To give life to your dream of a business startup, the first and foremost thing you need is enough money. However, there are multifarious things needed to give an idea shape, but financial support is a crucial thing. Sometimes, many business ideas die owing to the incapability of arranging funds. But in the past few years, there has been a new trend of crowdfunding to endorse talented people.
Crowdfunding has significantly altered the investment area and has already assisted hundreds of young entrepreneurs in their quest to disrupt the market. It can be seen through the studies that the popularity of the crowdfunding method is taking it to another level, and according to Fundly, the total amount raised by crowdfunding platforms globally is $34 billion, with mobile devices accounting for 17% of all donations.
What is Crowdfunding?
Crowdfunding is when numerous individuals contribute to a project. It is a platform where individuals may raise money for a cause that they believe is worthwhile. People’s donations may be small, but they matter and can help you achieve your goal with the right campaign. They may help you scale your startup into a thriving business sooner than you think.
The initiatives may be launched rapidly by getting the necessary funds. The majority of campaigns take place on crowdfunding sites with predetermined deadlines to gather cash and show amazing financial goals. Crowdfunding is a flourishing industry in present times, and entrepreneurs and businesses can benefit from the software development organization to create the best crowdfunding platforms.
What are the Types of Crowdfunding?
Equity Crowdfunding: This is a method of raising funds online from investors to assist businesses in the financial sector. With the investment of money in a business, the investors receive equity ownership in the firm. Every investor is entitled to a share in the company according to their investment. AngleList, MicroVentures, and Fundable are some popular equity-based crowdfunding platforms.
Donation Crowdfunding: This is a type of crowdfunding that is done for only social causes and to help someone rather than seeking financial profit in return. GoFundMe and RocketHub are some popular donation-based crowdfunding platforms.
Peer-to-Peer Lending: Through this method, individuals or businesses take loans directly from other people, and this method vacates the requirement of any mediator. The money committed by supporters is a loan that must be repaid by a certain deadline at an agreed-upon interest rate. Lending Club and Prosper are examples of peer-to-peer lending crowdfunding.
Reward Crowdfunding: Reward crowdfunding is when individuals give to a company or a crowdfunding project with the intention of receiving a non-monetary benefit in return, such as goods or services, T-shirts, and so on. The amount of money varies depending on how much money participants contribute to a campaign. Kickstarter and Indiegogo are flourishing reward crowdfunding platforms.
Human Capital Crowdfunding: It is a way for individuals to generate funds for personal growth or initiatives. Investors are given the opportunity to fund a project in exchange for a part of the winnings. Various sports athletes, for example, crowdfund money to play and then distribute a portion of their earnings to investors.
Real Estate Crowdfunding: Real estate crowdfunding in business provides people with opportunities to invest in real estate ventures. It is especially useful for those who want to invest in real estate but don’t want to deal with contractors, mortgage brokers, or real estate agents. CrowdStreet and DiversyFund are examples of real estate crowdfunding.
Profit-sharing/Revenue-sharing Crowdfunding: Profit-sharing, sometimes known as revenue-sharing, is a fundraising strategy that provides lenders with recurrent payments based on the financial performance of the firm. Businesses can donate a portion of their sales income or a percentage of their pre-determined net profit quarterly or yearly.
Most Popular Crowdfunding Platforms in 2022
Kickstarter is a public benefit organization founded in Brooklyn, New York, that operates a global financing platform centered on creativity. The declared purpose of the firm is to “assist in bringing creative concepts to reality.” As per the official website of Kickstarter, they have funded 224,092 so far. The platform is reward-based crowdfunding and it helps talented people in films, music, stage plays, comics, journalism, video games, technology, publishing, and food-related ventures.
Platform Fees – 5% plus 3% – 5% processing fees
Price – Free
CEO – Aziz Hasan
Indiegogo is a crowdfunding website in the United States that was started in 2008 by Danae Ringelmann, Slava Rubin, and Eric Schell. It is based in San Francisco, California. The website was among the first to provide crowd financing. Indiegogo allows users to raise money for their ideas, charities, or new businesses. Contributions on Indiegogo are subject to a 5% fee. This fee is in addition to the Stripe credit card processing fee of 3% plus $0.30 per transaction. Every month, 15 million individuals visit the website.
Platform Fees – 5%
Price – Free
Funded – 800,000 + creative ideas
CEO – Andy Yang
Patreon is a one-of-a-kind crowdfunding network that specifically caters to artists, musicians, podcasters, bloggers, and producers. It operates on subscriptions rather than crowdsourcing. It removes the necessity for limited-time promotions. Instead, it concentrates on cultivating a devoted following and generating recurring revenue through premium memberships. Regular creators can gain greatly because subscribers can cancel at any moment. Creators may keep people interested by providing behind-the-scenes or unique content.
Platform Fees – Three-tier model 5% (lite), 8% (Pro), 12% (premium) on monthly earned income plus processing fees
Price – Free
CEO – Jack Conte
GoFundMe is a platform for online crowdfunding and fundraising that allows you to gather funds for your cause. It has no platform costs, however, it does charge a tiny proportion of transaction fees and 30 cents for each gift. More than $5 billion has been raised for personal or corporate interests. You may retain anything you raise, whether it is more or less than the target. People frequently provide charity to trustworthy or close sources since it permits donations. It makes soliciting funds through the site more difficult. It is preferable for emergency or medical care purposes.
Platform Fee – Free (2.9% processing fees and $0.30 for every donation)
Price – Free
CEO – Tim Cadogan
Wefunder allows you to raise investments ranging from $50,000 to $50 million. You can run a brewery, a restaurant, a software venture, or a fashion company. The app has access to over 150,000 investors. Within fifteen minutes, you may set up a free account and begin raising funds. It might take anything from one to three months to achieve your venture’s aim. There are no transaction or administration fees. Wefunder’s operating expenses are covered by administrative charges. The first investment is $100. The app links young aspirants with skilled and experienced experts so that they may benefit from their knowledge.
Platform Fees – Only administrative charges (no processing or transactional fees)
Price – Free
CEO Russell Smith
Features Required For Your Crowdfunding Platform
- Admin Account
- Account Management
- Managing Transactions & Investments
- Managing Projects and Catagories
- Customer Support
- Platform Registration
- Profile Management
- Project Exploration
- The setting of Payments & Investments
For Platform Owner
- Account Creation
- Managing the Profile
- Project Management
- Investment Management
Advanced Features for the CrowdFunding Platform
Community Establishment: A crowdfunding platform should be designed so that users can readily engage with one another. It will assist them in announcing anything, such as contests, awards, scholarships, and internships. It will also increase the amount of feedback on start-up initiatives, increasing the likelihood of improvement.
Project Support & Assistance: Many start-ups or businesses do not understand what they need to accomplish on crowdfunding sites. They are unsure about the procedure and how they may obtain financing. As a result, you must give them guidance or support in order for them to comprehend how to use the platform.
Confirmation and Reminders: On a crowdfunding site, numerous factors must be addressed, such as user engagement, having a reminder feature that may remind you of crucial emails or actions to be added, and so on. You must be aware of everything as the owner or creator.
Calculating the Funds: This sophisticated function will assist businesses in calculating the precise amount of revenue raised, earned commissions, taxes, or payments. This automated computation tool will make the program more enjoyable and convenient to use.
Pre-launch Page: As per this feature, you can build a page for a campaign that you have not yet launched. It attracts investors and individuals and piques their curiosity about what’s on the horizon.
How Do Crowdfunding Platforms Make Money?
A crowdfunding website is more than simply a place to raise money through donations and other means. It may be utilized as an inventive concept to generate a lot of money. Let’s look at some of the numerous monetization strategies that may be used on a crowdfunding site.
Membership Fee: It is the most common method of earning money, in which the platform charges customers monthly or annual fees for subscription or membership. For example, Fundable charges customers $179 a month to raise funds.
Success Fee: This kind of monetization enables the platform to get a proportion of the total money raised by the campaign. Indiegogo, for example, levies a 5% fee to its users.
Loan Processing Fee: This strategy is mostly used by loan-based or peer-to-peer crowdfunding platforms. These platforms charge a % of the money lent by users. For example, Landbay adds 2 percent to 2.5 percent charges to each loan and charges 0.5 percent to 1 percent on the total loan balance annually.
Ads and Promotion: One of the most effective monetization strategies employed by crowdfunding platforms is to display adverts from other businesses on their website. Businesses who want to promote themselves will pay a fee to the site. It is for this reason that crowdfunding platforms enable non-profit groups to start campaigns for free because they gain money through advertisements and promotions.
Part of Future Sales: Unlike other sites that take a proportion of the total cash received by campaign creators, you can take a share of the campaign creator’s future earnings. Many crowdfunding platforms are now using this strategy to increase money. For example, PledgeMusic deducts 15% of the creator’s future revenues.
Six Crucial Steps in Developing a Crowdfunding Platform
- Organize a Market Analysis
Before using services for the development of the crowdfunding platform, it is quite helpful to gain some knowledge about the market. It is critical that you acquire knowledge about the other platforms that are going to be your rivals. There are various types of criteria for conducting a market analysis. For instance, you should pick the different types of platforms, such as reward-based, peer-to-peer lending, donation crowdfunding, equity crowdfunding, and others. You should also review the success rate of those platforms so that if that type of platform is not performing well, you can avoid choosing it. Last but not least, you should also check the target audience and also the followers, users, and social media success of the platform.
- Implement Your Business Plan
It is a must that your intended plan and your goal are in line and well assessed. And for this, you must have proper knowledge about the development process along with budget planning. It is suggested that you should have enough funds to create a well-designed crowdfunding platform since a perfectly designed website will be helpful in getting success shortly. It would also be good if you could create a community on a crowdfunding platform for more fundraisers to help you out in the development process.
- Have an engaging UX Design
You must approach a website development organization that has a team of experienced and well-qualified developers and UI/UX designers so that they can create an eye-catching and enticing website for you. It must have the capability of engaging the targeted audience, and there should be clear and easy-to-use features on the platform so that users can easily sign up and operate the platform. A good UX design always includes a user-friendly interface, flexibility, pleasantness, and color combination.
- Platform Development
If you want to develop the website from scratch or use templates or ready-made solutions, the next step after finishing the website design phase is writing the site code. It needs to be mentioned here that developing such a platform is a tough row to hoe since there are plenty of legal bodies and norms related to crowdfunding.
After that, you must pick which development approach is best for your website. You can choose a bespoke solution, a white-label crowdfunding platform, or anything else. At this stage, you may integrate any essential third-party API services into the platform while leveraging the most recent technological stack. To have a scalable solution, you must engage crowdfunding website developers.
- Testing Stage
The next pivotal step in the website development process is the inspection of what you have created so far to see if it has the intended capabilities and features. It should be kept in mind that the crowdfunding platforms should be highly secure and fast-working so that the users do not need to wait a long time and waste their time while operating the platform. If you discover a bug in the website while testing, it should be fixed right away.
- Building an MVP
It is a decision that must be made from the start of the development process. Launching an MVP will provide you with a sense of the market and the audience’s reaction to your solution. It is a rapid and cost-effective way to gain market dominance by enhancing the final solution in response to input from the target audience. After releasing the MVP version of the crowdfunding platform with basic functionality to the market, you may upgrade it with the most recent additions and functions based on user input.
Cost Estimate for Website Development Process
It depends on a multitude of factors, as some website development companies plan to create the platform from scratch, while others want to use the MVP version since they do not have a high budget. Before deciding about this, you must analyse the time and cost it will take to create a successful website. To exemplify, for developing a website like Kickstarter, there could be an expenditure of $15000 to $25000 with key features.
Moreover, if you want to add some sophisticated features according to market analysis, it will cost you more. Regardless, there are other elements that might affect the entire website creation cost, including features and functionality, developer location and expertise, legal entities and compliance, obtaining licenses, team structure, and tech stack, among others.
To Sum it Up
There is no denying the fact that creating a crowdfunding platform is a tremendous task, but do not worry, it can feel easy if you have the right development partner with you. We have mentioned the required information for making your mind about designing and developing the platform. Nevertheless, there are numerous crowdfunding platforms already on the market, but there is a vast scope for creating a unique platform after taking into consideration the requirements of the emerging audience.
If you have decided to develop a crowdfunding platform but are confused about picking the right development company, you should stop your search since NEXTPAGE IT Solutions has enormous experience in creating successful applications and software for various types of fields. We have skilled web and mobile app developers with years of experience in creating an exciting and user-friendly crowdfunding platform.