How to Select the Right Crowdfunding Sites For Businesses! Are you thinking about using crowdfunding for your business?
Crowdfunding is a great low-risk method to gain monetary investment to grow your business or help in product development. When considering crowdfunding, there are several platforms that you can pitch your idea to, depending on the campaign or project goals you have set out.
There are three main types of crowdfunding:
This is where a business gives a percentage of their business to their backers. Those backers would then see a return on their investment.
- Rewards based.
This focuses on what businesses offer investors, certain incentives depending on the amount that they invest. In this case, contributors would see no financial returns on their investment.
- Donation based.
This type of crowdfunding is often used for social causes, and any contributors would see no return or rewards on the money they have donated.
In order to help you choose the best crowdfunding platform for your business, we’ve done research into some of the top platforms with information on the fees that they charge to determine which platform is best based on the needs you have as a business. As we know choosing the best platform for your project is critical to the success of your campaign.
Crowdfunding Sites For Businesses: Equity-Based Crowdfunding
Crowdfunding Sites For Businesses: Crowdcube
Crowdcube is an online equity crowdfunding website that that allows everyone to invest in private companies. Which is unlike Kickstarter and GoFundMe which are a donation and reward-based crowdfunding platforms. Investing in companies using the ‘joint-venture profit share model’ allows the investors to own a bit part of the business and lay claim to profits.
You are able to crowdfund on Crowdcube as a startup as an early stage business or a growth business.
- When it comes to Crowdcube, investors are able to gain direct ownership of the business in terms if share without a middleman.
- Crowdcube gives investors the ability to receive voting and pre-emption rights and make it accessible and rewarding.
- With Crowdcube there are no investment fees, whether that be upfront costs or during the running of the business. For investors, the investments are their risk and their reward.
- Crowdcube has a success fee of 7% and a payment processing fee of 0.5% for the UK, 1% for Europe and 2.9% for the rest of the world.
Crowdfunding Sites For Businesses: Rewards-Based CrowdFunding
Crowdfunding Sites For Businesses: Kickstarter
One of the most popular platforms for crowdfunding is Kickstarter.
The reason it is one of the biggest platforms for crowdfunding is that they have raised over $3,000,000,000 for projects on their site, and have had over 100,000 successful campaigns.
Kickstarter is based on an all or nothing model, in which you set a goal for an amount of money that you require, however, if you do not reach the goal you set, it means that you will not keep any of the money raised. They do, however, charge a fee of 5% of the total funds that have been raised.
Another benefit is that they have a huge built-in community that is always looking to fund projects that are interesting to invest in.
This makes Kickstarter a good platform for businesses that are looking for equity-based crowdfunding.
- With Kickstarter, you are not obliged to fulfil the rewards until you have reached your funding goals.
- Kickstarter gets more exposure than other crowdfunding platforms, with over 12 million people previously backing a Kickstarter campaign.
- ‘All or nothing’ is one of the issues with Kickstarter. If you don’t reach your funding goal, you don’t receive any of the funding at all and the money is returned to the investors.
- The 5% charge is a lot of money out of your funding even though it doesn’t seem that much. If you were to raise £100,000 you would be charged £5,000 of what you were funding.
Crowdfunding Sites For Businesses: Indiegogo
Indiegogo is a popular crowdfunding platform because it is a diverse platform. It doesn’t focus on any particular industry.
Like Kickstarter, Indiegogo offers an all or nothing option, but it also offers a flexible funding campaign, which allows you to keep all the funds that you raise from your crowdfunding campaign.
Just make sure you keep in mind that flexible funding is only suitable if the project that you are crowdfunding for does not require you to meet a specific target.
(Note they charge 5% of the amount raised, but depending on your idea there is a possibility that you could overfund. So you won’t notice the fee.)
- Indiegogo is not an ‘all or nothing’ structure, so you’re able to receive all funds from a campaign even if you haven’t reached the funding goal.
- If you’re donating for a cause, Indiegogo provides a platform called Generosity that allows you to crowdfund with lower fees attached.
- Unlike some of the other ‘all or nothing’ platforms, if you don’t reach your crowdfunding goal you are charged a higher fee of 9% in comparison to the usual 5%.
Crowdfunding Sites For Businesses: Donation Based Crowdfunding
Crowdfunding Sites For Businesses: GoFundme
GoFundMe is a very big crowdfunding service that’s donation based. It is perfect for small or local companies trying to raise funds to launch or grow. GoFundMe also uses the “all or nothing” approach just like Indiegogo. They charge up to 5% and an addition 2% for processing fees.
GoFundMe is a crowdfunding site mainly used in times of emergency by the general public. You can often see gofundme pages for people who are trying to raise money for themselves or a loved one. People also often use gofundme to raise money for their favourite charities.
- There are no limits on the timing in which you can continue raising the funds.
- GoFundMe can help you get media coverage for your campaign.
- The fees are high with GoFundMe, it can be up to 8% on each donation.
Crowdfunding Sites For Businesses: JustGiving
JustGiving is a donation-based crowdfunding platform. It’s made to ‘make good things happen’ like donating towards charities, helping to support individuals, families or communities by paying medical expenses or even helping with financial aid. Unlike GoFundMe, JustGiving allows the user that is crowdfunding to keep all the money funded regardless of whether they reach their target or not. JustGiving takes 5% of the funding and take 1.25% for processing fees.
- JustGiving makes sure 25% in Gift Aid, plus a 3% supplement, are added to your donation, which is great if you are raising money for a cause.
- The website makes it very easy to donate to projects around the world on a variety of causes.
- The cause would receive 9% less of the 100%, because of the set up of the platform. The 9% in fees is taken from the gift aid part of donations.
Do you need crowdfunding support?
We can help. Drop The Crowdfunding Studio are proud partners of Crowdcube and Indiegogo. We assist ambitious businesses in communicating their ideas, products and services with outstanding crowdfunding video production, campaign design, crowdfunding marketing and crowdfunding PR.
To learn more about us and our services, visit our website drop.studio.
Or book a free phone workshop today and ask us anything, like how to create a successful crowdfunding campaign or how to accelerate your business from zero to fully funded.