Funding sites have become a popular way for entrepreneurs to design products and grow their business. Let’s take a look at the ins and outs of the top 5 Crowdfunding websites to help you decide which one could be right for your business.
One of the most popular and well-known funding sites, Kickstarter has become a go-to crowdfunding platform for all types of entrepreneurs looking to fund their projects.
The popular platform is open to most types of entrepreneurialism, meaning you can fund anything from the creation of comic books to state of the art technology.
Kickstarter works on an all or nothing basis, meaning that you either collect 100% of your required target or the money goes back to the pledgers. Whilst this is a good method for pledgers, it can be frustrating for those who are looking to fund their projects.
If you’re going to use this platform, be sure to set a realistic target.
With Kickstarter, a fee of 5% is paid if your campaign is successful but you’ll also have to pay a fee of around 3-5% to Stripe, the company who processes the money.
Another popular platform, Indiegogo, shares many features with Kickstarter but also allows people to crowd fund for charities and other not for profit campaigns.
With Indiegogo you can also crowdfund for personal finances. This can be ideal for entrepreneurs looking for ways to get their startup off of the ground and can help pay for non-product related costs such as office space.
However, it’s important to remember that strangers are unlikely to hand their hard-earned cash over to just anyone. Therefore, you’ll have to spend time making a convincing argument about how you’re going to use their donation.
Indiegogo has a flexible funding fee of 9% and if you reach your target, you’ll get 5% of that fee back. Alternatively, you can opt for their all or nothing model, similar to Kickstarter’s, which charges a flat rate fee of 4% on funds raised.
On top of this, you’ll also have to pay a processing fee of around 3-5%.
Crowd Cube is a professional crowdfunding website with a difference. Firstly, this platform is specifically designed to support British businesses and secondly, it is backed by private company investors rather than everyday people.
Crowd Cube allows you to either find investment opportunities or financial help for your startup. You pay investors back by giving them an equity stake in your business or alternatively, you give funders mini-bonds and allow them to share in your businesses growth.
There are a few different fees to pay for the pleasure of using Crowdcube once you’ve reached your target. These include a 5% success fee, an administration and corporate service cost of £1,250 and payment processing fees which are 2.4% of your funds, plus 20p per transaction.
Funding Circle is a peer-to-peer lending site that allows small businesses to obtain loans of up to £60k.
The main difference between regular crowdfunding and p2p lending is that you use peer lending like you would a bank and pay interest on money lent.
Funding websites such as these can be a good way to inject cash into your business quickly.
There are no processing fees or target goal fees but you will have to ensure that you can make repayments each month.
This means it is often better suited to businesses that are already established but looking to grow their company.
GoFundMe is another traditional crowdfunding site which offers a variety of funding options depending on your needs.
Personal crowdfunding – which allows you raise money without offering incentives, setting a deadline goal or target.
All or nothing – which lets you cash out when you’ve reached your goal.
Charity funding – which helps you to raise money by promoting it through social media sites.
In the UK, GoFundMe takes a flat fee of 5% but you’ll also have to pay a fee of 1.4% plus 20p per transaction to Stripe for processing.
For charities, it’s a little more with GoFundMe’s 5% rate on top of a 4.25% fee payable to FirstGiving.