Crowdfunding is a way to raise financing for businesses, non-profit projects, and one-time promotions. Projects launched on crowdfunding sites may choose not to offer rewards, they might offer nonfinancial gifts to sponsors, or fully return investors’ funds after implementation (only in the case of crowdinvesting). We will tell you which sites you should check out if you are just starting your journey in crowdfunding. We will also share some inspiring examples of businessmen who raised funds to start and operate their projects using crowd services.
I’d like to launch a crowdfunding project. What should I pay attention to before I start?
If you are just thinking about starting your own crowdfunding campaign, make sure that your project is unique, and the product you are planning to launch either has no alternatives or is very different from the product offered by your closest competitor. Does your idea essentially duplicate an existing project on the market? Either refine your idea, or abandon it altogether.
Projects whose creators clearly describe the reasons for their fundraising, report on how the raised funds will be used, and actively communicate with their audience have the greatest chances of raising their target funding. Projects that help the world around them also achieve great results. Even if you are raising funds for something that (at first glance) cannot help other people, try to highlight small details that will convince users of the relevance and importance of the project. For example, let’s say you are looking for funds to launch your own restaurant or hotel complex. Think about how this addition will improve the infrastructure of your city, how it will raise its tourist attractiveness and make the locals happier.
Top 7 crowdfunding platforms that are perfect for launching your business
- Kickstarter. One of the most popular crowdfunding services, where several thousand new projects are launched every day. Many people believe that “Kickstarter” was the pioneer for all crowdfunding platforms. It has a convenient design, clear rules for participation, and an active community. An important point: you cannot use this platform to raise funds for the operation of an existing company. And if you do not receive the declared amount of money (for example, you collect one and a half thousand dollars instead of two), all investments will have to be returned to your sponsors. The service charges a commission of about 5% from the total raised amount.
- Indiegogo. This platform will help raise money for your business, for your children’s education, and for charitable purposes. The service transfers all funds to the project creators, regardless of whether the campaign has raised the initially declared amount. However, if you fail to raise the target funding amount, Indiegogo will charge you a 9% commission fee instead of the standard 4%. Distinctive features of the platform include an automatic rating of the popularity of projects and the option to raise funding for life events (from weddings and operations to purchases of houses and planes).
- RocketHub. The site is similar to IndieGoGo in every way. It’s perfectly suited for beginners – when registering, you will have access to several lessons from an internal “school” provided by the service.
- Booomerang. Based in Denmark, the site initially funded exclusively music projects, with creators rarely requesting funding exceeding $10,000. Today, the service makes it possible to secure investments and donations to a wide variety of businesses, with an emphasis on social entrepreneurship.
- Boomstarter. In addition to business projects, the platform also supports widely distributed films, books by new authors and products developed by talented designers. Your project can raise an unlimited amount of funds over a certain amount of time, or remain open until the financial goal is achieved (even if it will take decades).
- Planeta.ru. This is a popular domestic crowdfunding resource, whose creators declare that the service operates “according to the laws of the Russian Federation.” The site takes a commission of 10% of the collected amount (or 15% if the goal has not been achieved) and allows projects to remain on the website for no more than a hundred days.
- StartTrack. A platform for attracting crowd investments. Suitable for businessmen who seek to develop their projects, but are unwilling (or unable) to apply to financial institutions for a loan.
Launching your business with crowdfunding? Get inspired by these successful projects!
The founders of Ecosneki, a company that sells marshmallow and fruit chips, raised funds to open its first shop on Boomstarter. They needed more than $5,000 to launch, and the entrepreneurs did not want to contact lenders or investors at accelerators. The crowdfunding platform turned out to be the perfect solution. Sure, the company founders had to make an effort – creating a high-quality video, a “selling” project description, talking about fundraising in social networks, finding ways to promote their page through charitable foundations. Crowdfunding sponsors were offered marshmallow gift sets as rewards. Perhaps this incentive resulted in the sharply increased client base, which has remained loyal to the project to this day.
Anastasia Berezenets, the owner of a Saint-Petersburg based cafe called Taiyaki, also found a way to fulfill her dream and scale her business. In order to open the second outlet of her Japanese street food cafe, she first had to sell her own property, before turning to the Planeta.ru crowdfunding platform. Thanks to the crowdfunding campaign on the platform, the woman was able to raise $9000 and attract additional investments.
Do you think that your project is too niche or largescale to raise the required funding amount? We are confident that’s not the case! Among the successful crowdfunding campaigns of the recent past (and crowdfunding only gained widespread prominence in 2012–2014), you’ll find many ambitious projects and unusual ideas. For example, a project to develop the Oculus virtual reality headset (2,4 million dollars Kickstarter), the Glowforge 3D printer (28 million dollars), or the high-tech Flow Hive (13 million dollars on Indiegogo). Investors and sponsors were also interested in original pop sockets (18,5 thousand dollars on Kickstarter), special offers from the Allbirds ‘shoe empire’ (120 thousand dollars on Kickstarter), and souvenirs for sponsors from watch manufacturer MBMT (300 thousand dollars on Indiegogo).
You can find funding for the most ambitious ideas on crowdfunding platforms. For example, the Pebble smartwatch project raised over a million dollars in the first day and a half after it was posted on Kickstarter. The final funding amount was almost 10 times larger than this initial amount. Innovative inventions often receive much more generous funding than planned – for example, the POP autonomous charger project raised about $140,000, three times the amount originally announced by its creators.
In the event of financial problems, you can save your business with the help of crowdfunding resources – users actively donate funds to projects in difficult situations. For example, after barely surviving the quarantine in 2020, the American bookstore City Lights Books raised 300 thousand dollars on GoFundMe in just a few days. The Brooklyn bar Sunny’s, which was destroyed by Hurricane Sandy in 2012, successfully raised over 100 thousand dollars for repair work and reopening through Kickstarter and Indiegogo. The California resort Spring Mountain Motorsports, which closed during the coronavirus pandemic, raised $ 75,000 on GoFundMe. Instead of spending the raised funds to support operations, the company’s management decided to distribute the money among employees who were sent on unpaid leave. Top managers of the Pennsylvanian country club Llanerch made the same decision – the $100,000 raised on GoFundMe were distributed among their “temporarily laid off” employees.
Crowdfunding is a great way to finance both a one-time product release and start a business that has every chance of becoming the largest player in the market. Explore various sites, choose the one that suits your needs (or choose several sites at once, why not?), and create your first crowdfunding project today!