Crowdfunding is an increasingly popular method for startups or small businesses to secure capital for launching a new business or new product, funding a special project, or financing business growth initiatives. However, since there is also a growing number of crowdfunding platforms, it may be challenging to select which one would be the best fit for your small business.
There are definite and significant differences in the type of funding each platform offers. To help you in your decision making process on where to seek funds, here’s a rundown of the most commonly used crowdfunding sites.
Kickstarter, founded in 2009, is one of the most well-known and established crowdfunding sites. Those seeking funding on Kickstarter commonly offer investors products or unique experiences based on the level of funding they provide.Kickstarter only funds specific projects, so it’s not the best spot to seek general startup or growth financing for your small business. To get funding from Kickstarter, you have to be seeking funding for something specific, such as a new product.
Also, Kickstarter investors lean heavily toward funding creative projects. For example, if you’re a freelance writer, you might consider Kickstarter to obtain funding for writing a novel.You have to raise 100% of your funding goal on Kickstarter to obtain funding. Financing fees include Kickstarter’s 5% fee and a 3% payment processing fee.
Indiegogo isn’t as niche as the other platforms, meaning you’ll find a solid mix of fundraising platforms on the site. Additionally, Indiegogo doesn’t require you to meet your fundraising goal in order to collect. However, you will pay a higher fee if you don’t reach your target. Plus, just about every industry is covered on the platform, making it a good fit for almost anybody.
Indiegogo offers both fixed and flexible funding. Fixed funding is ideal if your campaign can only continue if it raises a certain amount of money (such as needing $10,000 to buy a piece of equipment), while flexible is better if your campaign will benefit from any type of funding. The fee for either is 5%, but if you don’t hit your goal with a flexible funding campaign, you’ll pay a higher fee (which is reportedly 9%). There’s no fee for a fixed funding campaign if you don’t hit your goal. And, of course, there will be additional fees (usually around 3%) from payment processors.
Crowdfunder is geared toward providing opportunities for investors to access opportunities like those commonly invested in by venture capital firms, such as businesses involved in the technology, real estate, or health care sectors. If your startup or small business falls into one of those categories, Crowdfunder may be the best place to go to obtain financing.
Due to the nature of business funding Crowdfunder aims to provide, fundraising goals are typically much higher than those found on sites more like Kickstarter, even reaching into the millions. Therefore, Crowdfunder is good to consider if you’re seeking a high amount of investment capital. Crowdfunder doesn’t charge a specific funding fee as Kickstarter does, but instead levies a monthly subscription charge.
With an emphasis on creative projects, Patreon works with a subscription model. This means that donors provide regular contributions, rather than making a donation in one lump sum. With a tagline of “Creators, Come Get Paid,” the platform is designed to support creatives in pursuing their passions and making things that others enjoy.
Formerly, creatives on the platform would pay a 5% fee for the platform, as well as any other fees associated with payment processing. But, recently, Patreon changed its approach in order to give its creators as much money as possible. Now, donors are the ones who pay a service fee of 2.9% + $0.35 for each individual pledge to cover that payment processing. While it means that fundraisers now get to take home 95% of what they earned, many users were concerned that the additional fees for donors would scare away patrons.
EquityNet is one of the largest and more established crowdfunding platforms, having facilitated aspiring entrepreneurs receiving more than $200 million in business capital from equity investors. EquityNet’s site connects individual investors, entrepreneurs, startup incubators, and other business support services.EquityNet specifically aims to serve private investors who are looking to provide business capital in return for an equity interest in the company. Therefore, it’s not ideal if you aren’t willing to relinquish an equity interest in your startup idea or small business.
Businesses of any kind can seek funding from EquityNet, but the site caters especially to healthcare, manufacturing, and technology sector businesses. EquityNet does not charge a fee for fundraising. Instead, it operates on a monthly subscription basis. The site makes its business plan software available for you to use, after which you can search through the available investors and select ones to submit your business plan to.