Deciding which crowdfunding platform to launch on can not only impact your chances of success, but also the fees that you will pay, the likeliness that your project will be accepted by site managers, and which techniques you can use to spread the word about your crowdfunding campaign.
Below, you can see our guide to deciding which platform you should launch on based on a variety of factors. Be sure to leave a comment if you have any questions.
How many crowdfunding platforms are out there?
Alex Feldman, the creator of CrowdsUnite, a crowdfunding website aggregator and review site, estimates that there are almost 1,000 crowdfunding platforms in existence.
His website contains reviews for 100 niche websites like Pubslush and larger crowdfunding platforms like Indiegogo.
These crowdfunding platforms are divided into the following types:
1. Reward and Donation Crowdfunding Websites
Kickstarter, Indiegogo, and RocketHub are all examples of reward-based crowdfunding websites. Typically, a person can create a project, which includes a video, text, and reward tiers or “perks” that a backer will have access to should they pledge money to the initiative. Backers do not have ownership in the project.
GoFundMe, GiveForwad, and YouCaring are examples of donation-based crowdfunding websites that individuals will typically use to raise money for medical expenses, personal causes, and hardships. See more personal cause crowdfunding platforms here.
Razoo, Causes, and CrowdRise are examples of donation-based crowdfunding websites that non-profits might use to raise money for projects or initiatives. See more non-profit crowdfunding platforms here.
There are also hybrid platforms like FundAnything and Fundrazr that contain both rewards-based campaigns and campaigns in the “personal cause” category.
2. Equity Crowdfunding Websites
Some equity crowdfunding websites include CrowdCube, EarlyShares, Seedrs, and Fundable. At the time of writing, the JOBS Act has not yet been put into affect, meaning that only angel investors can back projects on these equity crowdfunding websites (for US).
Backers of these projects or businesses will receive equity in the project.
3. Debt Crowdfunding Websites (P2P lending)
You may have heard of SoMoLend or Lending Club. These are person-to-person or debt crowdfunding websites. With this type of crowdfunding tool, investors will receive their principal back with interest and borrowers will receive capital for their business. Peter Renton runs a good blog on P2P lending called LendAcademy.
4. Royalty Crowdfunding Websites
Royalty crowdfunding refers to the when creators raise money for a project, like a mobile app, and offer backers royalties or revenue when the app begins to generate sales. A few examples of this type of crowdfunding include: Quirky, TubeStart, and AppsFunder.
5. Peer to Peer Fundraising
I recently wrote about the difference between crowdfunding and peer to peer fundraising. Essentially, peer to peer fundraising is most often used by a an organization to empower their supporters to fundraise for a cause. For example, if your non-profit is putting on a marathon, you could require all participants to raise at least $1,000 from their own social network in order to be able to enter using a tool like CauseVox.
** This post will focus on deciding which rewards-based crowdfunding website is best for your project. If you’d like me to include guidelines for the other types of crowdfunding listed above, then leave a comment!
What are the differences between rewards-based platforms?
1. Categories and types of projects allowed.
There are websites like Kickstarter, Indiegogo, and RocketHub, which accept projects from multiple categories like design, fashion, music, and gaming.
There are also niche crowdfunding websites like PledgeMusic (music) and Medstartr (healthcare projects).
Different crowdfunding platforms have different terms of service. Some platforms will not allow charity projects or projects that do not fit into one of their designated categories. Other platforms will only allow projects of a particular category (like gaming). It’s important that you read through each platform’s guidelines and terms of service to see whether or not you can host a crowdfunding project on their website.
2. All or nothing vs. Flexible funding
Depending on the platform you choose, you may have the ability to do all-or-nothing fundraising or flexible funding. These types of fundraising are primarily for rewards-based crowdfunding and donation-based crowdfunding.
All-or-nothing crowdfunding is when, as a creator, if you set a $7,000 fundraising goal, you must have hit or exceed that $7,000 goal when the campaign duration is up (30-60 days usually), or else you will not receive any funds. If you do not hit or exceed that fundraising goal, your backers credit cards will not be charged.
Flexible funding is when, as a creator, if you set a $7,000 fundraising goal and you have only raised $5,000 in the allotted campaign time, you will be able to keep that $5,000 and the backers credit cards will be charged.
What’s the difference? For one, most platforms will take a larger cut of funds raised for flexible funding campaigns than all-or-nothing campaigns.
For example, Indiegogo takes a 9% fee of funds raised under a flexible funding campaign if you do not hit your fundraising goal. On Indiegogo, if you hit your fundraising goal when conducting a flexible funding campaign or an all-or-nothing campaign, they will only take a 4% fee.
For more information on which type of crowdfunding is best for you, check out all-or-nothing vs. flexible funding.
3. Community surrounding the website.
This is a topic that’s sure to spur some debate. If you disagree with me, I’d love you to leave a comment and say why.
Personally, from having interacted with over 3,000 creators through my blog, newsletter, forum, and PR website, I’ve come to have the opinion that of all the crowdfunding platforms out there, Kickstarter is really the only rewards-based platform that has what you would traditionally think of as a “backer community.”
This is confirmed via data from CrowdsUnite.
However, a community is much bigger than just “backers” on the platform. When choosing a platform, it’s important to determine whether you will need a lot of help/support or whether you have a hand on what you need to do to be successful.
If you need help/support, be sure to check out the different customer service ratings on CrowdsUnite. In my experience, smaller crowdfunding platforms like RocketHub and Pubslush tend to have better hand-holding in terms of email response and there is a closer connection with the managers of the crowdfunding platform.
That’s not to say that Kickstarter doesn’t provide some good resources like Kickstarter School. Indiegogo also has some great “insights” on their blog. Example: Online resources for marketing your crowdfunding campaign.
A quick glance on CrowdsUnite shows that Indiegogo has great customer service and attentiveness ratings. In my experience speaking with creators, Kickstarter doesn’t always fully explain their decisions (to reject projects) and sometimes the staff communications are imperfect. This could be due to their large volume of traffic.
In addition to seeking out ratings before launching, spend some time on LinkedIn groups, Google+ groups, twitter, and facebook. A quick google search yields these organizations that support Kickstarter/Indiegogo campaigns:
30 People to Promote Your Kickstarter or Indiegogo Campaign to on Twitter
21 places to promote your kickstarter campaign
When I search for terms like “Fundrazr (a canadian crowdfunding platform)” “GoFundMe (self-funding platform)” and “RocketHub,” I don’t find as many groups, forums, or communities dedicated to helping out creators.
If you are new to crowdfunding and anticipate that you will need support (Q&A) apart from what the platform can provide, then whether or not other online communities exist for the particular platform may influence your decision.
4. Expenses (Fees, service providers, etc).
Depending on the platform you choose to go with for your crowdfunding project, you can expect to pay platform fees usually ranging from 2% to 8% in addition to credit card processing charges, which are usually between 3% to 5%. If you are outside of the US, you may incur more fees and you will need to be mindful of exchange rates when accepting pledges.
Should you choose to hire any service providers, you should also do some research into preferred payment methods, expected costs, and areas of expertise. In my experience, the majority of consultants and service providers center on Kickstarter and Indiegogo. There are also emerging service providers for equity crowdfunding projects, however I can’t make any recommendations on this front.
Which platform is best for you?
1. What type of project do you want to create?
The type of project that you choose to create will determine which crowdfunding platforms you can host your fundraising campaign on. For example, if you would like to create a crowdfunding project for a personal cause, you wouldn’t be accepted on Kickstarter.
Be sure to thoroughly research the platform’s guidelines before submitting. It may be worth it to alter your project idea a bit before submitting for the website’s approval to make it a better fit for their community.
2. What stage is your project in?
If you’re project is in the idea stage, I would not recommend throwing up a Kickstarter or Indiegogo page and hoping to get some pledges. You need to prove that you call pull off the project, and the best way to do that is to have created a prototype.
Instead, you could wait until you have a prototype or you could flesh out your idea on Quirky (physical projects) or Assembly Made, a new Quirky-like website for software products. You could also create a pre-launch crowdfunding page on PitchFuse and get some feedback on your idea before investing the time in creating a prototype.
3. How big is your crowd?
If you have an established audience and you are using crowdfunding as a tool to engage this audience, you may want to consider self-hosting a crowdfunding campaign. You can use websites like SelfStarter.us and CrowdHoster to create a crowdfunding campaign on your own website and avoid platform fees.
4. What is your motive for raising money?
As crowdfunding gains mainstream appeal and entrepreneurs read about million dollar Kickstarter/Indiegogo campaigns, it can be deceptive to think that crowdfunding is easy money or that when you raise hundreds of thousands of dollars, you’ve hit the jackpot and can retire to a small island with your money.
This is simply not true. In my experience, the majority of creators do not make a profit on their project. The idea is not to pre-sell products for a high margin. Crowdfunding is a launch tool, and you should always put your backers first. Rather than viewing them as customers, view them as partners in your project and give them a say in the creation. They are patrons!
To take a quote from the musician Amanda Palmer, who raised $1.2 million on Kickstarter:
“In no fucking case scenario do i get a check for $1,000,000 and laugh my way to the bank, then book a private jet to ibiza where a limo filled with hookers and blow will be waiting to escort me to a slamming nightclub called “la uno percento” where i then spend my time contemplating my handsome nose job in the darkened mirrored bathrooms (probably weeping).
If we keep our expenses down, and keep the tour pretty practical and the video budget way down, i could probably put $100k of this in the bank personally. which would be great, but i might just be close to zero as i head off on tour this fall and you know what? seriouslythat’s FINE with me. it’s almost even THE PLAN.
if i break even on this project, i still see this as a massive win. do you see why?first of all, this kickstarter and its success is going to open the door for a lot of other artists, especially major-label refugees like me. ” – Where all this Kickstarter money is going.
If you are passionate about your project, want to involve others in it’s creation, and look forward to brainstorming some killer rewards to thank your backers for their support, then I’d say you are going into crowdfunding with the right reasons. Although Kickstarter and Indiegogo have been used by some creators as a pre-sale platform, typically, I’ve found that a raw, cool, and original pitch is received much better than a slick sales presentation.
Conclusion
While these criteria are no means complete, I hope I’ve given you a few things to consider before deciding what type of crowdfunding website you’d like to go with for your upcoming project. If you’d like me to cover another area more in-depth (like equity crowdfunding) or have any additional thoughts or questions, leave a comment on this article.
