If you want funding for your business, raising a fund or capital can be a big hurdle if you want to implement your vision through your business. Some useful fundraising options are bank loans and pitching investors. However, they are not always useful. Crowdfunding platforms allow you to get both funding and support from a crowd. It can be a group of individuals who believe in your idea and want to invest in it.
In this article, you will learn about crowdfunding platforms in general. Apart from that, we will also discuss how various crowdfunding platforms work for businesses and how they raise funds from these platforms. Finally, we will share with you some of the major crowdfunding platforms especially suited for small businesses. We will also share the fees of each of these websites to give you a better idea. Hence, to learn more, read on through to the end of the article.
What Are Crowdfunding Platforms?
According to Investopedia,
“Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture. Crowdfunding makes use of the easy accessibility of vast networks of people through social media and crowdfunding websites to bring investors and entrepreneurs together, with the potential to increase entrepreneurship by expanding the pool of investors beyond the traditional circle.”
In this digital era, it has become easier to raise funds for your business through your business idea in a crowdfunding platform. There are many crowdfunding websites that allow you to raise funds for a non-profit cause or your personal needs. These platforms offer you with easy-to-use tools that provide you with a smooth experience in raising funds.
How Do Crowdfunding Platforms Work?
Basically, using crowdfunding platforms, you can raise money or fund a business through small amounts of capital from a large number of people who are willing to invest. However, based on the crowdfunding platform you use, there are restrictions on who is allowed to fund a new business or how much a certain investor can contribute.
Through these websites, you can generate revenue from a percentage of funds that you have raised. In the United States, the Securities and Exchange Commission regulates equity-based crowdfunding ventures and looks after how they operate. However, crowdfunding can be of different types.
According to Business News Daily,
“There are four kinds of crowdfunding campaigns you can use for your business. With donation-based funding, contributors give money without receiving anything in return. In equity funding, backers get shares of the business. For debt-based funding, donors are repaid with interest. With reward-based funding, contributors receive tokens, products or services in return for their donations.”
In exchange for support, the individuals who fund a business or an individual through crowdfunding also receive a number of incentives. Some of them are:
- They get the opportunity to become early adopters of a particular product/ service.
- They get the option to pre-order a product. They can also share their ideas in the development of the product.
- Investors also get exclusive rewards and heavy discounts.
- They can personally access the businesspersons and can support people they know.
- They can also have their share in equity.
If you host your business on a crowdfunding site, you will also need to pay a platform fee, a payment processing fee, a transaction fee, and other charges. The overall fee structure remains more or less the same with every crowdfunding site, despite each having its own unique features.
Top Five Crowdfunding Platforms For Your Small Business
Shopify.com adds –
“Crowdfunding sites have allowed entrepreneurs around the world to fundraise for their businesses and causes, adding $65 billion in revenue to the global economy in 2020, according to Fundly’s latest report. What’s more, crowdfunding can also give entrepreneurs a way to validate demand for their ideas before they enter production by letting others buy in with pre-orders, donations, and investments.”
1. Kickstarter
If you want an overall good crowdfunding platform, Kickstarter is the best option to choose. It has helped raise billions since 2009. To meet your goal, you will need to pay a platform fee of 5%. Apart from that, there is also a payment transaction fee of 3% to 5% in the US.
2. Indiegogo
Operating since 2008, Indiegogo is a great choice for entrepreneurs and investors. It has operations in 235 countries, and it is easy to acquire funds fast. However, there is a 5% platform fee in addition to a third-party payment processing fee. It has more than 10 million monthly visitors.
3. SeedInvest
If you are a startup and you want to get quick funds to enable your startup to keep going, SeedInvest Technology is one of the best platforms to choose from. To date, this platform has attracted more than 700K investors and helped raise nearly about $500 million. If your fundraising is not successful, you will not need to pay any fees. However, there is a complicated vetting process.
4. GoFundMe
In GoFundMe, you can raise funds for businesses as well as your own personal healthcare expenses. You can also raise funds for other causes. The best part is that there is a 0% platform fee. Furthermore, you can avail of 24×7 customer support. However, there are credit card and debit card transaction fees.
5. Patreon
If you are a creative person or related to creativity, Patreon is one of the best platforms for you. You can also create subscription options for individuals based on various levels of pricing. The platform fee ranges from 5% to 12%, depending on the plan you choose.
Final Thoughts
Hope this article was helpful for you in getting a better idea of how crowdfunding platforms work. If you want to raise funds through crowdfunding, make sure to use one of the major platforms mentioned above. With the use of one of these crowdfunding platforms, you can raise capital for your business from a large group of investors.
With the help of crowdfunding, you can get the opportunity to raise the required capital, as well as support from a large number of investors who believe in your vision. All you have to do is pitch your idea in front of waiting investors. Do you know of some other great crowdfunding platforms? Share some info with us in the comments section below.
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