If you're thinking about starting your own crowdfunding campaign on one of these platforms to raise funds for your project then this article will help you understand what exactly that means and how it can benefit your business.
Crowdfunding has been around since 2009 when the first successful campaign was launched by an artist who raised over $1 million dollars from more than 20,000 people in less than 24 hours. Since then, hundreds of thousands of projects have successfully funded through different methods with many businesses using crowdfunding as part of their marketing strategy. The rise of these online fundraising campaigns has seen them become mainstream across all industries and even beyond traditional finance into new areas such as education, healthcare and politics.
These days there are several ways to go about launching a crowdfunding campaign but they fall under four broad categories which include: pre-launch (Kickstarter), launch (IndieGoGo) and post-launch (Patreon). These terms also apply to the companies themselves and each category requires its own specific set of rules. You'll see us discuss some of those below so stick with me if you want to learn more!
There are generally four types of crowdfunding, depending upon whether you’re raising money before, during or after a product/service launches. Each method can be used individually or combined together to create a customized approach for your business.
Pre-Launch Crowdfunding - The earliest form of crowdfunding involves asking investors to fund your idea before you actually produce anything. This could mean paying for the cost of developing a prototype, designing packaging materials or creating marketing material. It's important to note here though, that unlike other forms of crowdfunding where everything is done remotely, pre-launch crowdfunding usually takes place face-to-face between you and potential investors.
This type of crowdfunding allows you to test out your concept with a small group of early adopters and receive valuable feedback. If you do decide to move forward with pre-launch crowdsourced financing then it would make sense to consider hiring someone experienced in this area to assist you.
Post-Launch Crowdfunding - Once your product comes to market, you may choose to use another method of crowdfunding to collect additional capital once you've reached your goal. Post-launch crowdfunding means that instead of seeking investors before you release your product, you ask for donations after you've already sold units. For example, you might run a promotion offering free products to anyone who makes a donation, or provide special discounts for early backers.
In order to use this method effectively it helps to develop strong connections with customers who like your brand and trust you enough to buy something now rather than later. One way to achieve this is to sell exclusive items only available to supporters. Another option is to reward loyal customers with perks for supporting you throughout the life of your venture.
You should always think carefully about the value proposition you give to donors because not everyone will feel comfortable buying directly from you. Some prefer to use third party payment processors while others still prefer to pay in cash.
White Label Crowdfunding - Similar to Pre-Launch Crowdfunding, White Labeled Crowdfunding lets you raise funds without having to build any technology yourself. Instead, you can partner up with a company that offers a turnkey solution to enable you to take advantage of this model. They handle everything including building the website, managing payments, collecting pledges and shipping rewards, helping you avoid the costs associated with setting up your own system.
It's often best to work with a larger service provider who specializes in this space, however smaller players exist too. We recommend exploring the options available before committing to any particular choice.
Finally, you may come across 'hybrid' models. In fact, hybrid models are becoming increasingly common due to changing consumer preferences. Sometimes entrepreneurs don't know whether they'd prefer to go straight to investors or try to rely on word-of-mouth sales before reaching their goals. Hybrid models allow you to split your time between investor relations and customer relationships.
We mentioned above that there are four types of crowdfunding but let's look at them in greater detail. There are three basic stages within every crowdfunding campaign and it's vital that you get right down to brass tacks and figure out which stage you are currently operating in.
Stage 1 - Launch Stage - During the first phase of your campaign, you typically aim to attract as much attention as possible to drive interest and awareness and encourage users to pledge support. At this point you'll likely just focus on gaining momentum and spreading the word via social media channels.
Stage 2 - Fundraising Phase - As soon as you reach a certain amount of pledges, you enter the second phase of the process known as the Funding Phase. Here you'll begin requesting actual financial commitments from your backers as well as working towards closing deals with investors.
Once you have closed your deal with an investor, you'll transition back to the Launching Phase where you'll continue to promote your campaign in order to generate further interest and gain traction.
Stage 3 - Distribution & Delivery - After you close your final round of financing and hit your target number of orders, you'll move onto distribution and delivery. Depending on your chosen method, you'll distribute physical goods or digital content to your backers and deliver them.
As we explained earlier, there are four general phases involved in a typical crowdfunding campaign. However, there are two distinct types of crowdfunding: equity and debt based. Equity crowdfunding refers to a situation where individuals invest in a company in exchange for ownership shares. Debt-based crowdfunding occurs when lenders lend you money in return for a percentage of ownership in your company.
Many companies opt for both techniques to maximize the benefits of each method. By combining equity and debt-based crowdfunding, you can leverage the advantages of both approaches.
For instance, you could issue bonds backed by future profits to existing shareholders, allowing them to share in future growth opportunities. Alternatively, you could tap into the power of crowdfunding to secure short term loans to cover production expenses until you've generated sufficient revenue streams to repay the debts plus earn a healthy profit margin.
Which is better? That depends largely on your industry and individual circumstances. Both strategies have pros and cons and require careful consideration.
Nowadays, equity crowdfunding is the dominant force. According to Statista, in 2017 alone, US startups raised $2.4 billion through equity crowdfunding campaigns. Of course, not all of these were successful but the trend shows no signs of slowing down anytime soon.
At present, the US leads the world in terms of total volume of equity crowdfunding transactions. Other countries follow suit, albeit with lower numbers, however Europe accounts for nearly 60% of the global activity. Asia Pacific follows closely behind in terms of transaction volumes.
Why did equity crowdfunding grow so quickly? Well, that's simple really. Investors love investing in young companies because they tend to be highly innovative, fast growing and profitable. Most importantly, they believe in their ability to succeed. With equity crowdfunding, you can access millions of investors looking for great ideas and high returns.
Equity crowdfunding is a win-win scenario for both parties. First off, you get the chance to prove your concept to a large audience and get invaluable feedback. Secondly, investors get the opportunity to participate in the success of your startup and potentially reap massive rewards.
So next time you hear about a crowdfunding campaign being started, check out what kind of project it is going to be. Chances are that you'll find a similar project somewhere else, perhaps already live and running smoothly. But if it isn't, why not consider getting involved? A little extra effort could save you months of development time and countless sleepless nights worrying about your latest creation failing to catch fire.
Crowdfunding has become one of the most popular ways to fund your startup – and a lot of people have made it work successfully with their own campaigns. But how do you go about launching a successful campaign on your own terms? There’s no way around this question if you want to make sure your project gets funded. It all comes down to planning, preparation, and execution. The first step in getting started should be researching what kind of campaign works best for your product. With so many platforms out there, which ones will get the biggest response from investors? And what factors can help determine whether an investor actually backs your idea?
Fortunately, there are lots of resources online that can point you towards the right crowd funding solution. So let's take a look at some key questions to ask yourself before you launch any kind of campaign. What are some things I should consider when starting my campaign? How much time do I need to set aside for building, promoting, and managing my campaign? Is there anything else that needs to happen beforehand? These four simple steps will give you a good overview of what’s involved, and help you avoid wasting precious hours trying to find answers elsewhere.
You probably already know these basic guidelines, but they're worth mentioning as part of your research process anyway. First off, don't overpromise: People tend to back projects that come across as realistic rather than pie-in-the-sky fantasies. Second, keep everything clear and concise: A well-written description helps potential backers understand exactly what they'll receive once the campaign ends. Third, ensure that everyone who wants to invest knows the exact amount they're expected to contribute: If someone pledges $5,000, then only accept contributions up to $10,000. This gives everyone more confidence in backing you, knowing that they won’t lose money by contributing too little. Finally, remember to thank them! Investors are proud of having backed something special, and a personal touch always goes a long way with them.
There are several different forms of crowdfunding available today, each catering to a specific type of audience. We break down the major categories below:
IndieGogo (IGO): IndieGoGo was founded in 2010 and now hosts hundreds of thousands of campaigns worldwide every year. Its primary goal is to support independent creators—that means artists, designers, entrepreneurs, writers, filmmakers, musicians, activists, scientists, inventors, etc.—with innovative ideas and products. To use its services, you must meet certain qualifications including being able to prove that you've raised enough capital through other sources to cover costs associated with your campaign. You also need to provide detailed information about your company and your vision for success, along with details about your rewards package.
Kickstarter (KICK): Launched in 2009, Kickstarter allows anyone to create a fundraising campaign and share it with others. As of December 2018, KICK had helped raise close to $3 billion globally. While it originally focused solely on creative projects like books, film, music, art, design, toys, games, technology, fashion, architecture, food, and crafts, it has since expanded into non-creative industries such as education, healthcare, and politics. Anyone can host a KICK campaign using whatever title they choose, but the term “crowdfund” is preferred in order to differentiate between individual campaigns and larger initiatives like cities or countries raising funds. All campaigns must include detailed descriptions of the items offered, and backers can vote on which projects deserve additional funding based on their level of interest.
SeedInvest (SIEDI): Founded in 2014, SIEDI aims to democratize access to seed financing by offering equity investments to startups with limited budgets without requiring collateral upfront. In return, companies agree to pay monthly dividends on their shares until they reach profitability. Since its inception, SIEDI has facilitated over $1.6 million in equity investments for more than 1,600 companies. Unlike traditional VC firms, however, SIEDI does not charge fees to companies seeking funding. Instead, it takes a 10 percent cut from the total value of each deal closed.
Each form of crowdfunding serves a unique purpose depending on the category. Here are the top five options currently available.
Real Estate Crowdfunding Platforms (RECs) : RealEstateCrowdfundingPlatforms.com was launched in 2017 to bring together all existing real estate crowdfunding platforms under one umbrella. Today, RECs serve as hubs for dozens of niche communities dedicated to helping home buyers, sellers, landlords, developers, property managers, and investors connect with one another. Each community operates independently, allowing users to build networks within specific niches while keeping their profiles separate.
Lending Crowdfunding Platforms (LCPs) : Similar to RECs, LCPs were created specifically for those looking to borrow money. They operate similarly to credit cards where applicants submit their applications and financial documents. After receiving approval, lenders transfer cash directly to borrowers' bank accounts. Most LCPs require less documentation than standard loans because they rely primarily on applicant history instead of credit scores. However, due diligence is still required, especially for high risk individuals or businesses.
Patreon (PAYN): Launched in 2012, PAYN allows content creators to turn fans into contributors via subscriptions. Users pledge small amounts of money per month, usually ranging anywhere from $2-$100, in exchange for exclusive videos, artwork, interviews, behind-the-scenes footage, live streams, merchandise, and other perks. Once a user reaches a specified threshold, he/she receives a lump sum payment equal to the average amount pledged during his/her subscription period. For example, if a creator raises $200 per month for six months, she would receive a payout of $1200 after reaching her target number. Like RECs, LCPs, and other crowdfunding platforms, Patreons often allow users to join multiple groups simultaneously, giving them even greater exposure as well as a wider range of choices concerning the kinds of perks they request.
Blogging & Social Media Campaigns (B&SCAM): B&SCAM stands for Blogging and Social Content Advertising Marketing, and it refers to campaigns whose sole focus is sharing valuable content with others via blogs and social media channels. Examples include sponsored posts on Facebook, Instagram, Twitter, YouTube, LinkedIn, Pinterest, Snapchat, Reddit, Tumblr, and Vine. Some campaigns may involve affiliate marketing, meaning that sponsors will pay a commission whenever visitors buy products listed in blog posts or ads. Others simply promote free giveaways or contests. Regardless of how you decide to monetize your efforts, B&SCAM campaigns typically run for 12–30 days, ending shortly after reaching their targeted goals.
Social Shopping Sites (SSS): SSSPartnership.com offers a comprehensive list of shopping sites that facilitate online sales transactions via social media. You can browse the site by industry, location, or popularity, narrowing results further according to your budget, price range, and interests.
White Label Investment Platforms (WIP): WhiteLabelCrowdfinancing.com provides white label investing solutions designed exclusively for crowdfunding platforms. By partnering with WICF, you gain access to our proprietary whitelabeling engine, which enables you to brand your platform completely seamlessly. You also benefit from our team of experienced professionals who specialize in creating compelling landing pages, designing professional logos, writing press releases, conducting SEO audits, optimizing websites, and handling customer service inquiries. WIP partners earn revenue from commissions paid by crowdfunding participants, plus additional revenue earned through advertising partnerships.
If you'd like to learn more about crowdfunding platforms, check out the links below. Also, feel free to contact us if you have any questions regarding our platform, white labeling, or crowdfunding in general.
As mentioned earlier, there are numerous types of crowdfunding available today. Below are just a few examples of the most common.
Traditional Fundraising Models (TFMs): TFMs refer to traditional models used for years when pitching venture capitalists, banks, corporations, and friends. Although this model is becoming obsolete, it remains very effective at generating initial capital for new ventures. Two of the most common TFM methods include angel investing and microloans. Angel investors invest in startups alongside other accredited investors. Microloan programs provide low-interest loan opportunities for qualified individuals.
Microfinance Programs (MFPs): MFPs enable financially disadvantaged populations to pool their collective savings to lend to smaller members. In exchange, they earn a percentage of the principal and interest payments received. Many organizations use MFPs to generate income for themselves, providing grants to local charities. Other nonprofits, meanwhile, use MFPs to finance short-term development efforts, thereby reducing poverty rates in rural areas.
Crowdfunding has become one of the fastest growing industries in recent years and continues to grow rapidly. The number of campaigns launched on these platforms each year has increased steadily since 2012, when only $50 million was raised globally through crowdfunding. By October 2018 that figure had reached $5 billion. This rapid growth means there are now many different types of crowdfunding websites to choose from. For example, there's Classy, which offers investors access to more than 1,000 companies. There’s also Indiegogo.com, which allows anyone with an idea to crowdfund their project. Then there’s SeedInvest, which focuses specifically on raising capital for small businesses rather than projects. And then there’s GoFundme.com, which helps people who can't afford medical expenses cover costs while they wait for insurance approval.
White-label crowdfunding platforms allow entrepreneurs to set up a campaign using any pre-made template provided by the service provider. It doesn’t matter if you have your own website or don’t even know how to code HTML – all you need is a product or service you want to promote and some marketing materials. These services often include everything needed to launch a successful fundraising effort including payment processing (usually integrated into the platform), email management tools, social media integration, analytics tracking, as well as other features like a CRM database, customer support, and security measures. All this comes together to create a seamless user experience so it’s easy for potential backers to donate because they simply click ‘donate’ instead of having to sign up for yet another account. The key advantage of white-labelling the platform is that the entrepreneur gets full control over what happens within the campaign, without needing to hire additional staff. In addition, because the company provides all the necessary resources, there is little risk involved.
So what makes a good crowdfunding platform? Is there such thing as the perfect crowdfunding site? We look at three main factors when selecting the right platform for our clients: ease of use, reputation, and transparency. Here’s why…
Launched in 2008, IndieGoGo remains the biggest player in crowdfunding today. With more than 65,000 active users per month, and a network of more than 10 million supporters across 180 countries, IndieGoGo is a force to be reckoned with. Its success lies partly in its ability to cater to a wide range of needs, offering something for everyone. For instance, the platform supports both consumer and enterprise models of funding. It also includes various ways to track donations, such as via credit card payments, bank transfers, PayPal, Apple Pay, Google Wallet, Venmo, Dwolla, Zelle, Amazon Payments, Bitcoin, and eCash.
Since 2009, Kickstarter has been synonymous with crowdfunded innovation. Launching in Canada in April 2010, it quickly became an international sensation after being featured on television shows such as Shark Tank and Bill Nye Saves the World. Today, it processes nearly half a billion dollars worth of pledges every year. To date, the average pledge amount is around $1,200. But not all campaigns make it past the initial goal phase. Many fail due to lack of interest, poor timing, or unforeseen circumstances. Still, those that do reach their goals receive generous rewards ranging from T-shirts and stickers to fully funded products or even vacations.
Launched in May 2017, Classy is a new kind of online marketplace where individual contributors invest directly in startups and SMEs. Contributors get paid back immediately upon completion of the project. They also enjoy lower fees compared to traditional crowdfunding sites - 0% commission on funds received. Additionally, Classy offers a variety of financial instruments for contributions, including equity shares, debt notes, convertible bonds, and loans. Unlike other crowdfunding platforms, Classy does not charge a fee to accept contributions. However, it charges a percentage of returns earned from investments made in startup ventures.
A relatively new entrant onto the scene, GoFundMe began life as a way for friends and family members to help out loved ones in times of crisis. Since then, however, the platform has grown significantly and now serves millions of users monthly. As of August 2019, there were more than 2.8 million fundraisers underway on the site, generating more than $2 billion in total receipts. While the majority of campaigns are aimed at helping others, GoFundMe also accepts requests for personal causes and charitable purposes. Like many crowdfunding platforms, GoFundMe is available internationally and caters to everyone regardless of age, gender, sexual orientation, disability status, religion, race, ethnicity, political affiliation, or nationality.
In 2013, musician Jack Conte started a subscription-based music streaming platform called Pledgemusic. Within two months, he attracted 70,000 subscribers paying between $3-$20 per month. That same year, he pivoted his attention to a platform dedicated entirely to supporting independent artists through microfinancing. He founded Patreon in 2014 with the aim of allowing creators to generate income from fans. Today, Patreon boasts more than 3 million patrons worldwide and receives thousands of submissions per day. Creators earn anywhere between 5%-75% of total revenue generated from subscriptions and merchandise sales.
Founded in 2011, SeedInvest specializes solely in investing in early stage technology based companies. There are currently more than 30,000 registered users and more than 60,000 unique profiles created by accredited investors looking to fund innovative ideas. SeedInvest offers a suite of tools designed to help founders succeed during the seed financing process. On top of providing a secure environment for sharing information, SeedInvest integrates with third party apps like Slack, Trello, Basecamp, Salesforce, Gmail, Outlook, and Google Drive. Finally, SeedInvest offers a robust API to help developers build applications to integrate with the platform.
This crowdfunding site is open to everyone, irrespective of age, gender, sexuality, physical appearance, religious beliefs, ethnic origin, national identity, citizenship, place of birth, political opinion, occupation, marital status, health condition, criminal record, educational background, membership of trade unions, and source of income.
Launched in 2015, Lendio is a professional peer-to-peer lending platform for borrowers seeking short term cash flow solutions. Borrowers submit loan request proposals to lenders, who review them before deciding whether to lend or pass. Once approved, lenders commit funds instantly. Interest rates typically run between 8% and 20%, depending on the borrower’s profile. Lenders may withdraw funds whenever they wish, but they must repay principal plus accrued interest first.
Yes! You read that correctly. Our very own Crowdvault is a great option for building a successful crowdfunding platform. Built on the back of the expertise gained from creating the world’s first crowdlending portal, Crowdvault enables entrepreneurs to launch their own crowdfunding campaigns on the go. A simple drag & drop interface lets users easily upload documents and manage payments. Additionally, it integrates seamlessly with accounting systems, meaning no coding required. Lastly, it offers a comprehensive reporting system to keep tabs on finances throughout the entire lifecycle of the campaign. If you’re interested in learning more, contact us here.
Of course! Fundable is one of the leading options for entrepreneurs looking to turn their passion project into a business venture. The platform offers a free trial period and a 14-day refund policy, making it suitable for beginners and experts alike. Using the intuitive dashboard, entrepreneurs can monitor progress, share updates, and communicate with followers. Fundable also offers an array of financial instruments for contributors, including equity stakes and debt securities.
Upworthy is a news aggregator and content creator with a focus on stories related to mental wellbeing and self improvement. Founded in 2007, the platform attracts readership figures in excess of 50 million per month thanks to its diverse mix of articles spanning a host of topics. Its popularity stems largely from the fact that it publishes a mixture of long form pieces and shorter bite size items. Some notable names who have contributed to Upworthy’s editorial calendar include bestselling authors Malcolm Gladwell and Seth Godin, along with former President Barack Obama.
With more than 250,000 campaigns successfully completed and over 100,000 customers, FundingPost is a veteran crowdfunding pioneer. Offering a multitude of financial instrument choices, the platform aims to provide contributors with the flexibility to meet their specific objectives. Amongst its offerings are equity, debt, and hybrid finance deals. It also offers a unique approach to managing risks associated with microloans. Investors benefit from low default rates, lower operating costs, and higher earnings.
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