3.5m - 5% for failed Pledges = 175k - 10% for Kickstarter and Credit Processor Fees = 350k - 20% for Taxes (this is income!) = 700k Total received budget ~= 2.28m Now, figure 30% of that is shipping (684k), 40% of it is manufacturing (912k). Left over: $684K Now, common wisdom is that hiring one guy at $60k a year costs you $100k a year total in physical plant, HR, Payroll, benefits, etc. While I doubt they had ALL of that, let's say they're five guys, so now they have $184k to absorb any unexpected expenses and such. So if you have to do thee site visits due to QC issues, or have a supplier disappear (not entirely unlikely, but one of the less well known issues), or have to hire two or three extra people to handle the volume you just weren't prepared for, that's gone, you don't have any flex left. And those are the more common issues - imagine you do two site visits and then have to pay to have someone else do your manufacturing at 50% more: because it turns out everyone was lowballing their quotes, and when you go back to the other companies they tell you that they can't do it at that price. Not excusing them, but people tend to go "How could they lose [LARGE AMOUNT OF MONEY]" when the answer is "Most of what the campaign made was already earmarked to known costs - each pledge did not make them a lot of money, because what they were doing was expensive!" And they made the same scheduling and budgeting mistakes everyone makes.