it to make sure the game is as good as it can possibly be, sure, but it's now your money to _risk_. I balk at spending 6K on music, because to me that sound like taking 6k out of my family's bank account, going down to the casino and betting it all on black. But in reality, that's what I do every day. I sit down at my computer and I bet 1 days salary I can earn it back selling my game directly to players. My games only have a budget of around 100k each. Most of that my salary. Would 6k on music make 6k more over the life of the game? I don't know? Perhaps. Perhaps I should grow some balls and spend and extra 6K of my family's money on music for my next game as see what happens. Those risks, those bets, are a lot easier to make when they are somebody else's money. When you have an investor willing to share risks, or a publisher who will own the game when it's done anyhow.

skore 14y ago

Since they asked for 20k, I have real doubts they made a good business calculation. Especially if they note that "PayPal and Amazon take their portions" - I'm pretty sure that Kickstarter tells you to adjust for that. Had they received only the 20k that they asked for, they would now (adjusting for less money necessary for rewards etc.) be left with almost no money at all. That's simply not good business calculation.

gonzo 14y ago

Now do the math on building and shipping 85,000 watches. Hint: Pebble have $117 each to get it done.