If you want to start your own crowdfunding website, listen up!
You don’t have to create a Kickstarter or Indiegogo clone. You can come up with an entirely new business model.
There are two sides of the equation for every online business.
- How you deliver value to customers
- How you monetize that value
You’re giving campaigners the technology needed to launch their own crowdfunding campaign. There are a variety of factors that will impact how you can monetize that value. It all comes down to what the customer wants to use your website to raise money for.
Are they raising money for a startup in exchange for “perks” or “rewards”? Are they seeking funding for medical bills? Are they looking for direct investment in their company?
This article will give you a few business model ideas for your new crowdfunding website. I hope you find it to be useful!
Also, if you’re looking for a quick technical solution, I recommend looking into the IgnitionDeck wordpress plugin as one way to set up the platform. I’m an affiliate of theirs.
1. Percentage fee of the money raised
This is how most crowdfunding platforms make money. They take a percentage fee from any money raised on their platform. The creators pay this fee.
If you raise $10,000 on Kickstarter, the company would receive a 5% cut, or $500. They’d also charge you payment processing fees.
The advantage to this model is that there is less risk for a campaigner to raise money on your platform. It’s not going to cost them anything, unless they successfully raise money.
The obvious downside is that you’ll only make money if crowdfunders successfully raise money on your website. In essence, you’re providing them with this free technology that allows them to do online fundraising campaigns and you’re hoping that a certain percentage of your visitors will run successful crowdfunding campaigns.
Success with this model comes down to:
- A steady stream of campaign creators launching on your platform
- Regular backers. This forms a community, which draws in more campaign creators.
This model can apply to all types of crowdfunding.
Example platforms:
2. Donation or fee that’s charged to backers
This is a growing model, particularly among nonprofit, charity, or donation-based crowdfunding platforms.
For example, at the time of writing, Indiegogo’s Generosity platform will suggest a small donation when you “checkout” and donate to your friend’s campaign.
If you do the math, this is actually a 15% suggested donation. Wow! That’s pretty high compared to a 5% platform fee.
You could apply this fee model to other types of crowdfunding platforms also. You could also allow backers to cover the fee that you’re charging the campaigner. But, there are obvious pros and cons.
On the plus side, campaigners no longer are responsible for the fees. This will naturally attract more crowdfunding campaigns to your platform. For them, it’s “free” to raise funds.
However, you might risk alienating donors. I think that the reason this model works so well for charity crowdfunding websites is because the donor feels an obligation towards the person who started the fundraiser. After all, it’s their friend in need! This is why they’re willing to stomach the ask.
If the donor didn’t directly know the person who started the crowdfunding campaign, then they might be less likely to put up with the ask or cover the platform fees. But, I don’t know. That’s something you’d have to test out.
Example platforms:
3. Software subscription services
Let’s say that an entrepreneur or nonprofit approaches you saying that they want to run an online crowdfunding campaign, but they want to do it on their own website, with their own branding.
You could “rent out” the software that you used to create your crowdfunding platform to them in the form of a subscription or license.
You could even offer other software products that will enhance their ability to raise money from the crowd. This could be things like a text-to-donate feature.
The great thing about selling software solutions is that it adds a bit of stability to your business model. You won’t be functioning solely off of fundraising fees or donor fees.
Example platforms:
4. Offer crowdfunding services
Along with the other business models mentioned above, you could also offer crowdfunding services. These could include:
- Marketing
- Campaign management
- PR outreach
- Prototype development
- Design and branding
- Video making
- Reward fulfillment
If you don’t want to offer the services yourselves, you could also partner with services providers and take a cut of the action.
The great aspect of this type of business model is that you’re also going to profit from the brand exposure if the campaign goes well!
Example platform:
How do you start a platform?
I’ve gone over this topic in other articles, along with what to expect when you’re growing a platform.
If you want the short version, I’d recommend prototyping with WordPress and using a plugin like IgnitionDeck. Then, you can start to test your idea, get some traction, iterate, and decide if you want to invest more money in the business venture.
Hope this is a good primer on the different ways to monetize your platform. Let me know if you have any questions below.
