What is crowdfunding
Take an entrepreneur, a startup founder, or a small businessman – they all have practical, money-making, and job-creating ideas to create new businesses and help make a better community. But they need money or a loan to fund their ideas. How can they raise the money to create this business and what is the road map? The most common way is to get a loan from a bank. But banks consider entrepreneurial, start-up and small business ventures too risky. Today an entrepreneur needs a business plan, a loan application, and a drive to the bank to meet with the bank-loan officer or a VC in the hope of getting a loan.
But not with crowdfunding! Through the internet using cloud and social media environment, the entrepreneur connects with hundreds or thousands of potential investors via crowdfunding websites.
Have you ever had a fit of creativity or a clear vision of how to improve some thing or process? Lots of people have ideas like this but usually very few have the resources to turn their ideas into reality. But now with the help of the internet, people with creative ideas can get the funding they need to bring their ideas to life. Crowdfunding makes wonders! Pitch to your fans to finance your product.
Why should you care
At the very least, crowdfunding can bring success to your business. It can form entrepreneurial ecosystems that can light up innovation, create jobs and grow economies. Because of the high-priced technology development and limited finances business owners had to travel places looking for alternative technologies and attracting investors to their business. For the majority of them, it was a matter of cost and logic that made it impossible. Crowdfunding makes your life as an entrepreneur less challenging and gives you a lifetime opportunity to grow your business without major risks. But there are truly many other causes in this world where crowdfunding can make a huge impact.
How does crowdfunding work
A crowdfunding platform helps creators get donations from a large number of people at once, which reduces the amount of money that each funder has to put in. The nature of the Internet makes this model easy to implement using all kind of crowdfunding sites. Today there are about 2,000 different crowdfunding platforms worldwide. Some of them are designed for specific fields like science experiments, bands, or documentaries. All of them have different requirements and funding models.
There are four crowdfunding models:
- Donation model. People can donate money in small investments to a project they believe has a moral and ethical value that is good for the community. There is no return for given money.
- Pre-order model. People make online pledges during a campaign or pre-bye the product for later delivery.
- Reward-based model. Investors get the satisfaction of helping, and immediately receives a predetermined reward or item of value.
- Equity model. It requires a large number of people to invest small amounts’ funding into early startups, with the extra expectation to receive dividends or investment appreciation based on profits of the business.
Today there are a great variety of popular crowdfunding websites. We have categorized top global ranked crowdfunding sites and explained how they work so you can easily find a crowdfunding website for your cause.
Here’s our list:
- Crowdfunding websites for creative projects (Kickstarter, Ulule)
- Crowdfunding websites for personal causes (Gofundme)
- Crowdfunding for startups (Indiegogo)
- Crowdfunding websites for tech projects (AngelList)
- Crowdfunding websites for small businesses(Lending Club, Kiva)
- Crowdfunding websites for charity (JustGiving, Crowdrise, Youcaring)
- Crowdfunding websites for real estate (Fundrise)
Crowdfunding websites for creative projects
Kickstarter
What it is
Kickstarter is a well-known online fundraising platform with over 13 thousand successful campaigns since its launch in 2009.
Kickstarter is full of ideas and inventions. It has fifteen different project categories like art, fashion, design, technology and etc.
Here creators have to stay accountable to their supporters. Creators on Kickstarter are encouraged to be as open about their projects as possible. This could include describing project aspects, identifying potential challenges, providing progress updates and responding to feedback from supporters.
Many projects on Kickstarter have incentives for people who have donations above a certain amount. For example, if your project is a book you can reward your supporters with a digital or real copy of the book depending on the amount of donation.
The main difference between Kickstarter and other crowdfunding platforms is the requirements for projects. This is not a place to raise money for a charity like on GoFundMe or Indiegogo.
How it works
Creators post their projects and ideas, along with specs for their finished product, potential risks, and progress updates. Each project has its own page, where creators describe the funding goal, place a video explaining the venture, and the deadline, up to sixty days after the launch. Then other people can donate money towards these projects. When a creator posts a project, they set a monetary goal and a deadline to meet it by. Then supporters can pledge money towards the completion of the projects. If the project doesn’t meet its funding goal by the set deadline, the creator receives no money and the supporters will not be charged for their pledges. If you reach your goal, Kickstarter takes 5% of your fund and another three to five percent go to Amazon Payments.
Best for
Kickstarter supports only creative projects like films, games, music, and technology. So it is your go-to crowdfunding platform if you are an artist, designer, or inventor.
Ulule
What it is
Ulule is the first European crowdfunding platform founded in France in 2010. It is focused on creative projects like book publication, album recording, film shooting, tech product release. Political and charity projects are also welcome. For their support sponsors receive various bonuses, or the product itself. Equity financing is not practiced.
How it works
As usual, you create a profile for your project with all required information. Then comes the “Nestling” status, this means that the project is not shown on the platform’s site, and accessible only by a direct link. Now you wait for at least five people to make a donation to your project after what it will appear on the site. The Ulule platform using the “All or Nothing” model. If the collected amount is indicated in euros, then the creator must have a bank account in one of the 28 European Union countries or Switzerland, Liechtenstein, Norway, and Iceland. In case the amount is collected in dollars, then all payments are made through Paypal. The minimum donation is €5, the maximum limit doesn’t exist.
The price is 5% of the raised money, plus additional 3% to 3,5% for PayPal.
Best for
Creative projects or business ideas.
Crowdfunding websites for personal causes
Gofundme
What it is
The world’s number one personal fundraising website. Billions of dollars have been raised for important personal causes like medical bills, education expenses, volunteer trips, sports teams, and even animals and pets. Gofundme makes it easier to bring your family and friends together and help the people in your life.
How it works
Here’s a simple example. Let’s say a girl named Anna recently was injured in a car accident, now she is struggling with medical bills and missing out on work. Her friends want to help, so Jack sets up a fundraising campaign on Gofundme. He sets the goal, selects the photo, explains what happened, and shares the campaign with friends. People who want to help can make a donation. Jack will get an email each time a donation is made.
When a goal is reached he offers Anna the money and all she needs to receive it is to provide her bank account. Gofundme takes 3% to 5% payment processing fee.
Best for
This crowdfunding platform is for you if you want to help raise money for personal causes.
Crowdfunding for startups
Indiegogo
What it is
Indiegogo is a crowdfunding platform founded in 2008. This platform, unlike Kickstarter, lets any kind of project raise money for its cause. “We’re open to any campaign, any idea, anywhere in the world,” says the co-founder Slava Rubin. At first, you may think that it is great, but the catch is it’s really hard to stand out from the crowd when some of the projects out there are just bizarre.
How it works
As usual, you have to create a campaign for your project and place a video, a written summary, descriptions of perks for funders, a fundraising goal, and a deadline which is between 1 and 120 days from the launch date. Donations can be made by check, credit card, or PayPal. Indiegogo does not support the limiting ‘all-or-nothing’ strategy like Kickstarter. Here you can keep whatever you raise, whether or not the goal is achieved – that is called ‘flexible’ funding.
As for the pricing, IndieGoGo takes 4% if the fundraising goal is archived and 9% if it isn’t. Also, there is a third-party payment processing fee of 2.9%.
Best for
Pretty much anyone with an idea and a willingness to compete against thousands of others.
Crowdfunding websites for tech projects
AngelList
What it is
AngelList is one of the oldest and most established equity crowdfunding platforms that was founded in 2010. This website helps startups meet investors, candidates, and incubator. Companies like Uber, Postmates, and Thumbtack have used AngelList to find investors. AngelList also operates as a job board that lets developers, engineers, marketers, medical professionals, and other talented job-seekers connect with companies that are looking for their help.
How it works
AngelList has a strong pool of convenient investor that opens a lot of crowdfunding investment opportunities.
AngelList lets you create a detailed startup company profile that is open to the general public. No matter if your crowdfunding campaign just started, still in the middle or already ended you have to maintain active profiles indefinitely. The catch is that only registered angel investors are able to see whether companies are planning or already are in the funding round. The minimum investment you can make is $1,000, also a campaign creator can set his own investment minimum.
As for the pricing, AngelList is completely free for the entrepreneurs. But for the investors, the price is 5-20% per deal to the syndicated lead and 5% to AngelList.
Best for
This crowdfunding platform is most suited for tech startups.
Crowdfunding websites for small businesses
Lending Club
What it is
Lending Club is one of the leading CrowdFunding platforms, operating on the principle of public finance (Lending). Lending Club is a financial community that unites borrowers and lenders with a view to mutually beneficial cooperation. The platform replaces the costly and time-consuming process of bank loans and offers a simple, transparent and confidential mechanism. Lending Club provides its users with personal loans of up to $40,000, which they use for business needs.
Also, there is the option of large business loans of up to $300K for small business and startups owners. A big advantage for the borrower is his confidentiality. Investors do not have information about the borrower. His personality is kept secret.
How it works
The way Lending Club platform works:
- The borrower sends its request for a loan, with his credit score, that is should be at least 650. If it is a business loan, you need to make not less than $75000 annual business revenues and be on the market at least for two years. You can get your loan within one week.
- Based on your credit Lending Club set an interest rate from 6.78% to 27.99%.
- Investors, looking through the list of requests, select what they like and finance them.
- Borrowers have to pay back in one to five years. It happens automatically if there is the required amount of money in their bank accounts.
Best for
People in need for personal loans and small business owners.
Kiva
What it is
Kiva is a non-commercial crowdfunding organization that connects people through lending to end poverty. It provides low-income businesses in 86 countries all around the world with loans. More than 2 million business owners have raised over $850 million using Kiva. people can get loans up to $10 000 in 36 months.
How it works
People can choose a borrower to lend them a small amount of $25. For the reason that Kiva completely free, all the lent money goes right to funding loans. Furthermore, Kiva does not charge interest to their Field Partners, who administer the loans.
Best for
Small businesses with a desperate need for crowdfund investing or underserved populations.
Crowdfunding websites for charity
JustGiving
What it is
JustGiving is a worldwide crowdfunding online platform in London created in 2000 by Zarine Kharas and Anne-Marie Huby founded. The company provides tools and processing services for charity donations. This platform lets you unite people all over the world to raise money for charity or personal cases. It saves you time and money not going door to door or asking for sponsorship using advertisement.
How it works
You can set up a fundraising page really quickly, what you need to do is set a target, add a video to tell people your story, then click to send an email, share on Facebook or Twitter to let people across the world know that you need help. Then people can make donations online or from their mobiles anytime with a credit or debit card online, and share your story with their friends. After the money is raised, it gets transfer directly to the charity account. You can also do sponsored with the help of JustGiving to collect sponsorship from supporters.
The price of using JustGiving is 5% of donations. This doesn’t include card processing fees.
Best for
This platform is the best for people raising money for charities.
Crowdrise
What it is
CrowdRise is an online crowdfunding platform that is based around raising money for different charitable and personal causes. It lists over 1.5 million charities. Crowdrise, unlike other crowdfunding platforms, requires no campaign deadlines or minimum goals. Here you can fund for animal welfare, arts, cultures, diseases, education, and even religion.
How it works
With CrowdRise you can access funds with no limitation of time and amount of money, you can also email to donors.
There are two non-profit pricing models:
- The Fiver: With limited features, you can keep $95 of every $100 raised without a monthly subscription.
- The Tre: For the access to all of the features you can keep $97 of every $100 raised but pay $50 a month for a subscription.
Best for
For supporting charities or achieving personal goals.
Youcaring
What it is
YouCaring is a crowdfunding platform specifically designed to raise money for personal cases like adoption, medical bills, funeral expenses and tuition. The distinctive feature of this platform is that it is completely free. YouCaring does not support crowdfunding for legal or business matters.
How it works
As always you need to create your personal crowdfunding page and describe your cause and set a goal. Using YouCaring sharing tools you can reach out to your family and friends for help. Each time the donation is made you’ll receive an email and the money goes directly into your account. You can change your goal or description anytime you want.
Although YouCaring does not charge a penny, PayPal and WePay charge 2.9% plus $0.30 per transaction.
Best for
YouCaring offers crowdfunding for personal and charitable causes.
Crowdfunding websites for real estate
Fundrise
What it is
Fundrise is a crowdfunding platform that lets people invest directly in commercial real estate. It includes public offerings available to local investors and private offerings available to accredited investors.
How it works
Investors have access to real estate investments in some of the top US markets. The minimum required investment is $5000. Every month there is the same due diligence process that helps Fundrise team to decide which real estate deal to underwire, usually it is the top 5%.
When an underwriting decision is made, investors research opportunities and decide to invest with the crowd.Fundrise offerings provide shares of equity ownership in specific properties. Fee: 0-3%.
Best for
Real estate
In conclusion
Crowdfunding is a useful tool for making dreams come true, it opens new possibilities for funding entrepreneurs all over the world! This new funding mechanism can be used for boosting domestic innovation and creating a larger number of high-growth entrepreneurs. This technology provides an opportunity for entrepreneurs in developing countries to more easily find investors and clients anywhere in the world – and as such provides a healthy solution for economic growth.
So, if you always have had a project in mind but never had money for actually doing it, crowdfunding can be an answer. We hope this list of crowdfunding sites will help you find the best one for your cause.