Funding: Kickstarter or Family Loan?

Background I've been working on a video game for android devices (i.e. an app) for some months now, and I'm getting close to completing a solid, well polished product

I'm lucky enough to have an independent source of income, which just about pays my rent and food, but leaves little left at the end of each month to invest in the business

All I need to do to finish the app is pay some artists to create some of the spaceship models, background images and other artwork included in the app and any other promotional materials. The spaceships in particular will become the virtual goods sold in the app

I don't want to get VC funding for various reasons and the risk of the app failing is high, due to the fast-changing nature of the market, as well as other factors beyond my control. Bank loan is out for the same reasons

Fortunately I have two options for funding:

Kickstarter Campaign (www.kickstarter.com )

Pros:

• Creates engagement with (potential) customers
• Generates word-of-mouth
• Provides qualitative feedback on product before it fully hits the market
• No need to repay (basically free if you can persuade people)

Cons:

• Generates very limited funds
• Risk of failure if not enough backers found

Loan from Family Pros:

• Can hire professional QA
• Wider variety of virtual goods
• More funds for other marketing activities

Cons:

• Cash flow issues
• Repayments dampen future growth
• Tension with family members

The obvious answer is to do both, but I'm too honest to plead starving artist on kickstarter then take the loan anyway. (Also might generate bad PR if found out later).

Which would people recommend (or recommend something else entirely) and why?

"Risk of failure if not enough backers found"

A failed kickstarter is not a failure its just a chance to find more data about your potential customers base and try again. Second time around with a built in fan base.

If you need money in order to progress, and you can get it via Friends Family and Fools, then this is the quickest way to get your hands on it.

You list "Cash Flow Issues" as a con for using FFF. I would argue that in fact it's a PRO. You get cash, quickly, which means you can start generating income more quickly.

You also state that "Repayments dampen future growth". While it's true that what you have to pay back, can't be invested, a smaller growth over a longer time is better than not getting started at all.

Tension with family members - if you think that this is likely, then arrange the deal in a business like manner.

Depending on how much money you need and how favourable your FFFs are, perhaps you could persuade one or some of them to invest, rather than loan? Either way, you should warn them that there is a high likelihood of them not seeing their money back.

Well laid out post.

Why not combine the two via kickstarter / indiegogo? Create a campaign and promote it to your F&F.

This also helps with the downside of F&F fundraising: it causes tension because of the formality of the agreement and the expectation of a return (because it's called an investment). You don't need much money, so call it a grant/gift with some creative returns.

[Separately but not on point: it doesn't sound like you need a ton of design work done. I assume you've looked on places like dribbble or on freelancer sites to see if you can find a designer with a style you like, approach directly about doing the work?]

You could also find an angel investor or an incubator like ycombinator

Kickster (and similar websites) does something more profound than just provide money. It finds you customers. One way to look at it is if there aren't enough backers then your app may not be that viable business product.

There are ton of reasons to stay away from family loan.