The creation of any custom race, whether it's my demonic beast race, or those pretty elven characters people flock to, is more for the benefits of the person creating it than those who download it.
However, unlike most people, I find playing elves or humans in a fantasy game a bit boring. My first character in Oblivion was an Argonian, and my first in Skyrim was a Khajiit, more because I play fantasy games to be something different. 

I suppose there's a multitude of different reasons for it, but the big one is typically that in most games I've played, any 'beast race' tends to have significant combat advantages, often at the cost of social interactions.  I've played many pen-and-paper sessions with friends where we broke out of the usual confines of a rule-book and allowed creation of any race, so long as we could give a reasonable, non-contradictory lore for them, and at the same time, kept them in balance.  This was, I suppose, my very beginnings of 'custom races' and creating a race tailored to how I wanted to play.  And many gaming sessions had my beastly warrior rolling the dice to see if this mug of mead was going to be the one that pushed him beyond civility and caused havoc in the tavern.  It added a lot of dynamics to a playing session, and kept our Dungeon Master from getting bored and having to create situations to push us out of the taverns.  Then those friends moved on, or away, and I was left on my own.  But I discovered Oblivion, and that somewhat helped fill the gap.

Then I discovered modding, and soon I had the ability to play characters who were a lot more fun to me.
First, some backstory and where my inspiration came from.  There's some links in here for those of you who want to see where I came from when it came down to modding.  Please, visit these pages and try them, they're much higher quality than my stuff.

So, in Oblivion, I played as a Deadlands Daedric Beast (All links go to the Nexus, this just cleans it up.) and enjoyed my second playthrough a lot more because I wasn't just another being. I could weave my own backstory, didn't have to come up with a name that fit the lore, and generally had fun. This race, inevitably, was my inspiration for the Kriaal in Skyrim, different in their own way but sharing similarities.  This inspiration is somewhat obvious in the early files from the mod, but that's as far as it was, inspiration.

In Skyrim, however, my third or maybe fourth playthrough was as the Vaalsark, and for several characters after that as well, because for a long time, there wasn't a race closer to what I wanted, which was a proper wolf-like race.  However, they had some cool lore I could work with, and were excellent for an anti-mage build, so I had fun playing as them for quite a while until something new came along.

That 'something new' was the Lykaios (Legacy Edition, same as what I had, just after the author accidentally deleted it and put it back up), a proper wolf race that felt refreshing and new.  After a very long time playing as something that wasn't quite a wolf, it was quite fun playing a proper wolf for a while.  I didn't really look back at that point, made several characters, played many stories to their inevitable conclusions, and enjoyed my time in Skyrim.

Now that you know where I started from, and the races I played, let's answer the real question.

Why did I create the Kriaal?

Ironically enough, it was in a moment of boredom from playing a bit too much Skyrim.  I'd loaded up Oblivion for the first time in quite a few years with a fully-modded load order still in place, and played as a Daedric Beast for my first time in nearly 4 years.  I had a lot of fun, completed the main quest and a lot of the guild quests, and even fought through the Arena for a good experience.

And when I went back to Skyrim, I realized that I wanted to play a character who started evil, but turned good toward the end.  Someone who I could start out as a proper axe-murdering maniac and eventually redeems himself through the guild quests, Dawnguard, and the main quest.  What better background than to start with Daedric blood?

A quick search of the Nexus, however, led me to pretty much the same conclusions.  Either I'd be stuck playing as a Dremora, or I'd need to use one of the many reskinned elves or humans with a loose background lore of being Daedric in nature.

Well, the Dremora were a bit more human than I was willing to put up with (and yes, I know, in Skyrim they're basically reskinned Dunmer with horns), I wasn't going to use a recolored race based off of an elf or human.  And beast races were still limited, at the time when I started on this project, to only a handful, and of those handful, only a couple I'd considered as a beast race.

Being loosely familiar with the Creation Kit, because I've played in it far long enough, and having a tutorial on how to do things the right way with Race Compatibility for Dawnguard, I set off to create what I wanted.

Now, I'll admit, I don't know much, if anything, about 3D modeling.  But I do know how to unpack Skyrim's BSA archives, and to pick-and-choose my handful of meshes (eventually, I grew tired of unpacking, extracting, and then having to do it again later, so I did create a BSA Archive Folder to work out of).  So, I grabbed the head meshes for the Khajiit, opened them in NifSkope, kicked them over to Blender using the Export Function, tweaked the mesh a little, exported it back so that I could cram it back into NifSkope, and, well this is the result.  A rather overly-complicated way to do things completely the wrong way, but it worked.  Having done this much, I felt bold, confident, and inspired, so I launched myself into fully making this race.

As one might imagine with Skyrim's races, when you want to make a beast race, the only question you have to ask is "Fur, or Scales?"  If your race needs fur, your base race is the Khajiit.  If your race needs scales, your base race becomes the Argonians.  I needed fur, and so I copied the Khajiit and Khajiit Vampire races, and followed the Race Compatibility Guide to do things the right way.

So, the simple answer to "Why?"  Because there wasn't anything else like it available.  That's the way modding has always been, not everyone has the same taste as the mod authors, and so I decided that if I really wanted to do this, and would go through all this trouble to make one race so I could play a few characters, I'm going to do things mostly the right way.  And I'll do what I feel needs to be done in order to feel like I did things right. Then, because I've made this, even though it's not the best, I'd still release it because maybe it'll inspire others to do the same, because I know if I wanted it, maybe there's three or four people who also wanted something like this, too.

So, what is it that I feel needs to be done to feel like I've done things right?

Integration.

The race needs to be a part of the world.  My issue with the three races I've listed, and in fact, most of the custom races I've played, is that you're the only one of your kind.  I'm not saying that's a bad thing, or even wrong in most cases, as many races are intended to be rare.  My issue with it is more from the fact that when you play as a custom race, you're wandering around Skyrim without ever seeing another of your own kind.

Originally, this didn't bother me too much.  It was a quirk of the system, and I always made my characters based around the theme that they came here either from another continent, or were hidden away and never really ever seen.  Then at some point, I made a purely personal mod-patch that took the handful of beast races I had in my load order at some point (the Ronzo, Vaalsark, and Lykaios) and punched them into the level lists for enemies, specifically bandits.  And it kinda shook up my world.  Suddenly, I wasn't the only one of my own kind.  I'd be wandering along past the Valtheim Towers and suddenly I'm dodging arrows with my mage character, locked in a one-on-one duel with the Lykaios archer who got the drop on me.  Or I'd be facing off against a Vaalsark Stormcloak Soldier, and suddenly my magic isn't doing all that much because they had 50% resist magic, so I'd have to run because he's got a battle-axe.  It made the combat situation intense even without having to change the difficulty.

Which, inevitably, is why I decided from the start to design the Kriaal as a race that could exist in Skyrim.  I kept the 35 point balance, though changed things up a little.  I gave them two racial powers, but walloped them with some weaknesses to balance that out.  And eventually, I'll poke them into the leveled lists so you get some of them as enemies.

Let's talk about balance.

I've never really considered balance in the past.  When I did personal mods, balance was always secondary to Fun, so most things I had ended up a little overpowered, but rarely game-breaking.  (Note: the 0.01-Alpha has some weapons that, while they aren't game-breaking, are completely overpowered.  Keep in mind that these are intended for development only, and will be quite sharply scaled back.)

Knowing I was going to release this mod, however, balance has been a strong priority.  Everything became a question of "Is it balanced if I do this?"

A perfect example would be the main 35 point skill balances.  Most races get 10 to one skill and 5 to 5 others, making 35 points.

I chose instead to give seven skills 5 points, so that the Kriaal gain an extra skill they're okay with, at the cost of not having one really-good skill.  And they're balanced such that if you lock in on one play style, half of those skills are going to be useless.

So, I gave them the following:
Restoration
Conjuration
Destruction
Sneak
One-Handed
Two-Handed
Archery

In a way, it's slightly out of balance because it's heavily combat-focused (though their lore is intended that they were created as warriors), and most people aren't going to level those 7 skills together.  But then again, many of the vanilla races scattered their skills similarly, with even less focus.

When it came to powers, however, I took a bit of inspiration from the Oblivion mod and gave them two instead of one, but one of those is counter-balanced internally.

The power I was talking about, being internally counter-balanced, is Last Stand.

Like all Greater Powers, it's a one-time-per-day spell, designed to get you out of trouble in the heat of the moment.

What does it do, exactly?

Fortify Health 70 points for 30 seconds
Fortify Magicka 70 points for 30 seconds
Restore Health 55 points - Immediately
Restore Magicka 55 points - Immediately
Combat Exhaustion - Damage Stamina 10 points per second for 600 seconds
Last Stand (Skill) - Fortify (Skill) 40% for 60 seconds - Skills are Archery, One Handed, Two Handed, Destruction, Conjuration, Restoration, and Block.
Combat Fatigue (Skill) - Damage (Skill) 30% for 600 seconds - Skills are Archery, One Handed, Two Handed, Destruction, Conjuration, Restoration, and Block.

If you break it down further, you can see where it's balanced out.  The skills are boosted by 40% but a 30% debuff is active at the same time on the same skills.  Block was substituted for Sneak because if you've popped your Last Stand, it's because sneaking isn't working anymore, and you're in big trouble about to die.  But a shield might keep you alive long enough to win your fight.

The whole point behind Last Stand is to have a one-button-press Combat Boost that lasts just long enough to get you out of trouble, with any luck, but has detrimental side effects that keep you out of future fights for a good while.  10 minutes of stamina drain and reduced effectiveness with your main skills will lead to this being a power you don't use lightly.  Instead, it'll be saved for those moments where everything's going wrong, and for 60 seconds, you get to be dangerous.

But why am I fortifying health and magicka if I'm also going to restore health and magicka?  Fortify was put in there as an in-the-moment boost, similar to opening up your reserves because if you don't you're going to die.  The thought was "You're about to die, so put everything you have behind this fight, and put up with feeling worn out after you've survived it."  But, from initial play-testing, I found that without the health boost (the 55 point restore health, only a little better than a decent health potion), I tended to die quite easily, and it was all related to that mid-fight loss of Fortify, but not having taken a potion.  The same happened with Magicka, where I'd go to cast my life-saving spell and not have enough magicka.  In the intensity of the fight, it's really easy to forget to grab a potion or twelve to keep from dying.

Again, balance is tricky.  I was trying to balance the power on a technical scale, only to realize I needed to consider a different scale instead.  The balance of "Is it fun?" versus "Is it Fair?"

Last Stand leans a little more to "Is it Fair" than toward fun, if you asked me.  However, a power like this needed to have serious downsides.  I wanted it to be more than a free "Boost my health and magicka, and punch up my combat skills" power.  I wanted it to "wear out" the character if they had to use it.

But at the same time, I realized it'd be a fairly mundane race to have that power, so I also gave them Void Walker.

Silent Stride - Muffle for 60 seconds.
Void Shift - Invisibility for 60 seconds.
Again, a once-per-day power that pairs well with what I wanted.  If you need to be a sneaky menace for 60 seconds, this will do the job.  It's balanced more toward "is it Fun" instead of "Is it Fair" but it's, in my opinion, balanced enough in that Invisibility breaks the instant you activate anything.  It means you need Sneak to get the job done, this merely helps in bad situations.

Now I know what you're thinking.  "Wow, most races only get one crappy power, but these guys have two. So totally overpowered!"  To some degree, you're right.  Except that if you pop Last Stand, you go from being one of the strongest races for 60 seconds to spending the next 540 seconds (9 minutes) being able to be knocked over by a feather.  Remember, that stamina drain is there for a reason, and it's to keep you feeling fatigued.  No sprinting, no power attacks.  And yes, Void Walker is really powerful if you know how to use it, but again, it's a once-a-day thing, and it's not like you can't create or find some Muffle Boots and an invisibility spell or potion to do the same thing.  And while it does pair well with the Shadow Stone, again, it's a once-per-24 hour spell.

But, because even I could see the overpowered factor creeping in, I did something I haven't seen in the Vanilla game, but was inspired by Oblivion.

Shall we take a look at the Kriaal's resistances?

Oblivion Walker

Resist Fire 35%
Frost Weakness 20%
Shock Weakness 20%
Poison Weakness 20%

Sure, you have a very strong Resist Fire, but I've seen 50% before in other races.  But I counter-balanced the two powers and the fire resistance with three weaknesses to very common things in Skyrim.  Believe me, fighting Falmer is now actually worrying, and spiders at low levels can kill.  Fear the Chaurus, and learn to hate frost mages. You will want Cure Poison potions inyour inventory, as well as Resist Shock and Resist Frost potions.  And if you find any enchanted gear with Resist Shock or Resist Frost on it, you'll probably want to wear it.

Do I believe the Kriaal are balanced? Yes and No at the same time. For the player who's made a Kriaal character, yes, they are balanced. For the NPC Kriaal facing down a player character, however, they're not balanced, and that's mostly because I've never seen an NPC use their racial powers.

If they could use their racial powers, then yes, the NPC's would be balanced in my opinion, because they could use Last Stand to turn a fight into a war of attrition, or use Void Walker to pull a nasty sneak attack mid-combat.

So, wrapping up Balance, the simple answer is, yes, I feel they're balanced. Everything has a downside to it, and from play testing, they are a little bit of an early game challenge if you find enemies that will use poison.

Wrapping the Questions and Answers session up, I feel I've accomplished my mission here. I've created a race, integrated them into the world, and tinkered with lore enough to make them fit.