How To Pick The Crowdfunding Platform That Is Best For Your Startup
Chance Barnett · Follow
Published in · 7 min read · Apr 28, 2016
Unless you’ve been living on a remote island for the last few years, you’ve heard about crowdfunding or stories of people raising thousands or millions of dollars online.
In fact, there’s been so much chatter out there about crowdfunding that people love to throw out the line “yeah, I’ve heard there are something like 500 crowdfunding sites.” As the CEO of equity crowdfunding platform Crowdfunder.com, I see the industry from an inside view. And while hundreds of would-be crowdfunding sites may have been popping up, only a few of them have real communities and meaningful funding successes under their belt.
Which begs the question… what crowdfunding site is best for you?
As a crowdfunding industry insider, I thought I’d give you an easy guide for which site to go to for your crowdfunding needs.
I’ll start with a quick overview of the crowdfunding industry, insight into the different types of crowdfunding, and then I’ll get to specific recommendations for you.
The Crowdfunding Industry
Collaboration on the web is an area that is experiencing exponential growth. Crowdfunding, or collaborative funding via the web, is one of the standouts for growth in the evolving collaborative economy.
The Crowdfunding Industry Report by Massolution put out data showing the overall crowdfunding industry experienced accelerated growth that’s doubling year over year. In 2014 it grew to $16 billion and doubled again to over $35 billion in 2015 and shows no sign of slowing down.
With the implementation of Title III in the months to come, it marks the start of true equity crowdfunding including non-accredited investors and will only further accelerate the growth of this industry. This is a momentous shift as it will be the first time that everyday citizens will be able to invest in early-stage companies. This will open up a tremendous amount of new capital available to startups while allowing investors to further diversify their portfolio.
Crowdfunding Models
There are 3 main types of crowdfunding including equity crowdfunding, donation-based crowdfunding and rewards-based crowdfunding:
- Equity Crowdfunding
The most recent and innovative model is equity crowdfunding, where startups seeking capital sell ownership stakes online in the form of equity or debt. In this model, investors become owners or shareholders in the startup. With the implementation of Title III by the SEC, a new market of non-accredited investors will get the chance to invest in startups in return for equity as well.
2. Donation-Based Crowdfunding
The birth of crowdfunding came through this model, where funders donate via a collaborative goal based process. Donation-based funding is usually most common in social causes and charities. Funders do not obtain any ownership or rights to the project, however they donate to a cause that they are passionate about.
3. Rewards-Based Crowdfunding
In rewards-based crowdfunding, backers contribute typically small amounts of money in return for products, perks or rewards. Rewards-based crowdfunding is typically leveraged to pre sale a product or service. This is powerful because it allows you to build your customer base while raising capital to bring your product or service to market.
Top 10 Crowdfunding Sites
Kickstarter is a rewards-based crowdfunding site to fund creative projects and ideas. These projects can range from new innovative technologies, to movies, music, even clothing. It’s not for businesses, causes, charities, or personal financing needs. Kickstarter is one of the earlier platforms, and has experienced strong growth and many break-out large campaigns in the last few years.
Indiegogo is also a rewards-based crowdfunding site that allows for a broad range of fundraising campaigns like music, hobbyists, personal finance needs, charities and whatever else you could think of (except investment). This is different from Kickstarter in that it is way more democratic whereas Kickstarter is much more curated in its approach. They have had international growth because of their flexibility, broad approach and their early start in the industry.
Crowdfunder is the leading equity crowdfunding platform for raising investment (not rewards), and has a one of the largest and fastest growing network of investors. Crowdfunder provides investors free access to early-stage VC-backed startups. Crowdfunder recently launched the VC Index Fund that invests $100,000 into top VC-backed startups and then allows their investor base to invest in the startup at the same terms.
GoFundMe is a donation-based fundraising platform that allows users to create a campaign to describe what they are raising money for. The top 5 areas of usage on GoFundMe are 1) Medical 2) Educational 3) Volunteerism 4) Personal Emergencies and 5) Sports & Teams. During the fundraising process, members can describe their fundraising cause, the amount they hope to raise, and upload photos or video.
Kiva is a non-profit organization with a goal to connect people through lending to alleviate poverty. Kiva lets individuals lend as little as $25 to help create opportunity around the world. Because Kiva is a non-profit, 100% of every dollar that is lended goes directly towards funding loans. Furthermore, Kiva does not charge interest to their Field Partners, who administer the loans.
If you’re a tech startup with a shiny lead investor already signed on, or looking for for Silicon Valley momentum, then there are angels and institutions finding investments through AngelList. For a long while AngelList didn’t say that they did crowdfunding, which makes sense as they have catered to the investment establishment of VCs in tech startups. The accredited investors and institutions on AngelList have been funding a growing number of tech startup deals.
Rockethub powers donation-based funding for a wide variety of creative projects. What’s unique about RocketHub is their FuelPad and LaunchPad programs that help campaign owners and potential promotion and marketing partners connect and collaborate for the success of a campaign.
Crowdrise is a place for donation-based funding for Causes and Charity. They’ve attracted a community of do-gooders and and fund all kinds of inspiring causes and needs. A unique Points System on Crowdrise helps track and reveal how much charitable impact members and organizations are making.
Tilt is a donation-based funding platform for groups and communities to fundraise, collect, and send money to for parties, gifts, events, or any other causes the users propose. What’s unique about Tilt is that it is mainly used by groups and organization who want to fundraise for a specific experience or cause.
Patreon is a rewards-based funding platform where artists, musicians, content creators, and webcomic artists can get consistent funding for their creations, from their fans. In exchange, the fans (patrons) can receive exclusive content or behind the scenes peeks from these creators. Unlike Kickstarter or Indiegogo, Patreon enables creators to receive support on a regular basis. As a creator on Patreon, you choose if your patrons pay you per month or per creation.
These 10 crowdfunding sites cover most campaign types or funding goals you might have. Whether you’re looking to fundraise or not, go check out the sites here that grab your attention and get involved in this collaborative community.
The Shaping Of A New Economy
The crowdfunding industry is growing exponentially and is expected to surpass venture capital in 2016 as investing and fundraising for startups continues to move online. With the emergence of crowdfunding websites, there are more ways than ever to launch a startup or become an early-stage investor.
With access to capital more prevalent than ever and lowered barriers to entry due to advances in technology, it could be considered the best time ever to become an entrepreneur and bring your product or idea to the market.
I’m excited to be at the forefront of the industry at Crowdfunder where we’ve taken the next step in our mission to democratize access to capital with the launch of the VC Index Fund. The Fund invests $100,000 into top VC-backed deals then allows everyday investors access to the deal at the same terms.
So what are you waiting for, choose the crowdfunding website that best fits the needs of your business and start raising money today.
[Disclosure: I’m the CEO of Crowdfunder and have personal relationships with many of the founders and teams at the sites listed, though I stand behind my picks here as guidance of value for people looking for the right site.]
