Crowdfunding: The Simple Way to Startup Funding

In the past, celebrities, musicians, and politicians have all used crowdfunding to gain considerable amounts of capital for unique causes. Now, with the help of the internet, you can too. No matter the cause, or endeavor, there is a crowdfunding platform that will help you raise the startup funding you need.

What is Crowdfunding Anyway?

Crowdfunding is a term which is used to describe a method of gathering small amounts of startup funding from a large number of individuals and organizations. Whether you are thinking of taking on a business venture in the form of a startup, or you are planning on establishing an organization, it is a great way to secure startup funding.

Through the use of online platforms, integrated with social media sites like Facebook and Snapchat, more entrepreneurs and investors are connecting than ever before. It is a proven technique for raising more substantial amounts of capital than most individuals or organizations can afford on their own. Successful online campaigns can end in the hundreds of thousands of dollars, even millions.

Crowdfunding for your Startup

Image of startup funding growing from the palm of a hand.

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Entrepreneurs looking for additional startup funding should consider crowdfunding. The way most platforms are set up, virtually limitless individuals are capable of donating various amounts. Whether five dollars or five-hundred, those little hits can add up to some tall stacks of startup funding pretty quickly.

In today’s world of digital everything, there is no good reason to go without startup funding. When you come up with a bright idea, get a patent or document it. Quickly take the next step and seek funding from the crowd to get things started correctly.

Crowdfunding for Investors

Crowdfunding is not just lucrative for the startups, and it can be mutually beneficial to the investors. For example, many of these campaigns offer a different reward for each specific donation level. This may include anything from a coffee cup or t-shirt to some other promotional type item or gift.

Authors, video-game designers, and film-makers may reward contributors to their cause’s campaigns with free books, games, movies or other free merchandise. Contributing to an artists crowdfunding often results in some unique reward or another, such as a signed print.

More and more businesses are beginning to participate in equity-based crowdfunding. A form of crowdfunding which allows startups to remain in control of their companies as things progress, but still offer an equity-based reward incentive to contributors.

The 5 Best Crowdfunding Sites

There are numerous sites on today’s interwebs which are excellent places for crowdfunding. There are also a countless amount of con artists launching scam sites to steal people’s donations, so beware. Always take care to investigate a place before signing up for a crowdfunding campaign or donating to a cause. Below is a short list of the very best crowdfunding sites currently available.

Kickstarter

Screen shot of Kickstarter crowdfunding.

Image CC BY-SA 2.0, by methodshop, via Flickr

With nearly 150,000 crowdfunding projects completed, backed by over 14.5 million funders, it is clear to see why Kickstarter claims to be #1. Currently, there are between 3,500 and 4000 live crowdfunding projects on Kickstarter. By far the most popular site for securing startup funding.

You must be 18 years old have legal residency in one of the many countries that Kickstarter supports including address, bank account, and government-issued ID. If you are from Canada, you will need a major credit card in place of a bank account.

Project creation is limited to individuals representing themselves, or legally recognized entities with which they have an affiliation. The Kickstarter platform keeps 5% of all donations received, as well as an additional 3-5% for payment processing, a total of 8-10% of your crowdfunding capital. Explore Kickstarter by clicking here.

GoFundMe

Another big name in online crowdfunding. Like Kickstarter, GoFundMe touts being #1 in the industry. Regardless who is indeed the best, GoFundMe is one of the most trusted and highly preferred crowdfunding platform of millions. With GoFundMe, your cause matters, no matter the size. Set up a funding campaign for charity, education, emergencies, memorials and more.

Unlike Kickstarter, minors between the ages of 13 and 18(or 19 depending upon their location) can set up fundraising campaigns with the permission of a parent or guardian. GoFundMe does not charge taxes on donations received, they leave it in the hands of those running the campaign to make payments(if necessary) to the proper tax authorities.

There are no penalties for falling short of your fundraising target, and there are no requirements for setting goals or deadlines either. However, the platform does keep 2.9% of your raised funds plus $0.30 for each individual donation received.

Before heading over and signing up for a GoFundMe account to raise money for your cause, check the terms page to make sure that your idea is allowed on the platform. Some examples of forbidden crowdfunding on GoFundMe include reasons centered around gambling, weapons, legal support for those who total with hate crimes, violence, and bullying. Campaigns related to Illegal drugs, pornography, sales of illegally imported goods, and any causes which are purposefully misleading are also exclusively forbidden.

Indiegogo

Indiegogo is a fresh alternative for startup funding specifically for tech-related products. Not only can you advertise for your startup through the platform but you can also set up various shipping arrangements for your products.

The Indiegogo platform keeps around 8%-9% of your donations. 5% for their basic service fee, and another 3% for payment processing. They also withhold an additional $0.30 per transaction.

Bank accounts outside of the United States are charged a $25 international transfer fee upon receiving funds from their campaigns. You should also take note that your individual bank may charge fees as well.

If you are interested in learning more about startup funding for a tech-related product or service, click here.

YouCaring

A woman holding her hands out with a ball of crowdfunding cash.

Image CC0, by HeatherPaque, via Pixabay

Now a part of GoFundMe, this super popular platform raises millions of dollars in donations each year. Over a billion dollars to date. The interface is mobile and user-friendly, plus, it only takes about five minutes to set up a campaign.

YouCaring is one of the only crowdfunding sites which does not charge a fee for using their platform. However, their payment processing partners, PayPal and WePay, charge 2.9% and $0.30 per transaction. So, it is not entirely free, though, in the end, you keep up to 5-6% more than with other crowdfunding services.

As YouCaring is now a part of GoFundMe, the two platforms have the same terms for using their services. In basics, as long as you are operating fundraising campaigns for yourself, or a legally recognized organization with which you have an affiliation with, your most likely good to go.

If you are interested in setting up a crowdfunding campaign on a platform that is proven to achieve substantial results, YouCaring is the one you are looking for.

Facebook

A hand holding a smartphone with the Facebook icon.

Image CC by 2.0, by stockcatalog, via Flickr

The social media giant, Facebook, is becoming an extremely versatile platform for raising capital. Currently, fundraiser campaigns are possible on Facebook. Donation buttons which appear on groups and pages are also available for gathering startup funding through integrated Facebook social media campaigns.

Facebook donations are not charged a service fee, as long as they link to a US-based charity organization. That said, the third party payment processors, such as PayPal, Stripe, and WePay, will still charge their fees. Typically these charges are around 3% of all transactions.

US-based fundraising proceeds for personal campaigns on Facebook get charged 6.9% of each donation plus $0.30 per individual transaction. Canadian fundraising proceeds for personal campaigns cost 8.8% of total funds as well as a $0.30 transaction fee. For Austrailia, Europe, and New Zealand there are currently no charges attached to personal fundraising efforts on the platform.

Didn’t know all that was possible with Facebook? Click here to read more in-depth about it.

Frequently Asked Questions About Crowdfunding

A montage of crowdfunding related words and phrases.

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Do people really donate to causes through crowdfunding campaigns?

Yes, people donate to hundreds, even thousands, of causes through these platforms on a daily basis. Millions of dollars in startup funding are gained by businesses, organizations, and individuals each year.

What makes people decide to donate to a particular crowdfunding campaign?

People are generally attracted to at least one of three particular aspects of the campaign. The physical and visual appeal, the artistic appeal, or the fundamental cause behind the fundraising.

How much money do people generally donate to crowdfunding campaigns?

It all depends on the chosen platform. That said, the average contribution to campaigns on platforms like Kickstarter generates roughly between $25 and $75.

How do I get started with crowdfunding for my business or cause?

Head on over to the nearest website and sign up. No, seriously, it’s that easy! Just choose the platform which seems to suit your needs the most and register for an account. After that, it’s as simple as taking ten minutes and setting up your first campaign. You’ll be launching your startup in no time!

How long does a crowdfunding campaign last?

Three to six months on average, however, most platforms allow for highly customizable campaign settings. It will last as long as you require it to last, basically.

Which crowdfunding websites have you worked with in the past? Tell us about your experiences in the comments.

Featured image CC by 0, by Tumisu, via Pixabay

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