In recent years, many startups have turned to alternative investment opportunities to get their businesses off the ground. In particular, many startups have turned to crowdfunding platforms rather than business lenders and venture capitalists.
This approach has proved successful for many companies, allowing them to raise funds from a large base of smaller investments rather than relying on one large investment. Major companies like Oculus VR, Peloton, and MVMT all started with crowdfunding campaigns.
There’s plenty of hype around crowdfunding right now, with dozens of crowdfunding platforms to choose from online. As a startup founder, it’s difficult to determine which platform is going to be most effective for your company. In this article, we’ll take a look at 10 of the best crowdfunding platforms for startups on the market today and how to select the right one for your needs.
How do crowdfunding platforms work?
In a crowdfunding campaign, a large number of individual investors contribute relatively small amounts of money to fund a startup company. These contributions typically happen through an online platform.
There are many different types of crowdfunding campaigns. In some cases, investors contribute altruistically without the expectation of returns. However, this approach is rare, and most crowdfunding platforms offer some benefits for investors if the startup is successful.
Many platforms offer equity crowdfunding, where each investor receives a stake in the startups they contribute to. Companies using equity crowdfunding platforms in the United States must follow the SEC’s Regulation Crowdfunding rules.
The most popular alternative to equity crowdfunding is reward crowdfunding. With this type of campaign, investors receive rewards from the company for their contributions rather than receiving equity.
Most startups that take this approach offer early access to the company’s products or special edition items as a reward for investors. Because of this, reward crowdfunding usually works best for companies that sell a physical product rather than a digital product or a service.
What to look for in a crowdfunding platform
There are a variety of factors to consider when choosing a crowdfunding platform for your organization. The first is your chance of fundraising success on the platform. How competitive is it? What is the crowdfunding platform’s target audience, and how does that align with the target audience for your product? What marketing features and other tools do they have available to help you succeed?
It’s also important to look at the fees that the crowdfunding platform charges and consider how they would affect your startup financially. You’ll also need to determine whether equity or reward crowdfunding would be most effective for your business.
Additionally, there are crowdfunding platforms that cater specifically to sustainable companies, artists, or entrepreneurs from specific demographics. If your business fits into one of these categories, you may want to look into one of these more targeted platforms.
On top of that, consider how easy the platform is to use. Is the website intuitive? Do they provide consistent customer support throughout the fundraising process? Is information about the fundraising process readily available and easy to understand?
10 Best Crowdfunding Platforms for Startups
WeFunder was one of the first equity crowdfunding platforms to hit the market, and they remain one of the most popular options for growing startups. So far, WeFunder has raised over $5 billion for its startups, many of which have gone on to launch larger VC fundraising campaigns.
Some of the most notable WeFunder success stories include Meow Wolf, an immersive art installation that has since expanded to three locations, and Goldbelly, a premium food delivery service. WeFunder runs crowdfunding campaigns for companies in a wide variety of industries. They also have a user base of both accredited and unaccredited investors and have impressive connections to VC organizations like Y Combinator. The minimum investment on WeFunder is just $100, which helps campaigns attract investors that wouldn’t normally consider working with startups.
In order to create a WeFunder campaign, you’ll need to provide detailed financial information and create an appealing marketing pitch for investors. Because of this, WeFunder is best for companies who already have a product in place and have some sort of following.
The WeFunder team can help you put together your campaign and manage investor relations, even after the fundraising round is over. You’ll need to set your investment terms and create a contract on the platform in order to start raising money. Because this is an equity crowdfunding platform, you’ll need to have a working knowledge of Reg CF and other financial restrictions to avoid financial complications later on.
WeFunder does not charge startups any upfront fees. Instead, they charge a 7.5% fee if you meet your fundraising goal. This fee covers all of WeFunder’s services, including payment processing.
SeedInvest is a curated equity crowdfunding platform that has helped over 250 startups raise money since its inception in 2012. Many of their successful startups have gone on to attract the attention of investors like Bill Gates and Mark Cuban.
Because it is a curated platform, SeedInvest startups need to go through a rigorous application process that includes a financial due diligence check. Historically, SeedInvest has only accepted around 2% of applicants, so you’ll need a standout product and business model in order to launch a campaign. They accept startups from all sectors, but focus on companies with products that have the potential to disrupt existing markets.
SeedInvest’s connections to VC firms and angel investors could help your organization continue to grow, even after your initial fundraising round. Right now, SeedInvest’s minimum contribution for investors is $1,000, which is higher than many other crowdfunding platforms and attracts more serious investors.
Like WeFunder and many other equity crowdfunding campaigns, SeedInvest does not charge any fees upfront. Instead, they charge a 7.5% fee for successful campaigns. Overall, SeedInvest is best for established startups that have already seen some success.
If you’re interested in reward-based crowdfunding for your startup, Indiegogo is a platform worth checking out. They were founded in 2008 and have launched hundreds of thousands of campaigns since then. It’s available all over the world and anyone can set up a campaign without having to go through a financial vetting process.
Investors on Indiegogo do not receive equity in your startup. However, you have the option to offer perks to your investors if they contribute a certain dollar amount. Indiegogo is best for startups that sell physical products. After your campaign is over, you can continue to promote your products using the platform’s InDemand feature.
Indiegogo campaigns are short, with a maximum campaign length of 60 days. The platform charges a 5% campaign fee as well as a 3%+$0.20 transaction fee. They charge fees for all campaigns, regardless of success rate.
Republic is another curated equity crowdfunding campaign marketed at established startups. They work with both accredited and unaccredited investors, although some campaigns are only available for accredited members. Startups can set their own minimum investment amounts – some campaigns start at $150, while others require $1,000 or more. Republic also promotes real estate, crypto, and video game investments to its user base, but startups continue to be the star of the show.
Since Republic is a curated platform, not all startups can launch a campaign, and there’s a lengthy application process to go through. They have a detailed due diligence process, and they’ll also take an in-depth look at your products and business model to see how you’d perform in a competitive market. Republic is highly selective about the companies they work with.
Republic provides some support for startups through the fundraising process, but you will need to handle SEC filings and other legal obligations related to the campaign on your own. Like most other equity crowdfunding platforms, Republic only charges fees for successful campaigns. They charge a fee of 6% on money raised as well as 2% of securities issued. Additionally, you’ll need to pay payment processing and escrow fees, which add up to about 2% of your total campaigns.
Kickstarter is another one of the world’s largest reward crowdfunding platforms. Kickstarter is most popular for creative projects like movies and music, but it’s also popular for product development campaigns. This means it could be a good fit for startups that sell a specific physical product.
As with other reward crowdfunding platforms, you’ll need to offer perks to your investors rather than equity. Kickstarter allows anyone to launch a campaign without having to share company financials, although you will need to create a pitch and submit an application.
Once your application is accepted, you’ll run a campaign for 60 days or less. If you meet your fundraising goal in that time, your investors will be charged and you’ll be responsible for providing rewards. If you don’t meet your fundraising goals, you won’t receive any of the funds.
Like many other crowdfunding platforms, Kickstarter only charges fees if your campaign is successful. They charge a platform fee of 5% as well as payment processing fees of $3 + $0.20 per investment.
If your startup is based in the UK and you’re interested in equity crowdfunding, Crowdcube might be the platform for you. They offer funding campaigns for businesses in many different stages, from your initial seed stage to later rounds of growth funding. They accept startups across a wide variety of industries, although you will have to complete an initial application and review before starting your campaign.
Crowdcube allows investors to get started with only 10 pounds, creating a much lower barrier to entry than many other equity crowdfunding platforms. Additionally, their Cubex feature allows private businesses to offer shares directly to consumers, which you can do separately from your crowdfunding campaign. This gives your investors a way to sell their shares at any time.
After your crowdfunding campaign ends, you’ll have access to Crowdcube’s exclusive community of funded startups. This includes access to a dedicated support team to help with legal filing, shareholder management, and more.
Like many other platforms, Crowdcube charges a 7.5% fee if your fundraising campaign is successful. They do not charge you to maintain a listing on their secondary market.
Fundable is a crowdfunding platform that focuses on hands-on customer service for growing startups. The company’s founders have experience as startup founders themselves, so they set out to create a user-friendly crowdfunding platform. Their team helps each startup put together a profile and marketing materials and provide ongoing support throughout the process.
This platform is also unique in that they offer both equity crowdfunding and reward crowdfunding, so you can choose the option that makes the most sense for your company. Fundable reviews all campaigns before they go live to make sure it meets their requirements.
Fundable’s fee structure works differently than many other crowdfunding platforms. Instead of charging a percentage fee on funds raised, they charge a $179 monthly fee for all campaigns, regardless of whether they are successful or not. Rewards campaigns are also subject to payment processing fees of 3.5% + $0.30 per transaction.
StartEngine is a popular equity crowdfunding platform that hosts hundreds of startup campaigns in a wide variety of industries, including tech, finance, travel, food, healthcare, education, and much more. The Startengine platform itself is a crowdfunding success story.
Campaigns on the platform will need to reach a minimum funding goal of $10,000, although you can set a higher goal if you prefer. StartEngine offers either Reg CF or Reg A+ campaigns, both of which require legal guidance in order to launch. The platform charges a flat fee for successful campaign, although the exact amount varies depending on what types of campaign you choose and a variety of other factors. Campaign fees start around 7%.
If you’re looking for a crowdfunding platform that supports larger Reg A+ campaigns, StartEngine may be a good option for you. StartEngine is also unique in that they offer a secondary marketplace where investors can buy and sell shares of private companies after your crowdfunding campaign is complete.
MicroVentures is a highly respected equity crowdfunding platform that has worked with some of the most notable startups of the past decade. Their portfolio of past campaigns includes Uber, Slack, Airbnb, and plenty of other startups you might recognize.
They have only a few crowdfunding opportunities available at a time, and they also offer secondary trading for private companies. Additionally, MicroVentures supports crowdfunding campaigns that are limited to accredited investors.
MicroVentures is extremely selective with the companies they work with. They perform a thorough due diligence check, and they also assess your business to see if it aligns with their platform. The platform focuses on companies that put a new, innovative spin on existing technology or have a unique concept that hasn’t been brought to market yet.
Although it’s difficult to get listed on MicroVentures, the potential payoff is very high for startups that do make it through the application process. Keep in mind that you will have to pay for legal review and filing costs upfront. The platform also charges a 5% commission fee, 2% equity fee, and an escrow fee of either $1,000 or 0.35%, whichever is higher.
IFundWomen is the leading reward crowdfunding platform for female entrepreneurs. Unlike many other platforms on this list, crowdfunding is only a small part of what IFundWomen offers. They also provide a variety of other resources and support services for women entrepreneurs. When you launch your crowdfunding campaign, you’ll get access to a library of guides, courses, and networking opportunities to help you succeed.
Unlike many other crowdfunding platforms, IFundWomen lets you keep the money you raise, even if you don’t reach your total goal. They accept many different types of startups in various stages of development and charge a 5% platform fee for campaigns. IFundWomen offers rewards crowdfunding rather than equity crowdfunding, so you’ll need to provide perks for your investors.
With so many crowdfunding platforms out there, there’s a path to success for every startup. If traditional venture capital funding or lending platforms aren’t an option for you, crowdfunding can be an effective way to get your business off the ground. Since crowdfunding campaigns can be competitive, you’ll want to make sure your finances are in order and that you have strong marketing materials before you get started.
Crowdfunding For Startups: 10 Best Platforms For Fundraising Republished from Source https://www.youngupstarts.com/2022/11/21/crowdfunding-for-startups-10-best-platforms-for-fundraising/ via https://www.youngupstarts.com/feed/