Guide to crowdfunding & the best platforms for it
Reaching business investors is a challenge. Not all of them are interested in a particular sphere or eager to risk significant amounts of money. Therefore, many startups consider crowdfunding as a potential solution.
What is crowdfunding?
Crowdfunding is a public money-raising campaign conducted with a particular purpose. The participants may be both individuals and organizations. All of them can contribute a partial sum in order to reach the set financial goal. In some cases, the participants aka backers receive certain rewards adequate to the donation sum. For instance, the company might use crowdfunding for pre-sale of their future products or services. Those usually come with huge discounts and additional perks. As a result, people get motivated to take part as well as encourage their peers to do it. Crowdfunding events are usually limited in time. They are mainly organized with business, social, or charity aims.
A peculiar type of a business-related fundraiser is called equity crowdfunding. It differs from the usual campaigns in the sense of real investment. Rather than simply giving money to some cause, the funders receive corporate securities in exchange. Those include shares, convertible note, debt, revenue share, etc. This way, the backers become co-owners or shareholders of the company or a project and they can invest their money outside of stock exchange markets.
Top 10 crowdfunding websites
The majority of crowdfunding events take place online via social networks or relevant websites. Each of them has their own specialization, rules, and limitations. Here are the most popular online platforms designed for crowdfunding.
This trustworthy website unites the global creative community. It gathers money for art projects, films, music and dance, games, photography, design and illustration, comics creation, innovative technologies, the publishing business, crafts, and food catering. The resource charges successful projects a 5% hosting fee as well as a small commission fee for payment processing. The fundraisers are based on the all-or-nothing principle. Nobody is charged a payment unless the whole sum is accumulated.
Being a free online platform, it’s mostly used for social projects and charitable campaigns. It attracts compassionate people from all over the world who wish to help others in need. The platform hosts fundraisers to pay medical expenses, memorial costs, and scholarships; enable education projects; help the victims of natural disasters, wars, and tragic accidents; assist NGOs; promote environmental causes; save animals, etc. However, it also has a business section. Considering the nature of the web-platform, socially or eco-responsible businesses aimed to positively influence local communities can get popular here as well.
Another popular website among startup founders. It is aimed at social, cultural, and empowering entrepreneurship. As appears from its name, the fundraiser platform meant to serve good causes. The project owners can set both a tipping point (minimum needed sum) and a stretch financial goal. It is convenient since projects which don’t reach a goal, get nothing. By setting a tipping point, you can raise at least some money for the initial startup setting. By the way, they offer a free email course helping master crowdfunding and smartly present your product.
StartEngine is an equity crowdfunding website. It’s one of the biggest VC funds hosting a wide range of new companies from clothing to health care. Besides the USD contributions, “Initial Coin Offerings” (ICO) leverage the emerging blockchain and cryptocurrency ecosystem. All of the offerings become direct investments in the future brand.
Indiegogo is dedicated to technology and design. It’s a great platform for the backers who wish to receive the latest groundbreaking innovations with limited-time perks and pricing. They can support the creative teams right at the concept development stage and follow them through prototype creation to actual production. Not only do the funders help ideas transform to reality but also they become the lucky owners of unique items such as smart suitcases or slick air conditioners. The artists can participate too by offering tickets to their performances or exclusive designer items for sale.
It was the first equity crowdfunding platform to permit unaccredited regular investors to use their service. The platform is exclusively dedicated to business fundraising. Their most successful campaigns are customer-oriented and deal with tech businesses. The platform managers are very selective about the fundraisers. So far, they have endorsed only 1% of startup applicants. Nevertheless, their diligent check pays off while fundraising since the projects appear most trustworthy and promising for investors.
Patreon is a unique membership platform that provides backers with subscription products from the artists and creators they support.
One of the leading startup investment platforms. It allows even small investments such as $10 offering business securities instead. Most startups on Republic use security called Crowd SAFE – a specific version of SAFE, a financial instrument widely used by angels and VCs investing in startups. The website boasts a high 95-percentage of all campaigns ending successfully. It is a part of a family of startup platforms that includes AngelList and Product Hunt.
Microventures platform specializes in Regulation Crowdfunding which means that both accredited and non-accredited investors have the opportunity to put their money in early-stage organizations. It is one of the intermediary merchants enrolled by the Financial Industry Regulatory Authority (FINRA). It has a good reputation being one of the first websites of the kind and standing behind such famous corporate fundraisers as Facebook and Twitter.
WeFunder gives US corporations and LLCs access to more than 150,000 registered investors. However, this priority is quite expensive. While creating a profile is free, hosting a fundraising campaign itself costs $195.
How to succeed in crowdfunding?
There are many eager investors out there; however, the number of creators keeps growing. In order to remain competitive among other startuppers, consider the following tips.
- Learn the rules. Every crowdfunding platform differs. It has its fees, limitations, and fundraiser terms. Some leave all the raised funds for the applicant, the others work on the all-or-nothing principle. Study the website specifics carefully before starting a campaign.
- Promote your idea with precise emotional messages and high-impact video content. Your campaign should be informative and expressive. If you’re up to social entrepreneurship, clearly highlight the problem and an offered solution.
- Create a good rewards program. What’s in it for the backers? Plan it carefully, offer nice promotions or fair equity shares. Develop a cost-effective fulfillment method. Calculate all the costs linked to reward giving before making any offers.
- Communicate with supporters. Do not stop at a great marketing campaign, they’ll wait for an equally meaningful follow-up. Startup implementation and real-life production are not that predictable. Keep backers posted. Honestly inform them about any delays or failures while stressing out the solutions and new terms.