Each year, crowdfunding platforms generate $17.2 billion in investments in North America alone—proof that crowdfunding is a popular and worthwhile business venture. Its popularity lies in its ability to enable entrepreneurs and small businesses to raise money while giving investors a chance to bring projects to life.
Creating a successful crowdfunding site can be an excellent opportunity for emerging entrepreneurs looking to deepen their foothold in the investment sphere. This article explains how to get started with creating a crowdfunding site.
What Is a Crowdfunding Platform?
A crowdfunding platform enables businesses to present their products and services to the public for investment consideration. People can invest in projects they like, usually in exchange for equity or a gift (i.e., a “reward”).
How Have Crowdfunding Platforms Changed Investing?
Most crowdfunding platforms, such as Kickstarter, allow users to invest as little as $1. This opens up the industry to anyone who’s interested, allowing individuals and private companies to pool and manage resources without government funds or traditional business loans.
This format has opened new possibilities for small businesses and entrepreneurs. Successfully funded projects have an immediate audience and customer base for future projects, which sets up independent businesses for success.
Popular Crowdfunding Platforms
Since its inception in 2009, over 550,000 projects have been created on Kickstarter—with a success rate of 40%!
Kickstarter provides a venue where businesses can create web pages advertising their projects, and provide regular updates to their investors, called “backers,” via integrated project blogs.
Once a user finds a product they like, they can back the project in return for rewards. The businesses define the backing levels and rewards for their projects. Some businesses offer digital rewards, while others offer physical rewards. Backers also have the option to invest without asking for anything in return.
GoFundMe was founded in 2010. Since then, the platform has raised over $15 billion for humanitarian causes and events. The platform is open to the public for individual fundraising, but it also lets users raise money for their favorite registered charities. Fundraising projects on GoFundMe range from cancer treatments to graduation parties.
Unlike Kickstarter, GoFundMe is a crowdfunding site made specifically for charitable donations. GoFundMe is aimed at goodwill gestures, so users don’t typically receive rewards for backing a GoFundMe page.
Founded in 2007, IndieGoGo is the oldest crowdfunding platform on this list. It targets entrepreneurs, with the average successful project generating over $41,000—the highest of all crowdfunding platforms. This makes it an excellent crowdfunding platform for technical projects and projects requiring extensive resources.
Where Kickstarter offers investors rewards, IndieGoGo has a “perk” system, which is essentially the same. The primary difference between Kickstarter and IndieGoGo is that the latter offers more customization options on its project pages.
Key Features of Crowdfunding Websites
If you’re thinking about starting a crowdfunding platform, there are some vital features and considerations you should consider beforehand.
Campaign Management Portals
All good crowdfunding platforms need a solid campaign management portal that allows users to create, customize, and monitor projects. For example, Kickstarter allows users to add videos, photos, and text-based content as well as an integrated blog. Together, these tools enable users to create unique campaigns that are well-positioned for search engine optimization (SEO).
Crowdfunding platforms only work if investors can easily find new and suitable projects. Kickstarter allows users to browse projects by category, which helps investors find projects they’re genuinely interested in. Most sites also include a search feature.
Multiple Payment Gateways
Your platform should offer multiple payment options, including PayPal, Visa, and Mastercard. Offering several payment gateways instills trust and makes users more likely to invest in projects without fear of security issues.
Crowdfunding platforms have two sides—investor and project owner. Just as project owners need a campaign-management portal, investors need a way to access their personal information and investment portfolios.
Successful Crowdfunding Campaign Stories
America’s Food Fund
Leonardo DeCaprio led America’s Food Fund, which raised over $45 million and is the largest GoFundMe campaign to date. This success shows the power of crowdfunding platforms and their ability to unite celebrities, corporations, and the general public in support of a common goal.
Surprise! Four Secret Novels
A little ingenuity can go a long way. Instead of publishing his books through the traditional channels, Brandon Sanderson elected to publish four novels throughout 2023, giving Kickstarter backers pledge-based access to different versions. The project smashed its $1 million goal, ending at over $41 million, making it one of the platform’s most-backed projects.
Surprise! Four Secret Novels by Sanderson is an excellent example of crowdfunding’s powerful ability to fund projects even outside the tech sphere.
Flow Hive broke IndieGoGo records when its campaign reached over $2 million despite an initial goal of $70,000. Since then, the company has gone on to win multiple awards and run a successful business in the beekeeping industry.
Flow Hive’s success on IndieGoGo shows crowdfunding’s versatility. Investors and everyday people don’t typically fund niché projects like this, but it happened—thanks to IndieGoGo!
Where to Start When Developing Your Own Crowdfunding Platform
Choosing The Right Business Model
There are four main crowdfunding business models. The one you choose will determine how your platform should function and what features you’ll need to offer.
- With donation-based crowdfunding, users make a good-willed investment in a project, cause, or event without expecting remuneration.
- In reward-based crowdfunding, investors receive a product or gift in return for their investment.
- Debt-based crowdfunding is similar to traditional investments in which investors receive interest on their money in return for loaning the funds.
- As the name suggests, investors in equity-based crowdfunding receive business equity in return for their cash.
Hire an Expert Web Developer
Crowdfunding websites are technically complex, requiring an understanding of robust front- and back-end technologies, such as Vue and Django, as well as third-party API integrations for payment processing. Unless you have expert knowledge of web development, you’ll need to hire a professional web development agency to help you. At Idea Maker, we’re specialists in all of these areas. Not all developers can say the same.
There are many factors to consider when hiring a developer. Here are a few to get you started. (For a more detailed breakdown of hiring a web-development company, check out Idea Maker’s extensive guide.)
Portfolio and Experience
One of the most crucial steps in vetting a development company is examining its portfolio to see which industries they’ve worked with. For example, if they haven’t done any projects in the finance or SaaS industries, they’re unlikely to be the best choice to develop a crowdfunding platform.
However, if their unrelated developments function properly and feature extensive use of complex technologies, it might still be worth inquiring. You can always ask to see more examples of their work to better understand their expertise.
Clearly Defined Development Process
A development process outlines the order in which a website is built, from conceptualization to deployment. It should also indicate where your input will be required, and create transparency between you and the development team.
The best agencies will readily feature a clearly outlined development process on their website. If you don’t see one, contact them and ask for an overview of their development procedure. If they can’t provide one, the company is probably disorganized and not a reliable choice for intricate development projects.
Post-Release Support Options
Once your crowdfunding platform is built, it will need regular maintenance to keep it bug-free and running smoothly. Therefore, it’s important to hire a development agency that offers dependable post-release support. Many companies claim to provide post-release support but fail to deliver when required.
To ascertain whether a development agency provides genuine support, revisit their portfolio. If their previous projects work correctly, they probably have solid maintenance packages. Otherwise, it’s best to steer clear.
How Do Crowdfunding Sites Make Money?
Once your crowdfunding platform is up and running, you’ll need to generate an income to keep it maintained. The most common way to do this is to charge a commission on successfully funded projects. Most major crowdfunding platforms use this method of revenue generation.
For example, Kickstarter allows people to use its service free of charge—they can set up and manage projects without spending a dime. However, if a project meets its funding goal, Kickstarter takes a fee as a percentage of the total earnings. This is an attractive financial model for businesses because it incentivizes Kickstarter to promote all projects.
Risks Involved with Crowdfunding Campaigns
Order Fulfillment and Guarantees
If a project is fully funded and the business fails to deliver the promised rewards to backers, the business could be sued. In this case, your crowdfunding site would likely come into the crosshairs too. Kickstarter attempts to address this issue by placing the following disclaimer on all campaigns: “Rewards aren’t guaranteed, but creators must update backers.”
Data Vulnerability and GDPR
Your crowdfunding website will deal with sensitive financial and personal data, such as addresses and bank account numbers, so you’ll have to establish a procedure for destroying data after six years. This requirement is outlined by the Global Data Protection Regulation (GDPR), an active piece of international legislation in Europe. Even as a US-based company, if your website deals with European data, you must adhere to GDPR guidelines.
Now You’re Ready to Build a Crowdfunding Platform
After reading this guide, you should be ready to build your crowdfunding platform. This article covered the following:
- What is a crowdfunding site?
- How have crowdfunding platforms changed investments?
- Popular crowdfunding platforms
- Key features of crowdfunding websites
- Successful crowdfunding campaign stories
- Where to start when developing your own crowdfunding platform
Crowdfunding Website Development from Idea Maker
If you’re looking to build a crowdfunding platform but lack the required technical expertise, consider hiring Idea Maker. Our team of dedicated professionals is ready to build an exceptional crowdfunding site to your specifications. Schedule a free consultation today to learn more!