8 Crowdfunding Sites to Help Fund Your Business
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What Are Crowdfunding Sites?
What Are the Different Types of Crowdfunding?
Donation-Based Crowdfunding: People give money to a person, company, or campaign without receiving anything in return. For example, if someone needs an expensive piece of equipment for their new startup, they might ask for donations to help them make that purchase. Peer-to-Peer Lending or Debt-Based Crowdfunding: Backers pledge money as a loan to help a company or campaign get off the ground. The loan accrues interest and has to be repaid within a set period of time. Reward-Based Crowdfunding: Donors receive something in return for their donations. That can range from a discounted product or service to a branded perk like a t-shirt, coffee mug, etc. Equity-Based Crowdfunding: Startups or small businesses give away equity or shares of their company in exchange for investment funding from backers. Usually, the more the backers give, the more shares they receive.
What Are the Benefits to Using Crowdfunding?
Access to non-traditional funding. Entrepreneurs and small business owners can qualify for funds outside the standard sources and avoid the rigid requirements that accompany them. A more efficient way to raise funds. Especially with some of the more popular crowdfunding platforms, it can be easy to tell your startup’s story, feature compelling media and messaging, offer incentives and rewards and have a one-stop-shop for potential backers to find you. A built-in brain trust. Customers (and backers) are only ever a click or two away. This gives you the chance to call on them for feedback and ideas and field their questions, concerns, and complaints. This continuous communication loop creates a built-in brain trust. Added marketing and media exposure. The more popular the crowdfunding platform, the more eyes on your campaign, the higher the potential for press coverage and building brand awareness. This can be a great way to reach backers outside your existing network.
What Are Sites for Crowdfunding?
Massive marketplace with many users High visibility, exposure, and familiarity as a platform Transparent, all-or-nothing funding Exclusive service providers Subscription-based model A massive marketplace means massive competition You can’t keep your funds if you don’t reach your crowdfunding goal Subpar customer service More creative-minded than business-minded Rules and restrictions on how to launch a product or project
Campaign creators can continue to raise money after a successful fundraiser The earliest backers get limited-time perks and pricing Two types of funding options: all-or-nothing or keep-what-you-raise Diverse range of categories you can create campaigns for — from Tech & Innovation to Film, Theater, Comics, Charity, Personal Causes and more Less visibility than bigger-name sites like Kickstarter Campaigners must personally ship out perks and rewards to backers who claim them A 5% fee per standard crowdfunding campaign plus payment processing fees of 3%+$0.20
Minimum investments for backers as low as $500 Accepts non-accredited investors Doesn’t involve any ongoing fees Its Auto-Invest feature helps investors easily build a diversified portfolio Charges a 2% processing fee (up to $300 max) per investment, although it’s returned if the company doesn’t reach its fundraising goal Investments are risky and highly illiquid
Free to use Entrepreneurs have the idea, Quirky creates the product Easy idea-submission form and process Great platform for inventors and “fixers” who see everyday challenges and offer solutions The process for inventors getting paid is overly involved If an inventor’s idea is rejected, there isn’t always an opportunity to refine it Quirky retains the rights to the inventor’s intellectual property It can alter royalty payment amounts “for any reason”
Created by startup founders who can relate on a personal level A hands-on approach from staff during every step of the process Offers both reward-based and equity-based crowdfunding Minimal fees for successful campaigns Campaigns are prescreened, which benefits backers Entrepreneurs don’t get funds if they don’t reach their funding goal Flat monthly fees can get costly for unsuccessful campaigners Campaigns are prescreened before they get approval, which hurts pitching companies
An emphasis on diversity, inclusion, and holding people accountable A quality marketplace with access to over 800 investors, 50% of which are institutions A separate $125 million Growth Partners Fund, which uses its Helio software to identify startups that deserve investment Fee structure is vague, and it varies Investors must be accredited Only 7% of startups are approved to raise money on its website Campaigns have fundraising minimums and maximums
The minimum credit score to apply for a loan is 600 — a pro for subprime borrowers No hard credit inquiry is required to check loan rates on the site, which means less credit score damage while you’re shopping around for a loan Borrowers can stretch the loan repayment terms to three years or even five years There’s a medley of fees for borrowers, like a $7 fee if you pay by check, a $15 low balance fee, and a 5% late fee It can take up to seven days for LendingClub to actually turn the money around and get it into the borrower’s account LendingClub charges an origination fee, which is a payment associated with the establishment of an account with them.
Helps creators crowdfund continuously Offers rewards-based crowdfunding opportunities and multiple subscription plans Keeps it light on the restrictions in comparison to other crowdfunders There can be snags in collecting funds for creators There aren’t any built-in promotional tools Many people have complained publicly about the platform
Alternatives to Crowdfunding for Your Business
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