These days, it’s hard to hear much about fundraising without also hearing a thing or two about the concept of crowdfunding. Thanks to the internet, crowdfunding has opened up a whole new world of possibilities for a variety of people that might not have had the same chance to put their projects in motion on a practical basis before. These include small business owners, independent artists, charity workers, and many others. The rising popularity of top crowdfunding and fundraising websites such as Kickstarter and IndieGogo has only helped to spread the popularity of crowdfunding as a modern fundraising solution.
At present, the concept on the whole has caught on to such an extent that it’s gone beyond simply being a tool specifically utilized by small businesses and independent entities to get a given project off the ground. Even larger businesses are now turning to crowdfunding as a way to obtain funds to develop products and concepts the public would like to see happen.
Although crowdfunding has officially reached a point where it’s here to stay, it’s something that rose to prominence relatively recently as far as the history of fundraising goes. Prior to 2012, it really only existed as small scale peer-to-peer lending in which isolated individuals that believed in what you were doing would help you move your project forward by lending money. The term “crowdfunding” itself dates back to 2006 in relation to fundraising efforts for a video blogging network launched by Michael Sullivan.
What we currently think of when we hear the term “crowdfunding” actually first began as a form of outsourcing known as “crowdsourcing”. Crowdsourcing is the practice of delegating the many tasks attached to a given project over a portion of the general public to help facilitate its speedy completion. People who choose to become involved in crowdsourced projects generally do so on a volunteer basis out of a genuine desire to be involved.
Crowdfunding operates on the same general principle, but with the addition of incentives to encourage contribution and increase amounts donated. People who choose to help crowdfund a given project do generally do support the cause behind that project and wish to be involved in helping it come to fruition. However, many also wish to obtain the incentive attached to a particular size donation. The type of incentive involved is what determines the difference between reward-based crowdfunding and equity-based crowdfunding.
Reward based crowdfunding is probably the most popular and widespread of the two campaign types. After determining the amount of money that needs to be raised for a successful project, the person or company behind the campaign then sets up suggested donation amounts. Each of these will come attached to a specific reward or incentive.
For instance, if an independent filmmaker decides to use reward based crowdfunding to raise money for his next independent film, he might offer people who donate $100 to the cause a mention in the film’s credits. Those who choose to donate $500 might receive a signed film poster while people who donate $1000 might get to attend a meet-and-greet. The types of rewards that can come attached to a crowdfunding campaign can cover literally anything.
Some reward based crowdfunding campaigns require the entire target amount to be raised or exceeded in order for the business or individual to actually receive the funds. Others will simply allow them to collect whatever they manage to raise and put it toward the project in question. In cases where the sought-after benchmark needs to be met in order for any of the funds to be collected, people who donate have the added peace of mind that comes with knowing they’ll get their money back if there’s a possibility that enough wasn’t raised for the project to move forward as planned.
The largest crowdfunding site with more than 13 million visitors every month, Kickstarter hosts crowdfunding campaigns from comics and crafts to technology and Theater. The site does not allow campaigns for social causes so you’ll need a product or event to promote.
The platform has helped nearly 80,000 projects get funded with a strong community of repeat backers. Nearly 300,000 people on Kickstarter have backed 10 projects or more. About the biggest drawback for Kickstarter is that it only offers the all-or-nothing funding model which means that if you do not reach your funding target, you get none of the funds pledged.
Fees:
Kickstarter collects a 5% fee for successfully funded projects. Payments are processed by Stripe which charges between 3% and 5% of the amount.
Average Backer Pledge Kickstarter
Similar to Kickstarter, except that here, you can raise funds for any project (so long as it’s legal), including donation website for charity. This opens the crowdfunding site up to campaigns for personal finances, medical needs and just about anything. Kickstarter has gotten better about supporting international campaigns but I still hear from some campaigns that they prefer Indiegogo for raising money from international sources.
The flexibility and ease of international crowdfunding on Indiegogo has helped its popularity and campaign success is slightly higher at 44% compared to Kickstarter. The site receives upwards of nine million visitors per month.
Fees:
Under the flexible funding model, Indiegogo charges a 9% fee on the funds raised. If you reach your goal, you get 5.0% back, for an overall fee of 4%. Fees for the all-or-nothing model are a flat 4% of contributions. PayPal or credit card processing is available with fees ranging between 3% and 5% of the amount.
Indiegogo offers a 25% discount on their platform fees for any campaign raising funds for a nonprofit institution with a 501(c)(3) registration in the United States. Contributions for these campaigns are tax-deductible.
Kickstarter and Indiegogo Categories
Image courtesy of Simran Khosla at PandoDaily
AngelList is not necessarily a crowdfunding website but a platform for startups to meet investors, candidates and incubators. In the past, angel investing was one of the best forms of funding for startup companies, similar to venture capital, and was typically the first round of funding after friends and family. Angellist is an equity crowdfunding site where companies offer an ownership stake in exchange for funding. Click through to this post for more about how to find angel investors and raise money for your small business.
Syndicates – An angel or fund forms a syndicate, picking which investments it likes and wants to support. Private investors then support the syndicate to invest indirectly or directly in the separate projects.
Cost:
For Startups – No fees to receive an investment from a syndicate
For Backers – 5-20% carried interest per deal to the syndicated lead and 5% carried interest to AngelList
Out-of-pocket setup costs for each investment: $8K in the US and £8,300 in the UK
Self-syndication – Allows accredited investors the opportunity to make direct investment in individual campaigns.
Cost: Investors pay a 10% carried interest to AngelList and a fixed setup cost.
Appbackr is one of the two popular crowdfunding websites for applications development. It aims to index the world’s apps, helping developers raise funding and to build attention around their apps and app ideas.
Developers can sign up and post their apps, whether they are still in development or currently for sale in a mobile app store. Backrs purchase wholesale copies on appbackr and makes a 26% profit when he backs an app. If the app is already available, funds are immediately transferred to the developer’s PayPal account. If the app is pre-launch, the funds will be available when the app is ready to be released.
As the app sells, appbackr counts the number of sales and pays the developer and the backrs when the mobile app store distributes the money.
appbackr crowdfunding website model
Products
AppBakr has three main products
While it’s not necessarily a crowdfunding platform, Como.com is a great tool for app publishing and can be used with some of app crowdfunding platforms. After you’ve raised money developing your app, you’ll want to launch it to a larger audience with some of the features on Como.com like scratch cards and in-app coupons.
RocketHub is one of the more popular crowdfunding sites after Kickstarter and Indiegogo and has a great support system with the crowdfunding site’s Success School series. The platform offers the flexible funding model where you keep any pledges made whether you meet the funding goal or not.
RocketHub has partnered with A&E Project Startup for a huge potential boost to campaigns. Campaign owners have the chance to be featured on television and on the A&E website, as well as featured in the channel’s bi-annual magazine.
Fees:
If you reach your goal, 4% commission fee + 4% credit card handling fee. Fees for flexible funding if you don’t reach your goal are higher at 8% plus the 4% processing fee.
RocketHub Crowdfunding Success School
CrowdRise allows you to create a fundraiser online for your favorite cause. The fundraising website runs on the flexible funding model where you keep all pledged donations. The site is one of the largest for social cause crowdfunding and used by some of the largest non-profits including the Red Cross, UNICEF and the Boston Marathon. Crowdrise offers a unique point system that helps track the impact charities are making through their reporting numbers.
Edward Norton co-founder Crowdrise fundraising website
CrowdRise offers three pricing plans for crowdfuding:
Fundable is one of the few crowdfunding platforms to offer both equity crowdfunding and rewards-based crowdfunding. One of the most interesting features on Fundable is that it charges no fee associated with how much your campaign raises, i.e. the 5% fee on Kickstarter. This means you keep any money pledged and makes the site more attractive to those looking to raise a large amount.
Two ways to Fundraise – Equity-based Fundraising and Rewards-based Fundraising.
Pricing and Fees:
Fundable charges $179 per month plus a merchant processing fee of 3.5% + $0.30 per transaction for rewards-based crowdfunding.
The site charges $179 per month for equity crowdfunding campaigns.
SeedInvest is a platform that enables equity-based crowdfunding by accredited investors in startups. Crowdfunding campaigns must reach their funding goal to receive any funds. Companies should expect to take a minimum of 60 – 90 days to complete equity crowdfunding.
SeedInvest Equity Crowdfunding Website Model
The crowdfunding site charges no investor fees and allows you to invest alongside with institutional investors.
Costs:
WeFunder is another equity crowdfunding site but offers lower minimums for investment. You still have to be an accredited investor but can invest as little as $100 for an individual company.
Startups receive most of the funds committed, minus an admin fee. Investors also pay a $10-$75 admin fee on top of their investment.
Fees:
WeFunder charges 10% carried interest, and a nominal admin fee between $2,000 to $4,000 upon the successful close of the funding.
Wefunder Equity Crowdfunding Platform
CrowdCube is a U.K. crowdfunding website backed by Balderton Capital and more than 400 private investors who have collectively invested more than £1.8M across multiple rounds of funding. You can find investment opportunities in a variety of industries or raise funds for your business. Currently, they only support British businesses.
Fees:
Success fee – 5% (VAT Exempt) of total funds processed
Administration – £1,250 (ex. VAT)
Corporate services – £1,250 (ex. VAT)
Payment Processing Fees: 2.4% of the funds processed + £0.20 per transaction
GoFundMe is one of the most popular fundraising websites for personal fundraising causes. The platform offers a little more personalization in campaigns and three models for fundraising: personal campaigns, charity fundraising and all-or-nothing campaigns.
Under the personal campaign model, you set up your campaign and request donations. This is a good option for those looking to fund medical expenses, memorials, and travel because you don’t have to offer rewards. For personal campaigns, you do not have to set a deadline or funding goal.
The charity model allows you to choose one of the non-profit organizations listed on the site and promote it through your social network. Crowdfunding promotion is one of the toughest parts of crowdfunding so it’s nice to have another option.
The all-or-nothing campaign model is similar to Kickstarter where you create a crowdfunding campaign and offer rewards for backer contributions.
In the United States, GoFundMe deducts a 5% fee plus a processing fee of about 3% and $0.30 from each donation you receive. International fees range from 6.9% to 7.9% depending on the country. Charities pay a 5% platform fee and a 4.25% fee to FirstGiving.
If you do go with a non-rewards based fundraising website like GoFundMe, make sure you check out our mega-resource of 33 expert ideas to boost fundraising ideas and crowd campaigns.
YouCaring offers crowdfunding for personal and charitable causes and charges no fee to fundraising organizations. The site specifically offers categories of Medical and healthcare costs, Memorial & funeral costs, Education & tuition fundraising, Family & adoption costs, Faith-based service projects, Pet & animal expenses, Community or Cause.
YouCaring Free Fundraising Website
YouCaring does not permit fundraising for legal defense, litigation, bail bonds or other legal matters.
Fees:
YouCaring does not charge admin or service fees though donors are given the option to donate to the website to support operations. PayPal and WePay offer third-party payment processing and charge 2.9% plus $0.30 per transaction.
GiveForward is an online fundraising website that claims to be the #1 crowdfunding platform to start a medical fundraiser and the only site with fundraising coaches providing guidance. Specific categories include medical bills, veterinarian bills and funeral expenses.
Each fundraiser is assigned a personal coach that is available to answer questions and provide advice via phone or email. Besides the personal coach, an attractive feature is that the fundraising campaign can distribute funds to the recipient any time and in chunks or all at once.
Fees:
Giveforward charges 5% for the platform plus 2.9% + $0.50 goes to their online payment service provider.
GiveForward Fundraising Platform Coaches
Patreon was launched to enable fans to support their favorite creators and is geared towards ongoing projects of music, video and other creative projects. The site offers a really unique model in that backers pledge to support creators on an ongoing basis, usually for each project, until the backer cancels the promise. Pledges are generally for smaller amounts than the one-time donations on other crowdfunding sites but can grow over time with multiple projects.
Patreon can be a great way for those in the creative space to fund their ongoing projects without having to constantly worry about raising money for each individual campaign. Rewards are offered but are usually only deliverable one time.
Fees:
Patreon charges 5% on pledges with credit card processing adding another 4% off the donation. Beyond these fees, creators also pay billing partners for payment processing between 2% and 5% of the amount.
AlumniFunder aims to help build deeper relationships between students and alumni by providing a platform to fund creative and innovative projects within the university community.
People who register on AlumniFunder are divided into two groups: Students and alumni looking to create a project (“Doers”) and Alumni and the general public who are looking to browse and fund these projects (“Alumni”). Crowdfunding campaigns run for a limited time (30-60 days) and operate on the all-or-nothing model. As of this writing, there were no active projects listed on the site.
The idea of an alumni networking crowdfunding platform makes a lot of sense as alumni have been strong supporters of campaigns on other sites.
AppStori is a crowdfunding and fundraising platform connecting mobile app consumers and developers before an app becomes available on an app store.
Developers can raise funds, find beta testers, build an audience, advertise their needs and wants and create a “Stori”, essentially allowing friends, family and consumers to be part of the team that brings the app to the market.
When consumers find a team or an app they would like to support, they can make a contribution. Depending on the amount, each team offers different rewards to supporters/backers. Payments are facilitated with Amazon Payments.
Fees:
CircleUp is an equity crowdfunding platform that connects accredited investors with innovative consumer and retail companies. Companies must typically have substantial revenue (> $500,000 annually) or other indicators of potential success and are evaluated by private equity investors before being allowed on the site. Average funding time is between two and three months and funds can be raised through convertible debt or equity. Companies pay a commission to FundMe Securities LLC, a wholly owned subsidiary of CircleUp.
Minimum investment size is $1,000 and up, depending on the offering. There are no fees for investors and your investment is returned if the company fails to meet their target funding.
An interesting feature of CircleUp is the ability to follow “circles” based on an affiliate company, usually a private equity analyst or an investment firm. The affiliate publishes their opinion on deals and investors are allowed to co-invest through a fund managed by the affiliate. Investors pay carried interest to be a part of the fund.
CauseVox is another fundraising platform developer with tools to create your own website for online fundraising. The fundraising site tool works similar to WordPress with custom themes and templates available.
At the time of this writing, Causevox was offering development with no monthly fees until you raise $5,000 online. At that point, the site offers three pricing plans.
Payment processing is available through Stripe or PayPal and will amount to another 3% fee per transaction.
causevox fundraising websites
While some crowdfunding sites or fundraising websites may allow multiple types of campaigns, I’ve tried to offer some kind of classification below to help you pick the best for your fundraising campaign or crowd project. This is only a guide to make it a little easier but in no way absolute. Read through the descriptions of crowd and fundraising sites and consider talking to other campaigns to find the best for you.
RocketHub is also a popular rewards-based crowdfunding site though not quite as trafficked as Kickstarter or Indiegogo. The crowdfunding platform has developed a great program with A&E TV so might be able to offer huge exposure if you can get noticed by the site.
Patreon offers a unique crowdfunding model for people with recurring funding needs like artists, writers and others that create multiple projects regularly. If you’ve got an active group of people that regularly follow and support your work, this site is definitely worth checking out.
Even before the SEC clears non-accredited investors to invest in crowdfunding projects, equity crowdfunding has become a great source for business funding. As with traditional angel and venture capital funding, you sell an ownership stake in the company for funding.
Fundable offers rewards-based crowdfunding as well but one of the rewards-specific platforms would probably be better suited for a non-equity campaign. The upside to equity crowdfunding on Fundable is that you pay only a monthly fee instead of a percentage of funds raised.
SeedInvest, CircleUp and WeFunder are also equity crowdfunding websites with fees slightly lower on WeFunder. CircleUp has a strong investor community and has developed the investing circles concept on its platform. This might help to reach larger investors and influencers for your equity campaign.
For those business owners in the U.K., CrowdCube is a good choice for equity crowdfunding. The opportunity to raise money through equity funding or through bonds helps to match investor needs and risk appetite.
Appbackr and AppStori are both crowdfunding websites for application developers and look fairly similar. You can raise money for app development as well as sell your app through the sites. I’ve never used either and would love to hear from people that have used the sites and can help with feedback.
Fundraising websites and platforms account for a little over a quarter of total crowdfunding pledges each year. A few fundraising sites have become the standard for the group while others offer special features.
Crowdrise and GoFundMe are the two most popular crowdfunding fundraising websites. As co-founder of Crowdrise, Edward Norton has done a lot of press on the cause and really helped to bring the spotlight to the site. GoFundMe doesn’t have the boosters but has the most campaigns and higher visitor traffic.
YouCaring does not charge a project fee, making it one of the low-cost fundraising site options, but still charges payment processing. The fundraising coaches at GiveForward are a nice feature though I have never used the service.
CauseVox is a fundraising website developer and not necessarily a fundraising site where you can directly raise money. If your non-profit is an ongoing organization with regular funding needs, you might consider creating your own fundraising site for the purpose.
Choosing the best crowdfunding site or fundraising website is only one step of the process you’ll need to be successful. Crowdfunding sites have opened up a whole new world for small business and non-profit fundraising but you need to learn the process of promoting and managing your campaign to meet your goals.
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