Last Updated on December 31, 2022 by Selina Parker
When you’re starting a business, many important decisions are to make. One of the most important is how you will obtain the money you need to get your business off the ground. An excellent option for startups is a crowdfunding campaign. It involves raising money from many people, typically through an online platform.
Many different crowdfunding sites are available, each with its own rules and regulations. So, which site is best for your startup?
What are crowdfunding sites?
These online platforms allow startups and small businesses to raise money from many people. It is done by offering rewards or equity in the company for financial contributions.
They divided crowdfunding sites into two categories: donation-based crowdfunding and investment-based crowdfunding. Donation-based crowdfunding is when people contribute money to a project or venture without receiving anything in return. Investment-based crowdfunding is when people invest money in a company with the expectation of making a financial return on their investment.
Three Types of Crowdfunding
With this type, you will offer rewards to people who contribute money to your campaign. The tips can be anything from a t-shirt or mug with your company’s logo to VIP access to the product or service once it launches.
This type of crowdfunding is best for startups’ creative projects with a physical product or service to offer their backers.
You will receive money from investors who expect to get paid overtime with debt crowdfunding. It is best for established startups that need more capital but don’t want to give away equity in their company just yet.
This type of crowdfunding involves giving up a percentage of your company’s ownership in exchange for funding.
The best part of this type of crowdfunding is that it allows startups to raise large sums of money from many people.
Best Crowdfunding Sites
Since launching in 2008, Indiegogo has been one of the best crowdfunding sites for startups and small businesses. It’s best known as a pioneer in the crowdfunding space, but it has made several changes to stay ahead of the curve.
Indiegogo launches over 19,000 campaigns monthly, making it a prevalent choice for startups across the globe.
Platform fee: 5%
- Early-stage startups
- Startups looking to reach a global audience
- You can access the service in 235 countries globally
- Start campaigns on the platform with minimal requirements
- Allow you to connect with Meta and Google to enhance campaign performance
- There is also a separate third-party payment processing fee in addition to the 5% platform charge
- There are a lot of campaigns running on the site
SeedInvest has more than 500,000 investors and has funded over 235 startups raising more than $300 million. For early and seed-stage startups, this platform is best for having increased access to capital and investors.
SeedInvest has higher eligibility requirements than other platforms, requiring you to apply for its network of investors and then pass a thorough vetting process before being listed on the platform. It allows it to ensure that only quality startups can raise money from its list of accredited investors.
Placement fee: 7.5%
Equity fee: 5%
- Pre-seed startups
- Early-stage startups
- Tech startups
- This platform provides startups with the opportunity to connect with angel investors and venture capital firms
- It did not deduct fees for successful campaigns
- Investors and resources are widely accessible
- High prices for using the platform
- Strict vetting procedure
Patreon is widely used in creative communities to pursue a career in their passion. It has seen massive success, with best-selling authors and YouTubers utilizing the platform to fund their content creation.
Patreon is a crowdfunding platform geared toward assisting creative people in growing and sustaining their projects by obtaining financial assistance from friends, family, fans, and admirers. Patreon is free to join, but a monthly fee is associated with the available subscription levels.
Platform fee: 5%-12% depending on subscription
- Content creators
- Art startup
- Lifestyle startups
- Users can create monthly subscriptions
- The platform’s flexibility in terms of funding is ideal for artists
- Simple, straightforward integration makes it easy to promote campaigns
- Platform fees are high
- Not the best option for high-growth companies
GoFundMe isn’t always synonymous with startups, but it’s a fantastic platform for social entrepreneurs and nonprofit organizations who want to make the world a better place and need money to do so. Startups formed to assist others, such as medical startups, animal startups, and green businesses, are encouraged.
Payment fee: 2.9% + $0.30 per pledge
Platform fee: 0%
- Social entrepreneurs
- Non-profit organization
- Eco-friendly organization
No platform fee to use their services
You may maintain the funds donated to your campaign, regardless of whether or not you achieve your objective.
Low campaign success rates due to saturation
Strict criteria for campaigns on the platform imply that most firms will not be accepted.
Mightycause is our top pick for nonprofits since it provides one of the most cost-effective fundraising platforms while also providing a few free tools.
It is a fundraising tool to assist nonprofits and individuals raise money online for their causes. It has the benefit of being flexible in terms of fundraising, as it has helped over 150,000 organizations raise the funds they require to achieve their objectives.
Processing fee: 1.2% of the money you raise + $0.29/transaction
- Non-profit organizations
- Customer relationship management (CRM) platforms, such as Salesforce, are compatible.
- You may acquire a free demonstration at any time.
- There are numerous social media integrations accessible
- You may also establish recurring fundraising, special events, giving days, and crowdfunding efforts
- It includes the CRM integrations in their premium plan
On the platform, Fundable offers both equity and rewards-based crowdfunding for startups. Unlike many other crowdfunding sites, Fundable does not simply take a cut of your profits; instead, customers pay a monthly fee to the site and may launch campaigns as long as they are accepted. It is especially advantageous for successful campaigns because it takes.
Payment fee: 3.5% + $0.30 per pledge
Platform fee: 5% for successful campaigns only
- Tech startups
- High-growth companies
- US-based startups
- If you fail to reach a goal, these equity crowdfunding platform campaigns can continue accepting donations.
- Subscribers pay a low monthly flat fee
- Additional resources are available
- Utilization of this fundraising method may determine the amount of equity capital that a firm may raise through crowdfunding.
- Whether or not your campaign is a success, you must pay the platform fee
- Only US-based companies are eligible
This website’s name, iFundWomen, should indicate its focus (though men can raise money on the platform). The website’s creators created it as a “funding ecosystem for women-led startups and small businesses.” It also provides coaching, marketing, and other services to startup owners.
Monthly plans: 2.9%+$0.30 per pledge
- Women-owned startups
Keep-what-you-raise funding structure allows you to adjust your budget as needed
Commitment to reinvesting in the women-owned company community
Extra services like video production and a private discussion area are available
Only 23 nations are eligible to use the service.
There is a large amount of information on success rate and customer experience.
How can you use crowdfunding money?
Generating money from the crowdfunding site is an excellent method of raising funds, whether you’re starting a business or looking to take your existing company to the next level.
What you disclosed as the purpose of raising money should be the same thing written on the campaign page. People often forget this important detail, leading to the crowdfunding site shutting down your campaign.
How to Choose the Best Crowdfunding Site
Check for the cost
Each platform has a fee structure or payment processing fees that they must examine to determine whether or not it best meets your startup’s needs.
Compatibility with social media sites
The best crowdfunding platforms are also compatible with popular social media sites, making it easier for you to build momentum and raise more funds.
Look at their interface: how simple is it to use?
Platforms have user-friendly interfaces that simplify navigating and submitting your campaign, thus saving you time if you’re not tech-savvy.
Can you continue to raise money if you fail to reach the goal?
It is an important question that you have to ask yourself before selecting a crowdfunding site because some only allow for one campaign at a time.
Are you able to keep the funds raised even if you fail to reach the goal?
Some platforms take a percentage of the money you raised, even if you fail to reach the goal. Be sure to inquire about this before selecting a site.
Is your campaign eligible?
Some platforms are only for US-based businesses, while others are open to companies worldwide. Check eligibility requirements before signing up.
Crowdfunding is a great way to raise funds for your startup or business, but you need to choose the best crowdfunding site to meet your company’s needs.
Choose a platform based on what best fits and is most practical for your company’s purpose; don’t get distracted by flashy options with pricing schemes that can be detrimental to your campaign.
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ABOUT THE AUTHOR
“What began as a life and career coaching services company to aide entrepreneurs through the early-stage challenges and tough transformations of starting a social venture has evolved over the years to include mergers and acquisitions, organizational consulting, and business growth advisory services to mission-driven organizations that strive to improve access to basic physiological, safety, and security needs while increasing their profit margin. Clients include founders and organizations with the purpose of addressing deficiencies in delivering quality healthcare and mental health services, sufficient employment, access to clean water and air, safe shelter, adequate food, and more.”