In 2013 crowdfunding websites raised an estimated $5.1 billion dollars for everything from the capital needed to finance a new business to emergency medical care. If you are planning to start a crowdfunding campaign, you may be shocked to find there are hundreds of sites to choose from. Instead of simply choosing a site that you have heard of, it is important to select the one that best fits your needs. The following looks at the most popular crowdfunding websites, including what category they fall in, associated expenses, and more.
Donation Based vs. Equity Based (Investing)
There are two primary types of crowdfunding websites: donation and investing. Contributions made through a donation based site are considered to be no strings attached. Also known as “rewards based crowdfunding”, the general public donates without any incentives. They are primarily used to fund philanthropic, “fund my life”, and creative projects.
Equity based crowdfunding is used to raise capital for a new business by allowing contributors to buy a small stake in the actual company itself. The United States Securities and Exchange Commission (SEC) has regulations in place regarding equity based crowdfunding.
Founded in 2009, Kickstarter is a popular donation-based site that is used to fund creative projects, such as music, film, technology, and video. Projects cannot offer financial incentives, involve prohibited items, or fundraise for charity. Kickstarter does have a rigorous submission process and it operates on an all-or-nothing basis. This means that the project creator sets a funding goal and deadline. If the project reaches its financial goal in the time allowed, a creator receives the funds and those who pledged donations are charged. If the project doesn’t meet its goal, no one is charged and the creator doesn’t receive anything.
As of today, 78,988 (44%) projects have been successfully funded through Kickstarter.
As of January 2014, 10% of campaigns have been successfully funded using Indiegogo.
Founded in 2010, Crowdcube is based in the United Kingdom and allows anyone to invest a small amount of money into a company in exchange for equity. It is open to British businesses that are in need of start-up money, as well as are in the early stages of growth. Crowdcube only requires that you pay after you have met your equity funding target. This includes a 5% success fee, £1,250 administration fee, and £1,250 corporate services fee. Payment processing fees also apply depending on your payment provider.
Authorized through the Financial Services Authority (FSA), Crowdcube has raised more than $94 million (£61m) and successfully funded 194 UK businesses as of February 2015.
RocketHub is a donation based crowdfunding site that is open to anyone who is in need of funding for the arts, business, education, science, and social good projects. The site has partnered with A&E to provide extra support for select projects and also helps connect campaign owners with possible marketing partners. If your goal is met, you are charged a 4% commission fee and a 4% credit card handling fee. If your goal is not met, you are charged an 8% commission fee plus the credit card handling fee.
Rockethub reports that millions of dollars have been raised on their site by thousands of people all over the world.
Founded in 2008, FundRzr is a Canadian donation based crowdfunding site that can be used by anyone to collect money for a group, personal, political, or non-profit cause. Campaigns are free to set up, but owners must have a personal Facebook or Google+ account to do so. Any money raised is subject to a 5 % FundRzr fee and a Payment Provider fee of 2.9% + 30¢ for each transaction. Users in the US can accept money via PayPal and WePay, while international users must use PayPal.
FundRzr reports they have raised more than $52 million for more than 45,000 people in 37 countries.
Launched in 2011, GoGetFunding is a donation based site that allows you to raise money for any cause that is important to you, whether that is launching a new business, paying off medical bills, taking a vacation, and much more. GoGetFunding charges a 4% competitive fee on all funds raised, as well as a 2.9% payment processing fee + 30¢ for each transaction. This is automatically deducted anytime you receive a donation.
Websites and Crowdfunding