Did you know yearly, $17.2 billion funds are being raised through crowdfunding website / platforms in North America alone?
It’s bursting forth, and the entire crowdfunding industry is firmly predicted to reach $300 billion by 2030.
More than that, crowdfunding has become the primary source of finding pre-seed and seed capital for many startups and entrepreneurs.
Whether you are a small startup or an individual hustler, gathering funds for your initiative is the top priority. Entrepreneurs frequent top crowdfunding website or platforms to collect funds.
But, “is starting a crowdfunding platform a lucrative idea?” It could be the primary question that you may be struggling to find an answer for.
Besides, there might be various other questions scrolling through your minds, like “what is crowdfunding,” “how to create a crowdfunding platform,” and so much so forth.
So, if you’re looking to build a platform that fosters a dynamic economy of self-starters, learning how to start a crowdfunding website might just be your call. And, if all these things overwhelm you, let us decode your all unsolved questions through our comprehensive guide that helps not just to create a crowdfunding platform but also guides you through how to accumulate funds through it. But, let us explain you the basic first;
What is Crowdfunding All About?
Crowdfunding is a way to raise funds for specific causes — it could be raising funds for a company, project, or cause, such as tech or non-tech startups, non-profit organizations, or anyone with medical expenses, and others. For example, if you have an excellent idea, cause, or any beneficial project that requires massive capital investment, you can share those ideas with common using a crowdfunding platform. It will help you gather funds or raise small amounts of money from a large number of people (whosoever is interested will pay you).
How does Crowdfunding Work?
As in the diagram suggested, when people with an excellent idea or cause or urgent medical expense need funds. Such people (in need) start a crowdfunding campaign by placing their projects on a crowdfunding platform. They can even choose to create their own crowdsourcing platform and place a project to raise funds. The project includes a detailed project description with a business plan and photos (if needed). Now, the backers, who can be anyone —individuals or companies, have to decide if they should invest in the project or charity.
SEE ALSO: How To Raise Funds For Startup Business
Should You Create a Crowdfunding Platform?
Before going further around how to start crowdfunding, let’s begin with some worth knowing facts related to crowdfunding.
The facts given here will help you understand the nitty-gritty of crowdfunding and prepare a robust strategy for your crowdfunding campaign. Now, it is you who has to decide if you should start a crowdfunding platform. You may have heard about many crowdsourcing platforms, like Kickstarter, GoFundMe, LendingClub, Indiegogo, and many others performing well in their respective field. You can take inspiration from those platforms and make decisions.
Let’s explore the core elements of creating a crowdfunding platform that achieves success.
Before Starting a Crowdfunding Business, Find Target Audience
What kind of individuals are you looking to attract with your platform? Instead of starting a crowdfunding platform where anyone can run a campaign, choose your people. E.g., Patreon is a crowdfunding website that aids YouTubers, musicians, artists, and other creative people to raise money for their business.
If you want to appeal to all, find out the opportunity gap in the market. Individuals would rather run a campaign on a platform with like-minded people than choose a big player. Choose your niche.
Research Competitors/Study the Competitive Landscapes
Studying your competitors will help you decide a better niche. We focus more on this part because a crowdfunding platform’s success lies behind the right niche, and the right niche comes out of the market gap and fundraisers’ pain points.
You will come to know these after going through intense competitive analysis. Gather a list of top local, national and international crowdfunding platforms and study them to find how they make money out of their platforms.
Let’s explore some of the best examples of crowdfunding organizations from different countries and regions.
|Regions||Top Crowdfunding Platforms|
|North America/South America|
By going through these platforms, you will be able to think globally and act locally and understand how to start a crowdfunding company that performs better on all scales.
Let us make your task easy by sharing yet another research showing a market share of crowdfunding platforms.
Apart from these, there are plenty of other sectors that came into the limelight over the years to utilize the crowdsourcing platforms to raise funds. They are;
SEE ALSO: How to Create a Fantasy Sports Website?
Juggling with How to Create a Crowdfunding Platform? Choose a Right Business Model First
If you are looking to create a crowdfunding platform, you need to select the right crowdfunding business model. There are four main types of models.
Donation-based crowdfunding: Donation-based crowdfunding is called when a fund is raised for social or charitable purposes. Donors, in this case, give money without expectations to have it back. Such crowdfunding is used by non-profit organizations and NGOs, sometimes by individuals with specific causes, like medical expenses or others.
Reward-based crowdfunding: Pre-sale purchase is very much common today where backers, donors or investors, invest money in return for specific reward associated with the project they support. For example, many companies, especially innovation startups or product creators, come up with an idea or prototype.
Using crowdfunding platforms, businesses can either offer rewards for support or initiate pre-sales to raise funds. The funds raised will be used for product development.
The bottom line is, people donate or fund a new product line and may own that product in return (when fully developed or available). If you expect to get more compelling projects that profitably attract donors by convincing them that they will be rewarded in return, then creating a reward-based crowdfunding platform should be your call.
Peer-to-peer lending: Peer-to-peer lending is when an individual gets money from an investor or other individual without any middleman (bank or other financial institution) support. In other words, investors lend money expecting to gain interest in return.
Equity-based crowdfunding: If you want to start a crowdfunding business that provides benefits to donors or investors, then equity-based crowdfunding can be the preferable choice. In this, the platform allows ordinary individuals to become a part of commercial enterprises by asking them to invest in the venture. Those who support the commercial venture become a part of it as the owner of securities. That means the investors who invest through your platform also become stakeholders in the company.
SEE ALSO: Starting A FinTech Company
Right Revenue Models Give Way to Start a Crowdfunding Business
Once you’ve decided on a model, you’ll need a way to monetize these campaigns on your platform. You can either charge a fee from the collected funds or have campaign runners subscribe to your platform at a monthly fee. You can also lend your space for paid advertising or charge a fee for every campaign run on your platform. In short, there are plenty of ways to implement monetization for your crowdfunding platform. Let’s explore some of the top revenue models;
Commission-based, aka success-based revenue models, are widely popular, and most crowdfunding businesses use this model for revenue generation. As a crowdfunding platform, you will receive a percentage of the amount raised. In some cases, the investors will be liable for the percentage only after a required or necessary amount of money or goal is raised or achieved.
Take an example of Kickstarter that takes 5% commission for each achieved goal from fundraisers. However, to make this revenue model successful, you need to ensure that you get a constant flow of investors and fundraisers with quality projects.
You can also initiate membership revenue models by allowing fundraisers or campaign runners to subscribe to your platform at a monthly fee. In return, the subscribers or fundraisers can utilize your platform to run crowdfunding campaigns. You can take the example of Fundable that charges a sum of $179 per month from subscribers. Besides, the Patreon app is another membership platform that allows creators to build their own fanbase and get paid for the value they deliver. They pay the platform a sum of money they get.
Paid services and features on the website
As a crowdfunding platform, you may choose to support campaign runners in campaign management, create a prototype, and publish video advertising, branding with appealing messages and more. In return, the fundraisers will pay the platform for support. You can see many examples online when crowdfunding platforms support people for their cause and ideas. In this case, campaign runners come up with ideas and the rest of the things will be managed by the crowdfunding platforms.
Advertisements and promotions
If you have a good number of subscribers, then you can implement advertising or promotion-based revenue models. You can also allow fundraisers to use your platform to promote their campaigns, and in return, you will get a certain amount of money as fees.
Build your crowdfunding platform
Now that your plan for how to create a crowdfunding platform is ready, it’s time to get to the technical bits – build your platform. There are various ways you can go about creating your crowdfunding website.
You can choose a CMS like WordPress or choose a white-label platform. They consume less time and are quick-to-launch, but come with significant drawbacks – no customization, unfit technology stack, pre-made features, might not fit well with your use case.
However, if you choose to create a crowdfunding platform from the ground up, you get the freedom to personalize it as you wish to. Our experienced team of web and mobile app developers can help you create your crowdfunding platform just the way you want, all from scratch. Using the right crowdfunding design technique and development framework that aligns with your use case, your crowdfunding project will be ready in no time.
Get updates of the latest tech news
Register with your email ID to get the first bite of the most trending news.
Although slackened during the pandemic, the vibrant startup culture is set to boom in the coming years. Consequently, the need for credible and open source crowdfunding platforms would be on the rise.
If you are new to crowdfunding, you need to take steps wisely —a single wrong step can mend your initiative. Please don’t shy away from an expert’s help to brainstorm your ideas and plan to execute them flawlessly. You can also take our expert assistance for a comprehensive guide.
We can help you from ideation, planning to implementation (designing, development, and deployment) —all at a reduced cost to build a robust crowdfunding for business startups. Get in touch with us now to know more.
FAQs for How to Start a Crowdfunding Website
Besides, you can refer to this article again to get comprehensive ideas for how to create a crowdfunding platform. This article answers your question in detail.
Depending on the prototyping and business plan, you will start getting funds for your initiative. However, the funds for your business will depend on how compelling your business idea is.
You can make money with your crowdfunding platform by implementing the right engagement models. For example, based on your crowdfunding platform niche, you can choose the engagement model from a range of options, such as Commission/Success fee model, Membership fee, Paid services and features on the website model, Advertisements & promotions, and so forth.
It may cost you from anywhere between $8000 to $15,000 for a web platform.
Besides, if you are looking for an exact estimation, then it’s not possible to say unless we go through your project requirements. In fact, nobody can tell you the right estimation without knowing your requirements.
The cost to develop a crowdfunding website depends on various factors, such as the business niche, technology stacks, web development company, and regions. For example, if you choose to develop your projects in the USA, UK, Canada, or other European countries, then developing a crowdfunding website will bang on your bank. However, for the same project, if you choose a crowdfunding website development company in South Asian countries like India, then you will get your project developed at significantly less cost.