You’ve probably already heard about successful crowd fundraising stories. At the moment, a lot of people are raising large sums of money online. Numerous websites are dedicated to finding funds for entrepreneurial projects that are creative and up-and-running – we’re talking about crowdfunding sites. Let’s learn more about the concept behind these platforms and your best options.
The idea behind the crowdfunding industry
Web collaboration is a realm that has an immense growth potential, and there are two distinctive models of crowdfunding. The first of them is known as donation-based funding. This is how crowdfunding got its start. Funders make donations via a collaborative aim, in exchange for perks, rewards and products.
The second and latest model is known as investment crowdfunding. In this scenario, entrepreneurs seeking capital will sell ownership stakes on the web, in the form of equity or debt. Afterward, the individuals who want to fund will become either shareholders or owners, with the possibility of financial return, as opposed to the previous model.
The truth is that crowdfunding sites differ, and they were created to fulfill different needs. Some of the sites are best at raising funds for an a project or invention. Others are better at helping people to raise money for a charity or a person in need. Hence, here’s a classification of the very best crowdfunding sites so that you can establish which one suits your needs best.
Kickstarter is among the most popular crowdfunding sites, being almost synonymous with this concept. It has assisted over 80,000 projects, so, it comes as no surprise that it has nearly 13 million visitors per month. It is a site that enables creative projects to rise donation-based funding. These projects vary a lot. In fact, they support any unique, original concept such as a cool watch, an art installation, a pre-selling music album, namely, an idea that seems to have real potential. Or not. Some of Kickstarter’s gag campaigns have generated a lot of attention in the last few years.
However, Kickstarter was not created for supporting causes, businesses, charities, or personal financial needs. Due its ever-growing popularity, one may benefit from recognition and increased visibility with Kickstarter, both features that account for bonuses. Notwithstanding, one of the main drawbacks associated with the platform is that it’s an all-or-nothing funding model. In other words, if you don’t accomplish your funding target you won’t get your hands on the pledged funds.
Regarding the fees, Kickstarter typically collects a 5 percent fee per successfully funded project. Stripe processes the payments and gets an additional 3 to 5 percent of the total amount.
While Kickstarter preserves a fixed focus on supporting creative projects; Indiegogo acclaims donation-based fundraising campaigns for next to anything – charities, music, hobbyists, personal financial needs, and many others. Investment is the exception. Due to their flexibility, they have relished international growth lately. 4 percent of the funds acquired through a successful project go to the site. On the other hand, if the project isn’t as successful as expected, you are charged 9 percent. The site is available for users from all countries, and there’s no application required.
Crowdrise enables you to design an online fundraising campaign for supporting your favorite cause. It’s based on a flexible funding model, allowing you to keep all pledged donations. It’s acknowledged as one of the largest, most significant crowdfunding sites, having supported some of the most prominent non-profit organizations such as UNICEF, Red Cross, as well as the Boston Marathon. On top of that, it provides its users with a particular system that allows you to track the impact of a charity, through the reporting numbers.
There are three distinctive pricing plans on Crowdrise – the Basic Plan, the Featured Plan, and the Royale Plan – each being crafted to specific needs. The Basic Plan doesn’t involve an annual fee; however, it charges 5 percent per transaction, to that adding credit card fees of 2.9 percent per transaction. Moving on to the Featured Plan – one pays a monthly fee of 49 dollars, but the donation fee is diminished to 4 percent, adding up the credit card charges. And lastly, the Royale Plan implies a monthly fee of 199 dollars, with a lowered donation fee of three percent as well as credit card fees. What’s great about these plans is that the fee charged is actually much lower than many other places on the web. That means that an increasing number of charities are funding themselves using Crowdrise’s platform, and getting more money because of that.
Fundable is part of the crowdfunding platforms that provide equity and reward-based crowdfunding. An interesting and attractive feature of the platform is that it doesn’t charge the user according to the amount of money the campaign raises. In other words, that means that you keep the pledged money.
The site is a genuinely attractive option, especially to those who intend on raising substantial sums. But what does Fundable charge its users? $179 per month, and also a processing fee of 3.5 percent per transaction – that applies to reward-based crowdfunding. When it comes to equity crowdfunding campaigns, the site charges the same sum.
Seedinvest is a platform that facilitates equity-based crowdfunding. Nonetheless, one thing to bear in mind – crowdfunding campaigns have to reach their funding goal. Concurrently, companies should anticipate taking at least 60 to 90 days for completing the crowdfunding action. There are no investor fees, and the platform enables one to invest together with institutional investors. What about the costs? There’s a 5 percent placement fee, which depends on the value of the fundraising. Simultaneously, a sum between $3000 and $5000 in due diligence, marketing, escrow, and legal expense reimbursement.
WeFunder is another leading equity crowdfunding site. It provides low minimums when it comes to investments. One has to be in the position of an accredited investor to get involved. However, investing as little as $100 is a possibility WeFunder offers you. Startups get a significant part of the funds committed, except for the admin fee. Concurrently, investors pay somewhere between $10 – $75 in admin costs, apart from the investment. The platform charges 10 percent carried interest and a nominal fee that may range from $2000 to $4000.
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