Every Fortune 500 company once started with just an idea, though it takes tons of endeavor to change that idea into a prosperous business.

Many business ideas do not materialize due to the shortage of funds. However, various crowdfunding platforms assist millions of entrepreneurs in making their dreams come true.

Funding a business idea can be challenging. Money does not come easy as you believe it will, and loans to start your entrepreneurial journey have requirements such as minimum credit score and collateral. Crowdfunding for business is popular among aspiring and skilled entrepreneurs.

This blog will discuss crowdfunding, its market, types of crowdfunding, and much more.

So, let’s dive in.

Table Of Contents

What is Crowdfunding?

Crowdfunding means when many people fund a project. It is a platform where people raise funds for a particular cause that they think is encouraging.

Users’ donations may be little, but with a good campaign, they can assist you in scaling your startup into a booming business quicker than you envision.

The projects can quickly begin by obtaining the required money. Most campaigns occur on crowdfunding platforms with predefined deadlines to raise funds and reveal remarkable financial objectives.

Crowdfunding today is a prospering industry, and a leading web and mobile app development company can help entrepreneurs and businesses to build a robust crowdfunding platform.

Crowdfunding Platform: Market Overview

Let’s know some of the significant stats on the global crowdfunding market. It is challenging to estimate the overall size of the crowdfunding market accurately as it depends on various aspects like the worldwide volume of transactions, equities earned and their unstable value on the market, donations, indirect contributions, etc.

  • According to Statista, the transaction amount in the Crowdfunding sector is predicted to reach 1.15 billion US dollars in 2022.
  • The transaction amount is expected to grow at a CAGR of 2%, resulting in 1.22 billion US dollars by 2026.
  • As per Fundly, the worldwide amount raised by Crowdfunding platforms is $34 billion, and 17% of crowdfunding donations are made on mobile devices.

Types of Crowdfunding

Equity Crowdfunding

Equity crowdfunding is a way of raising capital online from investors to finance a business. In return for money, investors receive equity ownership in the company. Every investor is authorized to a stake in the business proportional to their investment.

Popular Equity-based Crowdfunding Examples

  • Fundable
  • Republic

Donation Crowdfunding

Donation-based crowdfunding is when individuals give a campaign, business, or person money to support personal or social causes with no financial returns for the contributors.

Popular Donation-based Crowdfunding Examples

  • GoFundMe
  • RocketHub

Reward Crowdfunding

In Rewards-based crowdfunding, individuals donate to a startup or a crowdfunding idea with the expectation of accepting a non-financial reward in return, like goods or services, T-shirts, etc. Rewards crowdfunding varies by the size of the funding based on how much contribution participants provide to a campaign.

Popular Rewards-based Crowdfunding Examples

  • Kickstarter
  • Indiegogo

Peer-to-Peer Lending

Peer-to-Peer (P2P) lending permits individuals to receive loans directly from other people, eliminating the financial organization as the middleman. The money pledged by supporters is a loan and must be refunded at an agreed interest rate by a specific deadline.

Popular Rewards-based Crowdfunding Examples

  • Lending Club
  • Prosper

Real Estate Crowdfunding

In business, real estate crowdfunding presents people with prospects to invest in real estate projects. It is particularly beneficial for people interested in real estate investing but does not want to deal with contractors, mortgage brokers, or real estate agents.

Popular Rewards-based Crowdfunding Examples

  • CrowdStreet
  • DiversyFund

Human Capital Crowdfunding

It is a method for individuals to raise money to support their personal development or projects. Investors are offered the chance to fund a project in exchange for a percentage of the winning amount.

For example, various sports players crowdfund money to play and then allocate a share of their winnings back to investors.

Profit-sharing / Revenue-sharing Crowdfunding

Profit-sharing or revenue-sharing is a fundraising mechanism that delivers lenders recurring payments based on the business’s financial results. Enterprises can give a percentage of sales revenue or a share of pre-determined net profit from their business quarterly or annually.

Most Popular Crowdfunding Platforms in-2022

Kickstarter

  • Founders: Perry Chen, Yancey Strickler, Charles Adler
  • Headquarters: Brooklyn, New York
  • Platform Fee: 5% of total funds raised
  • Model: Reward-based

Kickstarter is a major crowdfunding platform. It is a rewards-based donation platform that has been assisting enterprises in raising money since April 28, 2009. A platform like Kickstarter is ideal for startups, SMEs, designers, techies, artists, musicians, filmmakers, etc.

According to Kickstarter’s official website, they have raised more than $6.5 billion with more than 220,083 successfully funded projects till now.

Successful Kickstarter campaign:

  • Four Secret Novels by Brandon Sanderson (2022) — $22 Million; Ongoing.

GoFundMe

  • Founders: Brad Damphousse, Andrew Ballester
  • Headquarters: Redwood, California
  • Platform Fee: 5% of donations, and payment processors take 2.9%
  • Model: Donation-based

Founded on May 10, 2010, GoFundMe is a donation-based crowdfunding platform. It is ideal for charitable initiatives, startups, service-based causes, artists, designers, etc. Moreover, enterprises can also take advantage of the platform. Since its inception, GoFundMe has been liable for generating more than $5 billion for various projects.

Successful GoFundMe campaign:

  • Time’s Up Legal Defense Fund- $22 million

Indiegogo

  • Founders: Slava Rubin, Danae Ringelmann, Eric Schell
  • Headquarters: San Francisco, California
  • Platform Fee: 5% of total funds raised and 3% to 5% third-party processing fee.
  • Model: Reward-based

Established in January 2008, Indiegogo is a reward-based platform that delivers two kinds of funding.

Fixed funding authorizes you to set a goal for a specific amount of money, and if you do not reach your target, all funds are returned to donors.

Another one is flexible funding; it is when you are searching for any amount of monetary help, all of which you can keep whether you hit your goal or not. It is ideal for small-scale businesses, service-based causes, techies, startups, and service-based causes.

Successful Indiegogo campaign:

  • MATE X: Raised almost $17.6 million

RocketHub

  • Founders: Brian Meece, Jed Cohen, Alon Hillel-Tuch, and Vladimir Vukicevic
  • Headquarters: New York City
  • Platform Fee: 4% of total funds raised and 4% transaction fee
  • Model: Donation-based

Launched in January 2012, RocketHub is a global crowdfunding platform for startups. This business crowdfunding platform is ideal for SMEs, scientists, startups, artists, social projects, etc.

You can develop an interest for your backers by pitching your idea, which brings more feedback on your project alongside extra funding.

Successful RocketHub campaign:

  • Clean the World- $12,034

MightyCause

  • Founders: Tom Matthews
  • Headquarters: Alexandria, Virginia, USA
  • Platform Charges: 2.9% and $0.30 card processing fee
  • Model: Donation-based

Launched in 2006, MightyCause (earlier known as Razoo) crowdfunding platform is not aimed much toward for-profit making business funding as it is all meant for helping deserving causes. It is ideal for nonprofit organizations, social causes, engrossing donors with online fundraising, etc.

It has successfully generated more than $600 million for addressing real causes. From multi-million dollar companies to individuals, donations are gathered for those in need.

Must-Have Features For Your Crowdfunding Platform

Fundraiser Panel

  • Sign up and sign in
  • See the ideas
  • Fund the ideas
  • Payment management
  • Chat or Audio call feature
  • Present feedback
  • Auto-Investments
  • Loyalty points & referrals

Admin Panel

  • Admin login panel
  • User profile management
  • Ads management
  • Premium and subscription model
  • Revenue management
  • Verify the account of users
  • Help & support
  • Manage the feedback

Steps For Crowdfunding Platform Development

Discovery Services:

In the discovery phase, the crowdfunding platform development firm and customer work jointly to collect appropriate and needed information to create an excellent user experience. Discovery services include the following aspects:

  • Validating the Idea: Entrepreneurs or business owners can quickly validate your crowdfunding idea. The procedure starts with documentation of your vision, ideation, market research, wireframing, and concluding the technical infrastructure.
  • Building an MVP: Building an MVP of your crowdfunding platform can assist you in understanding the real-time feedback of the market without investing significant funds at risk. Minimum viable product (MVP) comprises the main features of a product. You can build the platform in less budget and time than a fully-fledged version. You can consult an MVP development company to assist you in making an MVP for your crowdfunding platform.
  • Create a Detailed Budget Plan: A complete estimation of crowdfunding website and app development costs should cover all essential process elements. The best method to create a sophisticated budget plan is to list the entire prerequisites and take the assistance of a mobile and website development company to help you with their experience in providing the most precise cost estimation.

Design

The design has multiple segments that work together to improve the experience of your website and mobile application. The UI/UX developers will assist you with the design, including graphic design, interface design, etc. These components decide how your crowdfunding app and website look, feels and works on different devices.

Deployment

The deployment of a crowdfunding platform consists of two segments:

Website Deployment: In this procedure, web developers deploy the code (HTML, CSS, javascript, and server code) from source control to a hosting platform and publish it to the internet.

App Deployment: A mobile app development company will use the following steps to deploy your crowdfunding app to various stores-

  • Build your developer account
  • Link your merchant account
  • Build a crowdfunding app
  • Prepare store listing
  • Upload an APK file for Android and .ipa file for iOS
  • Set up pricing and distribution
  • Release the app to stores

Testing

After completing the deployment of the platform module, it is time for website and mobile app testing to find bugs and glitches that might hamper the platform’s performance.

Support and Maintenance

The web and mobile app development company ensures the platform functionality stays intact through maintenance services. Thus, they keep on working for additional improvements and the inclusion of new features.

How Do Crowdfunding Platforms Make Money?

Crowdfunding in business makes money through platform fees and the type of campaigns fundraisers choose.

Platform Fees: Platform fees are the primary method for crowdfunding platforms to make money. There are two kinds of fundraisers:

All or Nothing Campaigns: In this, startups, entrepreneurs, or individuals must reach the goal they set to keep the funds that they raised. Usually, the platform takes 5% of funds raised if the campaign is successful.

Keep What You Raise Campaigns: You can keep the number of funds raised by the campaign, even if you have not achieved your goal at the end of your fundraising time. Platforms typically will charge a total fee of 8-10%.

Most crowdfunding platforms also charge a payment processing fee, which averages around 3%; however, it varies from platform to platform.

So, if you are a business owner looking to build a crowdfunding website, you can take the assistance of a reliable crowdfunding platform development company.

How Could Blockchain Help Crowdfunding Platforms?

There are multiple areas where Blockchain could help and improve the crowdfunding platforms using Blockchain technology. It will assist in eliminating the requirement for intermediaries or third parties.

Decentralization

Since Blockchain is decentralized, the decision-making capability will transfer from a centralized entity to a distributed network. The crowdfunding platform will become more transparent, and the project can get maximum visibility.

Also Read: Complete Guide On DeFi App Development

Equity Access

To deliver investors equity or ownership, Blockchain could depend on asset tokenization. For instance, for an individual who intends to build numerous new products with the incoming funds and give a small equity stake in the company.

Versatile Opportunity

Any project that uses a Blockchain-based crowdfunding model can get financed. Any individual with an internet connection can donate to projects.

Adaptable Choices

Using Blockchain as asset tokens give makers and entrepreneurs more freedom. Asset tokens have their currency to help companies to hire specialists and advertisers.

You can hire a Blockchain development company to build an engaging and secured crowdfunding platform for scalability.

How Much Does It Cost To Build a Crowdfunding Platform?

The precise cost relies on various development factors, some of which contain the complexity of the business model, elements, functionalities, and the experience of the web development company.

Crowdfunding development solutions providers influence the cost by the team type you choose.

Cost to Create a Crowdfunding Website

There are various methods to hire a crowdfunding platform development firm as an entrepreneur. Some of your options comprise an in-house team, freelancers, or outsourcing.

To provide you with an idea of a required budget:

Type Average Cost
In-house team $180,000
Outsourcing company $60,000
Freelancers $45,000
Local development firm $225,000

To sum up, a typical crowdfunding website will cost approximately $60,000 to $230,000.

Cost to Create a Crowdfunding App

The cost of creating a Crowdfunding app relies on your business model, needs, and other factors. The factor on which the cost of a crowdfunding app depends is

  • The application design and development.
  • Basic features
  • The advanced features of the crowdfunding app
  • The platform used (Android or IOS)
  • The intricacy of the app
  • Mobile developer’s experience

Thus, it is challenging to provide an exact estimation of a Crowdfunding app. However, the approximate cost of creating a crowdfunding app ranges from $50,000 to $80,000.

Wrapping Up

Crowdfunding platforms connect startups, enterprises, individuals, and nonprofit organizations requiring funds for their ideas. Crowdfunding provides hassle-free access to critical funding to launch new businesses.

Building a crowdfunding platform is an outstanding opportunity for business owners to be leaders in this niche. The essential aspect of success in your crowdfunding platform development process is selecting a reliable crowdfunding platform development firm.

You should seek crowdfunding platform services with the required skills, knowledge, and experience in building an advanced crowdsourcing platform. At Sparx IT Solutions, we comprehend the complexity of building a large-scale crowdfunding platform. We have proficient web and mobile app developers having years of expertise in making an engaging and intuitive crowdfunding platform.

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