Crowdfunding is defined as “the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.” It’s a relatively new phenomenon and a rapidly growing industry that is revolutionizing the way that new ventures receive funding.
Before crowdfunding, one of the most common ways for new ventures to receive funding was to get a bank loan. Banks would use the money they collected from their customers to help fund these ventures and profits made were used to provide interest to bank customers. However it’s very difficult for small businesses to receive sufficient bank loans nowadays.
Crowdfunding cuts out the middle man (the bank,) and allows people to directly invest in the projects they choose. This way investors can choose exactly how they invest their money and how they are rewarded. With crowdfunding, many small projects that would go unfunded now have the chance to receive the funding they desperately need.
Crowdfunding requires a lot of work and more preparation than simply launching a campaign on a site. You must plan out a way of inviting a crowd to your page and how to encourage them to invest money. If you don’t have a good network to reach out to, crowdfunding may not be for you. It’s best not to think of crowdfunding as selling your product or idea, but actually selling a story to people that makes them feel good about investing money. If you would prefer a more traditional method of funding, consider seeking help from consulting services.
Before you start It’s very helpful to search past campaigns for similar ideas to get a picture of how (or how not) to do things. Searching past campaigns is easy, just use the search bar below!
Most projects would receive no funding if there was no benefit to the backers. That’s why each crowdfunding website offers different ways for projects to give back to their backers. The five different types of funding are donation, reward, debt, equity and royalty.
Need help finding out which platform is best for you?
|Give Back to Investors||A Simple Thanks||Good or Service||Interest on Principal||Ownership of Business||Percentage of Revenue|
|Qualifications||non-profit business, philanthropic cause||Interesting good or service to offer as perks||Making a Profit||Must be a business||Generate Revenues|
|Investor Restrictions||None||None||Accredited Investor for business lending||Accredited Investors Only||Accredited Investors Only|
|Best For||Non-profits, Philanthrophic projects||Pre-sale items, Projects with a large crowd||Must have cash-flows and collateral, seeking lower interest + faster approval than bank||Growing companies, Exit strategy in mind||No bankruptcy risks, No equity loss, Pay only when you make money|
|Stats||Average Amount Raised $1,400, Industry Size $1.4 Billion in 2013||Average Amount Raised $2,300, Industry Size $1.3 Billion, More than 50% fail to reach goal||Average Raised $4,700, Industry Size $2.1 Billion||Average Raised $190,000,|
|Top Platforms||gofundme | Youcaring | WeDidIt||Kickstarter | RocketHub | Indiegogo||Lending Club | Prosper | Funding Community||AngelList | CircleUp | Seedinvest||Bolstr | Pave|
|All Platforms||List of Donation Platforms||List of Reward Platforms||List of Debt Platforms||List of Equity Platforms||List of Royalty Platforms|