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

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.

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.

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.

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.

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!).

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?

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.

$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/

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

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.

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.

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