The man who made $50 million ditching Kickstarter

Ten million dollars for a watch? Not bad. $13.3 million for a cooler? Impressive. Still, the crowdfunding records set by Pebble and the Coolest Cooler pale when compared to the amount video-game developer Chris Roberts has raised for his next title.

Since kicking off the campaign for "Star Citizen" nearly two years ago, Roberts, the designer of the classic "Wing Commander" series, has raised more than $52 million, and he's not done yet.

Perhaps most impressive, only $2.1 million of that $52 million came from a traditional crowdfunding site, Kickstarter. The rest was raised through a campaign Roberts runs himself, eliminating the fees that most entrepreneurs must pay to crowdfunding middlemen.

Max Photography for GDC Online 2012

Video-game developer Chris Roberts speaks during a press event at the Game Developer’s Conference in 2012.

All totaled, roughly 534,000 backers have put their money behind "Star Citizen," at an average of $100 each (which is a fair bit more than the average $60 price tag of today's typical video game). Roberts credits the largess of his donors, at least in part, to the nature of his game. "Star Citizen" is a PC space simulator, a genre other publishers have largely ignored for years. It also includes dashes of several other popular gaming types, including first-person shooters. Roberts said he's attempting to create an interstellar version of Activision-Blizzard's "World of Warcraft," and the potential longevity of that sort of game appeals to a different sort of player.

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"It's not just a single-player game or something you'll finish in a week," Roberts said. "We're building a universe you can live inside. People view it as a long-term investment. They're willing to invest more because of that."

The game is being built in six stages, each focused on a different sort of game play. Backers can already explore their ships and are able to participate in an early trial of space dogfights. Coming in the months ahead are the aforementioned first-person shooter element (which takes place on planets in the game's universe), a story-driven campaign, and a persistent universe where players can make and trade goods with each other. (Roberts, who is leading a team of 270 people on the game, does not have a firm launch date for the final product.)

Roberts almost launched the crowdfunding campaign for "Star Citizen" a year earlier but opted instead to raise seed capital from friends (and spend some of his own money) to build a prototype of the game so he'd have more to show potential backers. Because he had sunk so much cash into making that prototype, he was left with a budget of only $10,000 for the game's website, an insufficient amount to build a premium site with a crowdfunding engine.

Kicking Kickstarter out of the equation

As a cost-cutting move, Roberts took to free blog service Wordpress and employed a crowdfunding add-on. That plug-in was initially unable to withstand the traffic surge when the game was announced, but Roberts also used Kickstarter as a backup. Between the two, he raised $6.2 million.

Since then, all fundraising has been done on the "Star Citizen" site (which has moved to its own domain and built and integrated its own donation collection software). Having everything in one place has allowed the campaign to thrive, Roberts said.

"This keeps the community together. They have all this energy. Typically, people get excited; then a campaign ends, and everyone goes off and it loses that momentum and sense of community," Roberts said. "I felt, as I was looking at it, the whole idea was to have a site for the community, a place with forums and where they could hear news about the game. And that would be the same place you could back the game."

The money machine that's making $57,365 an hour

Andrew Harrer | Bloomberg | Getty Images

Community is the crucial element to Roberts' success. The backers/players talk about the game to their friends and on gaming message boards, which piques the interest of others, who visit the site and contribute themselves.

And a small fraction of that community continues to give more than its share. As work on the game progresses, Roberts and his team showcase upcoming ships that players can earn after progressing to a certain point in the game. By making additional contributions (which can be as high as $325), players can add those ships to their fleet automatically, giving themselves an in-game advantage.

Additionally, the team puts together a detailed monthly newsletter (which is between 50 and 75 pages long) as well as behind-the-scenes videos for backers who pay an additional $10 to $20 per month.

"We go out of our way to communicate with [our backers]," Roberts said. "I think that creates the feedback loop where they get excited and like the experience and ... they tell their friends, and it becomes self-propagating."

Making you the next crowdfunding star citizen

The community and virtuous funding cycle Roberts has created for the game wouldn't be possible without the proprietary fundraising service Roberts' team built. Now, given the service's success, he's planning to offer a platform to other entrepreneurs who want to bypass traditional crowdfunding sites that can gather and collect contributions, integrate a community and—if it's an evolving software product—act as the place to get the most recent downloads. In essence, a hub for the entirety of the project, from campaign to shipped product.

"We're actually in the process of setting up a separate entity to deal with [licensing our platform]," Roberts said. It's vertically integrated—built around a single campaign, though not necessarily gaming—whereas most crowdfunding platforms are designed to handle many different types of projects, but only in the fundraising aspect.

How much do Indiegogo and Kickstarter make?

• Indiegogo charges 4 percent for fixed and flexible funding campaigns that reach their goal.
• Indiegogo charges 9 percent for flexible funding campaigns that don't reach their goal. (The difference between flexible and fixed is that flexible campaigns can keep funds even if they fall short of their goal.)
• Kickstarter charges a 5 percent fee on projects that reach their goal. (It does not have a flexible funding option like Indiegogo.)
• Both sites charge card-processing and PayPal fees that can range from 3 percent to 5 percent.
• And now to put it all together and provide an example: Kickstarter should have made roughly $665,000 from the $13.3 million Coolest Cooler project. Of the $1.1 billion Kickstarter now states as total dollars pledged across all successful projects in the past five-and-a-half years, it should have made over $57.1 million in project funding fee revenue.

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Kevin Winter | Getty Images

"It's still a Coke and Pepsi world in crowdfunding," said Wharton School professor Ethan Mollick, but he added that he does expect the industry to splinter a bit, for example, with smaller platforms growing up around private companies and universities, the real estate industry and even on the basis of demographic divisions.

"Part of the advantage of a Kickstarter or Indiegogo is the many millions of people on both platforms, and that gives you user base. Why doesn't everyone have their own Twitter? There is economy of scale," he said. The Wharton professor said another reason the crowdfunding duopoly attracts the most users is established fraud protection protocols, both through an active community of informed backers who can "sniff out" suspicious projects, as well as platform algorithms that monitor projects for signs of potentially bad intentions.

Mollick doesn't think Roberts' success is the best example of crowdfunding's go-it-alone future, either, because Kickstarter has more or less already "won" video games, but he added, "The key to crowdfunding isn't the funding part but the crowd part, and if you can attract your own crowd, then this strategy might be a viable alternative."

While Roberts said that his industry is significantly different from many others and some of the techniques he used won't be a universal help to other crowdfunding projects and crowdfunded companies, he does have one suggestion: If there's any way to avoid it, skip physical rewards.

Instead, for digitally-oriented projects, focus on backer bonuses that will impact the experience directly. It's something useful for backers instead of a trinket that will likely be shoved in a closet or tossed someday, and it will save the project creator money.

"The physical side is cool, but it's more difficult to distribute on a worldwide basis," Roberts said. "That's the problem with crowdfunding, especially with games. You tend to focus on physical, and most people don't realize how expensive it is to manufacture and ship those. We said, 'Give us more money and we'll give you a better digital ship in the [game's] universe.' That was kind of revolutionary, since before that it was 'We'll give you statue, or a bigger box or dinner with development team.' As a gamer, if I'm backing a game, I want something that improves the game, not sits off to the side."