App of the Day
Financing and Funding June 2, 2014

7 Top Crowdfunding Sites Reviewed

With millions of dollars in funding, thousands of completed campaigns, and the Reading Rainbow’s return , it's surprising that "crowdfunding" just recently officially became a word . Even if you weren’t using the term in your writing, you have likely been hearing about products and businesses that have had successful funding through the online community. 


Typical Process

If you aren’t familiar with the concept, from a high level it typically looks like this:

  1. Come up with a unique or improved idea
  2. Research for established markets
  3. Build prototype (product) or business model (startup)
  4. Create a production & distribution plan
  5. Begin creating promotional material
  6. Establish / build up your marketing channels
  7. Publish a campaign to a crowdfunding site
  8. Market, market, market
  9. Receive funds
  10. Distribute rewards to those who funded

This will be your 10-step plan for most peer-funding sites. There will of course be exceptions, but don’t expect your “revolutionary” idea to become funded without significant forethought and work.

If you are serious about raising funds and have a prototype, business model, or an established business that needs additional funding, a crowdfunded round of capital may be able to help launch your company to success.


Crowdfunding Platform Considerations

Here is a quick run-down of things to look at when comparing these funding platforms. These criteria should get you thinking, at least at a high level, about what it is you are looking for in a crowdfunding solution and if it is right for you.

1. What it's meant for: this is the type of campaigns, products, or pitches you can make on the site. This is your first step: to find a site that will permit you to list your idea.

2. Type of Support: how your backers will be related to your business once they support your campaign. Typically comes in two forms.

  • Pledges: funds donated that are typically rewarded with products and require no stake in your company.
  • Equity: is where you give up portions of your company to your supporters in return for funding.

3. Funding Model: This is how you will receive your funds from the campaign. Comes in 2 forms as well.

  • All or Nothing: where you receive the accrued funds only if you meet your pre-established goal.
  • Partial: where you keep all of the funds received but for a higher % fee taken by the crowdfunding platform.

4. Fees: The amount paid to the broker (the crowdfunding site) + applicable credit card and processing fees.

5. Typical Investor: The type of person who will be viewing, contributing to, and promoting your campaign.

6. Search Engine Traffic: Used here as an indicator of how much exposure your campaigns could get on each individual site. Remember, quantity is not directly correlated with quantity but the ability for a site to draw users beyond your own marketing will impact organic visibility.


1. Kickstarter

Meant for: Projects (products) Only

Type of Support: Pledge

Funding Model: All-or-Nothing

Fee: 5%

Typical Investor: Consumers & Non-Accredited Investors

Search Engine Traffic: 1,450,000 visits/day from Google top 20 results

Probably one of the most well known crowdfunding platforms, Kickstarter is meant for “Projects”. What’s a project? A project has a finite time scale and is capable of being completed with the funding raised. Typically highlighting creative works, you won’t see funding for starting your business, but if you have a new product idea that you need help launching, consider Kickstarter to get it off the ground for cheap. The typical “backer” for Kickstarter campaigns is one who has an interest in the product itself, the early-adopter rewards, or those who find your cause to be worthwhile. Being the most “mainstream” of the crowdfunding platforms, news and media outlets are always looking to highlight Kickstarter Projects that can bring them traffic. If your think that your product has what it takes to go viral, Kickstarter is your platform.

Why Kickstarter:

  • Launch projects on one of the largest funding sites
  • Don’t give up any equity in your business
  • Incredible 44% of projects have reached funding goal
  • Excellent chance of backing (81% of campaigns that reach 20% funding go on to become fully funded)
  • All or nothing model with limited liability
  • Big exposure, large user-base and traffic
  • Better chance for your product to be picked up by the media.
  • “Kickstarter School” which teaches you almost everything you need to run a successful campaign
  • Option to live preview your campaign to get feedback from immediate networks

Limitations:

  • Cannot be used to fund websites or apps focused on eCommerce, business, or social networking. You must have the platform in place already; you can only fund products that would be used within these platforms.
  • Remember that you must consider the cost of rewarding your backers (with finished products or one-of-a-kind experience) in your funding.
  • If you don’t have Intellectual Property rights and patents on your designs, there is nothing stopping anyone else from appropriating your ideas.
  • Projects must fit into one of these categories: Art, Comics, Dance, Design, Fashion, Film, Food, Games, Music, Photography, Publishing, Technology, and Theater. They are broad yet flexible, get creative with your project description and pitch to make it fit.
  • Apps, websites, and startups won’t do well here.

Learn more about setting up your project with Kickstarter School .


2. Indiegogo

Meant for: All types of campaigns (but mainly projects)

Type of Support: Pledge

Funding Model: All-or-Nothing / Partial

Fee: 4% on All-or-Nothing / 9% on Partial + 3-5% PayPal or Credit Card Fees

Typical Investor: Consumers & Non-Accredited Investors

Search Engine Traffic: 250,000 visits/day from Google top 20 results

Indiegogo, while slightly less prominent, is the more open version of Kickstarter. Allowing campaigns with no finite end result, you are able to raise funds to start or expand your business. Retain partial funding for a slightly higher fee with their flexible funding plan or go all-or-nothing with the fixed plan for one of the lowest rates around. Indiegogo is still considered project-oriented. While you can fund businesses, which typically have no finite end, the vast majority of campaigns on Indiegogo have a completion

Why Indiegogo:

  • More inclusive and open than Kickstarter
  • Don’t give up any equity in your business
  • Low fee of 4% on a completed campaign
  • Option for flexible funding so you can keep what you raise
  • Higher traffic for more visibility than other platforms
  • Option to live preview your campaign to get feedback from immediate networks
  • Indiegogo Playbook with tons of campaign setup and management resources

Limitations:

  • Remember that you must consider the cost of rewarding your backers (with finished products or one-of-a-kind experience) in your funding. With the flexible funding model, if you only get 25% of your funding goal, you are still responsible for fulfilling rewards promised to your backers. Don’t offer tangible rewards that are only possible contingent upon 100% funding.
  • If you don’t have Intellectual Property rights and patents on your designs, there is nothing stopping anyone else from appropriating your ideas.

Learn more about creating your campaign with the Indiegogo Playbook.


3. Fundable

Meant for: Small Businesses

Type of Support: Pledge or Equity

Funding Model: All-or-Nothing / Partial

Fee: Free until launch, then $179/month + 3.5% PayPal or Credit Card Fees

Typical Investor: Consumer, Non-Accredited, & Accredited Investors

Search Engine Traffic: 5,600 visits/day from Google top 20 results

Dedicated exclusively to helping companies raise capital, Fundable is the business-friendly crowdfunding platform. Fundable offers two types of raise options: Rewards (like Kickstarter or Indiegogo) or equity. On their site, they recommend the reward-based campaigns for raises under $50,000 while anything more is not likely to receive funding without offering equity. One significant difference between project-based platforms and Fundable is the allowance of Accredited investors only on equity-based raises. You will only be receiving funds from qualified investors in this case and the investment amounts will be substantially higher than rewards-based investments (who is going to give you $5,000 for a t-shirt?).

Why Fundable:

  • Business-oriented platform with hands-on support
  • Larger capital raises are more likely
  • Less dilution than other sites
  • Investors on this site are looking to fund businesses
  • Split profile into public and proprietary sections to protect your business plan
  • Approve investors before allowing them to see your business plan
  • Equity raises are not All-or-Nothing – equity is granted upon funds received

Limitations:

  • Minimum investment amount of $1,000 for equity-based raises
  • All-or-nothing model for rewards based raises
  • Lower organic traffic making this site less popular for rewards-based raises
  • Transactions are handled outside of Fundable – you must go through the funding process with investors on your own, the “commitments” on-site are just that, commitments.

Fundable’s beginner guide to crowdfunding.


4. RocketHub

Meant for: All types

Type of Support: Pledge

Funding Model: Partial

Fee: 4% if All-or-Nothing / 8% if Partial + 4% Credit Card fees

Typical Investor: Consumers, Non-Accredited Investors, A&E Network

Search Engine Traffic: 11,800 visits/day from Google top 20 results

Rockethub partnered with A&E in 2013 for their series Project Startup granting them one advantage over other funding sites: reality TV. Aside from being a solid enough crowdfunding platform in itself, this partnership not only brings A&E’s funding to the table, but also their distribution. With a keep-it-all model, you will retain any and all funds obtained for their 4% fee (assuming you make your goal) or an 8% fee (if you don’t make your mark). The highlight doesn’t seem to be the projects on the site so much as the Project Startup series. If you are decent funding platform with low rates then Rockethub is a fine choice. If looking for a shot at instant fame, funding, and have a project with serious social appeal, then make Rockethub your choice.

Why RocketHub:

  • Potential for A&E to fund your project and for distribution on their Project Startup series
  • Rewards-based system, retain all rights and interest in company
  • Low fee from funds raised (if you make your raise goal)
  • Supports 4 categories: Art, Science, Business, and Social Good – effectively everything

Limitations:

  • Remember that you must consider the cost of rewarding your backers (with finished products or one-of-a-kind experience) in your funding regardless of raising your goal.
  • If you don’t have Intellectual Property rights and patents on your designs, there is nothing stopping anyone else from appropriating your ideas.
  • Low traffic for one that is not specifically business / investor-oriented
  • Seems to be primarily a feeder for their Project Startup series before a “crowd” funding site

Learn how to launch your project at the RocketHub Success School .


5. MicroVentures

Meant for: Business (typically technology related)

Type of Support: Equity

Funding Model: All-or-Nothing

Fee: 10%

Typical Investor: Accredited Only, Venture Capitalists

Search Engine Traffic: 350 visits/day from Google top 20 results

With a funding portfolio that includes Facebook, Twitter, and Yelp, MicroVentures is for the serious business endeavor. Designed to allow “micro” investments by accredited angel investors, MicroVentures is for businesses with 3 things: A unique idea or innovative spin, market traction, and an expert team that can execute. Similar to most crowdfunding sites, they will review every application but at MicroVentures, expect to be put through a gauntlet of probes to determine your business worth and potential.

MicroVentures’ is a registered broker/dealer and adheres to SEC/FINRA rules and regulations. This means that all transactions happen through their service and you can be sure of the legitimacy of the transactions. In addition to the equity exchange, there is also a 5% fee deducted from each party for a total of 10% of funds deducted from the sum.

Why MicroVentures:

  • Exclusive listings - 0.5% of companies that apply make it to active capital raises
  • Direct customer service line – call and see if their service is right for your business
  • $5,000 minimum investment for investors means better odds of funding from multiple sources
  • Site users are ALL accredited investors looking to fund businesses

Limitations:

  • Typical investments are in these categories: Software, Gaming, Social, Internet Technology, Media & Entertainment, and Green Technology
  • Do not expect altruistic investments, these investors are looking for ROI. If your business plan isn’t rock-solid, expect coal in your coffers.

Beginner’s guide to MicroVentures


6. Crowd Supply

Meant for: Retail Products

Type of Support: Pledge & Retail Orders

Funding Model: All-or-Nothing

Fee: 5% + 2.9% Credit Card Fee / 10% on pre-order campaigning

Typical Investor: Consumers & Non-Accredited

Search Engine Traffic: 4,700visits/day from Google top 20 results

Crowd supply offers an interesting set of services in addition to a typical All-or-Nothing crowdfunding model. If you have a retail product that you are looking to launch but haven’t the capital to make it happen, crowdfund the production and then take pre and retail orders through Crowd Supply. The location of the funding is a natural place to drive interest for the product itself, especially if it is successful. It makes logical sense to generate fulfillment orders when there is interest in and a location for ordering rather than having your product drop from the site, lost to consumers until you find distribution channels.

Why Crowd Supply:

  • If you have a retail product to launch, this is where they thrive
  • Pre-order funding can be accumulated on top of campaign funding
  • Packaging, warehousing, and fulfillment assistance
  • Continue to sell your product on-site after the campaign ends
  • Non-exclusive sales on their site, you retain the right to distribute elsewhere and with no perpetual royalties
  • Decent organic traffic
  • If your product’s manufacturing and distribution plans aren’t quite there yet, they will help get you on the right path (your success is their success)

Limitations:

  • Retail products only
  • More exclusive than Kickstarter and Indiegogo with only the more complete projects getting the green light
  • If you don’t have Intellectual Property rights and patents on your designs, there is nothing stopping anyone else from appropriating your ideas.

Find out how to launch your product with the Crowd Supply Campaign Checklist


7. CircleUp

Meant for: Established, Branded Retail

Type of Support: Equity

Funding Model: All-or-Nothing

Fee: One time $500 for ESCROW account + variable % of raised funds

Typical Investor: Accredited, Venture Capitalists

Search Engine Traffic: 350 visits/day from Google top 20 results

CircleUp allows your already successful business the opportunity to make the expansion you have always wanted. Focusing on tangible products such as retail goods, CircleUp’s clientele are those companies that are doing $500,000 in revenue, though they have a seed program for prospective companies with excellent leadership and a proven ability to succeed. The equity funding acquired through “circles” is distributed amongst backers who invest within this circle (hence the namesake). The “circle” acts as a broker who determines which companies to invest in based on your investment interests.

Why CircleUp:

  • Very likely to receive funding if selected to be listed
  • Only accredited, $1,000 minimum investments
  • Investors who select your company to finance have interest in it succeeding (and often expertise and connections that have value beyond their investment)
  • Can setup investment “reservations” where investors can declare interest in company before you take your campaign live
  • If investment target is not met, you are not held to the equity that would have been granted to the investors.
  • All-or-Nothing equity raise allows you to retain full ownership unless all funding goals are met.

Limitations:

  • Your company must be making significant financial headway already > $500,000 annually in revenue
  • Cannot make public announcements or market your listing to anyone but personally acquainted, accredited investors (this is a federal regulation)
  • Consider the circles, where one affiliate circle can represent a larger portion of the investment and thus, equity. Rather than 1,000 investors having .1% stock in the company, you may now have 3 investors (each representing 333 people) with 33% stake per investor.

Here is the CircleUp Fundraising FAQ section.


BONUS RESOURCE

IgnitionDeck – DIY WordPress Crowdfunding Platform

Meant for: All

Type of Support: Whatever you can legally accept

Funding Model: Choice

Fee: One time $79 - $349 for license

Typical Investor: Consumers & Non-Accredited

Search Engine Traffic: Based on your own traffic generation

IgnitionDeck is a set of WordPress Themes and Plug-ins that allow you to create and manage your own crowdfunding campaign, page, or platform. If you want to retain full funds from your campaign with no limitations on time frame or licensing, consider building it yourself! The irony of a do-it-yourself crowdfunding site aside, If you are tech-savvy and want a side project to help launch your other side projects, consider IgnitionDeck.

For a great example of a DIY crowdfunding site built on WordPress, see Peerbackers.com.

Why IgnitionDeck:

  • No Fees beyond the $349 license (though you do have to renew licenses for support and updates)
  • Customizable to the ends of your imagination
  • List anything you want to be crowdfunded
  • Host other peoples’ crowdfunding projects and make revenue on their raises

Limitations:

  • You must implement everything on your own – marketing, deliverability, terms of service, etc
  • Reputation is not established, you will need to assure of credibility and deliverability of the funded project.
  • No guarantees of legitimacy of investors
  • It will take a lot of time to implement

Here’s the IgnitionDeck Getting started guide which includes WordPress Links.

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