A crowdfunding platform is a plan of action to collect capital or fund for your startup business, donation, event listing, real estate, etc. Crowdfunding websites allow individuals to collect funds by using social networks.
Previously people used to take money from banks for business or any other investment. Many of us think about why we need to raise funds from people when there is a bank loan option available. Well, people donate so that you can bring ideas to life.
Types of Crowdfunding Platforms
As you know crowdfunding refers to the practice of funding a project or venture by raising money from a large number of people, typically via the internet. There are several types of crowdfunding platforms, each with its own unique features and focus. The following are the main types of crowdfunding platforms:
Donation Based Crowdfunding
Donation-based crowdfunding is a type of crowdfunding platform that focuses on raising funds for charitable causes and non-profit organizations. It allows individuals to donate money to a specific cause or project, with no expectation of receiving any financial return or reward. The funds raised through donation-based crowdfunding are typically used to support a specific project or initiative, such as building a school in a developing country, funding medical research, or providing disaster relief.
Rewards Based Crowdfunding
Rewards-based crowdfunding is a type of crowdfunding platform that offers rewards to backers in exchange for their support. This type of platform is commonly used by entrepreneurs, creatives, and small business owners to raise funds for their projects or ventures. The rewards offered can range from early access to the product or service, to exclusive merchandise, to personalized experiences.
Equity Based Crowdfunding
Equity-based crowdfunding is a type of crowdfunding platform that allows investors to receive a share of the company in exchange for their investment. In this type of crowdfunding, investors invest money in a company in exchange for equity ownership in the form of stocks or shares.Equity-based crowdfunding provides startups and early-stage companies with an alternative source of funding, allowing them to raise capital without incurring debt or giving up control of their company.
Debt Based Crowdfunding
Debt crowdfunding, also known as peer-to-peer (P2P) lending, is a type of crowdfunding platform that allows individuals to lend money to businesses or projects, with the expectation of being paid back with interest. In this type of crowdfunding, investors act as lenders, providing capital to businesses in exchange for a return on their investment in the form of regular interest payments.
Other types of crowdfunding includes:
Real Estate Crowdfunding
Real estate crowdfunding provides investors with the opportunity to invest in real estate projects and potentially earn a return on their investment, without having to purchase a property outright or manage it themselves. It also provides real estate developers and investors with an alternative source of funding, allowing them to raise capital for their projects and bring them to life.
Event Listing Crowdfunding
Event listing crowdfunding is a type of crowdfunding platform that allows individuals and organizations to raise funds for events, such as concerts, festivals, and charity events. In this type of crowdfunding, individuals can make a contribution to the event, with the expectation of receiving rewards or benefits in return, such as tickets, merchandise, or exclusive experiences.
Security Based Crowdfunding
Security-based crowdfunding is a type of crowdfunding platform that allows individuals to invest in securities, such as stocks, bonds, and other financial instruments. In this type of crowdfunding, individuals can invest in companies, projects, or funds, with the expectation of earning a return on their investment through appreciation, dividends, or interest.
Lending Based Crowdfunding
Lending-based crowdfunding is a type of crowdfunding platform that allows individuals to lend money to individuals or businesses, with the expectation of receiving a return on their investment in the form of interest. In this type of crowdfunding, individuals can lend money to individuals or businesses in need of funding, without having to go through a traditional bank or financial institution.
Hand Picked Best Crowdfunding Platform
- Best Crowdfunding For Entrepreneurs: Indiegogo
- Best Crowdfunding For Musicians or Artist: Kickstarter
- Best Crowdfunding For Creative Professionals or Creators: Patreon
- Best Crowdfunding For Individuals: GoFundMe
- Best Crowdfunding For Startups Business: SeedInvest
- Best Crowdfunding For Nonprofits: Mightycause
- Best Crowdfunding For Investing or High-Growth: StartEngine
- Best Crowdfunding For Education: DonorsChoose
- Best Crowdfunding For Real Estate: PeerStreet
- Best Crowdfunding For Small Businesses: Fundable
Indiegogo is a global crowdfunding platform that was founded in 2008. It allows individuals and entrepreneurs to raise funds for creative, entrepreneurial, and cause-related projects and initiatives.
The platform offers both flexible and fixed funding options, allowing campaigners to keep the funds raised even if they do not reach their funding goal. Indiegogo offers a wide range of categories, including technology, design, film, music, art, and more.
The platform also provides a range of tools and resources to help campaigners successfully launch and run their campaigns, including marketing and promotional tools, and support from a dedicated team of experts.
Kickstarter is a crowdfunding platform that allows creators to raise money for creative projects, such as films, music, art, and technology. Creators create a project page on the Kickstarter website, where they share details about their project and offer rewards to backers in exchange for their support.
Backers can choose to support a project by pledging a certain amount of money, and in return, they receive the rewards offered by the creator. If a project meets its fundraising goal, the funds are collected from the backers and released to the creator.
Patreon is a platform that allows creators to receive ongoing funding from their fans or patrons. Creators create a page on Patreon where they share details about their work and offer rewards to their patrons in exchange for their support.
Patrons can choose to support a creator by pledging a certain amount of money per piece of content that the creator releases, or on a monthly basis. In return, patrons receive the rewards offered by the creator. Patreon is similar to Kickstarter in that it allows creators to receive funding directly from their audience.
GoFundMe is a crowdfunding platform that allows individuals and organizations to raise money for personal or charitable causes. GoFundMe allows users to create a campaign page where they can share details about their cause and accept donations from the public.
Donors can choose to make a one-time donation or set up a recurring donation. GoFundMe is similar to platforms like Kickstarter and Patreon, but it is generally used for personal or charitable causes rather than creative projects.
SeedInvest is a leading equity crowdfunding platform that was founded in 2012. It provides startups with a platform to raise capital from a large pool of accredited investors, and allows investors to invest in early-stage companies and startups.
SeedInvest is a regulated crowdfunding platform, and is registered with the US Securities and Exchange Commission (SEC) as a broker-dealer. This means that it must adhere to strict regulations and standards, providing investors with a level of protection and security.
Mightycause is a leading online fundraising platform that was founded in 2010. It provides individuals and organizations with a platform to raise funds for a wide range of causes, including nonprofit organizations, schools, religious organizations, and personal causes.
Mightycause offers a range of tools and resources to help individuals and organizations successfully launch and run their fundraising campaigns, including customizable fundraising pages, marketing and promotional tools, and support from a dedicated team of experts.
StartEngine is a leading equity crowdfunding platform that was founded in 2014. It provides startups and early-stage companies with a platform to raise capital from a large pool of accredited investors.
StartEngine is a regulated crowdfunding platform, and is registered with the US Securities and Exchange Commission (SEC) as a broker-dealer. The platform offers a range of investment opportunities, including equity investments, convertible notes, and SAFEs (Simple Agreement for Future Equity).
StartEngine also provides startups with a range of tools and resources to help them successfully launch and run their campaigns, including marketing and promotional tools, and support from a dedicated team of experts.
DonorsChoose is an online charity platform that was founded in 2000. It provides a platform for individuals to support public school classrooms in the United States by funding specific classroom projects and materials.
On DonorsChoose, teachers from public schools can create project requests for materials and experiences their students need to learn and grow. Donors can then browse and choose projects to support, and see the impact of their donations.
PeerStreet is an online real estate investing platform that was founded in 2013. It provides individuals with the opportunity to invest in short-term, high-yield real estate loans.
PeerStreet offers a range of investment opportunities, including residential and commercial real estate loans, with terms ranging from 6 to 36 months. Investors can choose to invest in individual loans or in a diversified portfolio of loans, and can expect to earn returns of 7% to 12% per year.
PeerStreet provides a range of tools and resources to help investors make informed investment decisions, including detailed loan information, real-time performance data, and a team of investment professionals to answer questions and provide support.
Fundable is a crowdfunding platform that was founded in 2012. It provides startups and small businesses with a platform to raise capital from a large pool of investors, including accredited investors, friends and family, and customers.
Fundable offers two types of crowdfunding: rewards-based crowdfunding and equity crowdfunding. With rewards-based crowdfunding, entrepreneurs can raise funds by offering rewards to backers in exchange for their support. With equity crowdfunding, entrepreneurs can raise funds by selling equity in their company to investors.
Difference Between Traditional Fundraising and Crowdfunding
- In traditional fundraising, investors are approached by volunteers. For that, they had to arrange offline campaigns. On the other hand, crowdfunding raises money through online platforms.
- Traditional fundraising methods used to take a lot of time. Because they need to arrange offline campaigns, convince people, etc. But the crowdfunding method is time-consuming. As they collect funds online.
- Rather than crowdfunding, traditional fundraising is a long-term process. This process is mainly for any organization. Crowdfunding is a short-term process. Their main concern is to fulfill their goal.
- Crowdfunding sites collect a lot of money in comparison to traditional fundraising. Their main source of money is collected online.
- In crowdfunding, they can keep in touch with their investors or donators. But in traditional fundraising, it’s quite impossible.
Benefits of Crowdfunding
The most important benefit of a crowdfunding website is you can raise money easily. Business owners have found major success in using crowdfunding to gain support and move them to succeed in their goals. Nonprofit organizations also use crowdfunding for high-stakes giving days.
Raise Money Quickly: Many crowdfunding websites raise money within 30-40 days. But how? Well, crowdfunding website raises money quickly. By following some marketing strategy they reach their potential individuals and fulfill their goals.
Diversification of Funding: Crowdfunding allows for the pooling of small contributions from a large number of people, reducing the risk for any single investor.
Build a Community: A crowdfunding platform builds a community. Togetherness is an integral part of fundraising. People come and support each other on their major causes. The bond creates a feeling of fulfillment and motivates them.
Potential Return on Investment: Crowdfunding campaigns can offer rewards or equity-based incentives to backers, providing a potential return on investment.
Raise Awareness: Crowdfunding raise awareness. Through crowdfunding, awareness raises among people. They are encouraged for donating.
Consider This Before Choosing a Crowdfunding Platform
Platform Fees: Consider the fees charged by the platform for using their service, including any transaction fees and the cost of running a campaign.
Campaign Requirements: Review the platform’s guidelines and requirements for campaigns, including the types of projects they allow and their approval process.
Reach and Audience: Consider the platform’s target audience and their level of engagement, as well as the platform’s reach and ability to promote campaigns to a wider audience.
Payment Processing: Research the platform’s payment processing options, including the types of payment methods accepted and any fees associated with payment processing.
Reward Fulfillment: Evaluate the platform’s policies and procedures for delivering rewards to backers, including any fees or restrictions.
Campaign Support: Consider the level of support offered by the platform, including resources and tools to help you run a successful campaign.
Campaign Metrics: Look for a platform that provides detailed metrics and analytics to help you track and measure the success of your campaign.
Legal and Regulatory Compliance: Make sure the platform is compliant with relevant laws and regulations, including those related to crowdfunding and securities laws.
Crowdfunding is a popular way for individuals and organizations to raise money for a wide variety of projects and causes. It allows creators to connect with their audience and get funding directly from the people who are interested in their work. It also allows backers to support projects and causes that they believe in and to contribute to the success of something that they are passionate about.
There are a number of different crowdfunding platforms available, each with its own unique features and focus. It is important to choose the right platform for your needs and to carefully plan and execute your crowdfunding campaign in order to maximize your chances of success.