Understanding Crowd Financing and Its Popular Platforms

Crowd financing is a way for individuals to invest in projects or businesses by pooling their funds together. It's a form of alternative finance that has gained popularity in recent years.

One of the key benefits of crowd financing is that it allows entrepreneurs to raise funds from a large number of people, often with lower minimum investment requirements. This can be especially helpful for startups or small businesses that may not have access to traditional funding sources.

Crowd financing platforms have made it easier for people to participate in this type of investing. According to an article, Kickstarter was one of the first major platforms to popularize crowd financing.

Crowdfunding is a way to raise small amounts of money from a large number of individuals to finance a new business venture.

It leverages social media and crowdfunding websites to connect investors and entrepreneurs, expanding the pool of investors beyond traditional circles.

The 2008 financial crisis led to the rise of crowdfunding, as banks enforced stricter lending policies post-recession, making it harder for small businesses to secure credit.

In response, many small businesses turned to alternative funding methods, including crowdfunding.

The global crowdfunding market volume was estimated at $1.17 billion in 2023, showing a slight increase from previous years.

The transaction value of the global crowdfunding sector is expected to grow by 1.48% annually from 2024 to 2028.

Crowdfunding is a great way to find funding for your business idea and get the word out about your product or service.

You can reach a broader group of potential investors through crowdfunding.

It often starts with sharing your request for funding with family and friends via social networks.

Unlike a business loan, crowdfunding doesn't involve raising funds for your business through debt financing.

With crowdfunding, there is no loan obligation or a need to pay back the funds.

Crowdfunding platforms and websites have become increasingly popular, offering a unique way for individuals and businesses to raise funds. Kickstarter, Indiegogo, and GoFundMe are some of the most well-known platforms, attracting hundreds of thousands of people hoping to create or support the next big thing.

Kickstarter is a reward-based platform for creative concepts, while Indiegogo is geared toward elevating technology projects. Patreon is an ongoing crowdfunding host where creatives and content creators can build committed memberships of supporters.

Here are some popular crowdfunding platforms for businesses:

StartEngine is one of the largest equity crowdfunding platforms in the U.S., claiming to have raised over $500 million for over 500 company offerings since its founding in 2014.

Kickstarter is a popular reward-based platform for creative concepts, where small businesses can raise money for projects like innovative small appliances or independent films. Kickstarter is geared towards creative projects.

Indiegogo is another crowdfunding site, focused on elevating technology projects. Past campaigns have included hovering cameras and e-bike accessories. Indiegogo is a great option for tech-savvy investors.

Patreon is an ongoing crowdfunding host, where creatives and content creators can build committed memberships of supporters. These supporters pay a monthly subscription fee in exchange for exclusive content and access to their favorite creators. Patreon is perfect for fans who want to support their favorite artists.

GoFundMe is a popular crowdfunding platform that attracts hundreds of thousands of people hoping to create, or support, the next big thing. GoFundMe is a great option for personal or business projects.

Here are some popular crowdfunding websites:

Fundrise is one of the most popular real estate crowdfunding platforms, opening the doors for everyday investors to participate in this asset class.

Investors can profit from Fundrise in two ways: dividends and appreciation, with dividends being regular payments from rental income or other property earnings.

You can get started with Fundrise for as little as $10 in cash or $1,000 if you go through an individual retirement account.

One of the benefits of Fundrise is its low minimum investment and user-friendly platform, making it easy for anyone to get started.

However, it's essential to recognize that your money can be locked in for several years, which might not be suitable for all investors.

Fundrise charges investors multiple fees, including a 0.15 percent advisory fee and a 0.85 percent annual management fee for real estate funds.

Here are some key pros and cons of investing with Fundrise:

Crowdfunding is a powerful way for businesses to raise funds from a large number of people, often with small contributions. You can choose from various platforms, such as Kickstarter, Indiegogo, and SeedInvest, each with its own focus and features.

To get started, you'll need to pick a crowdfunding platform that fits your business needs. Some platforms, like Kickstarter, are geared towards creative projects, while others, like SeedInvest, are designed for startups looking to gain traction and funds. You can also consider platforms like Fundable, which offers both rewards- and equity-based funding.

Once you've chosen a platform, you'll need to create a business profile and set a funding goal. Some platforms, like Fundable, allow you to keep the funds you raise even if you don't reach your goal, while others don't. You'll also need to pay a fee for using the platform, which can be a percentage of the funds raised or a monthly fee.

Business credit cards can be another option for startup funding, offering a revolving line of credit that can be used for current and future business expenses. They can also help build your business credit, making you more appealing to future lenders.

Crowdfunding can be a great way to raise funds for a business, but it's not without its risks. You'll need to be prepared to market your campaign and engage with potential investors to reach your funding goal. You'll also need to be transparent about your business and its plans for the funds raised.

Here are some popular crowdfunding platforms for businesses:

Keep in mind that crowdfunding is not a one-size-fits-all solution, and you'll need to choose the right platform and strategy for your business. With careful planning and execution, however, crowdfunding can be a powerful tool for raising funds and building your business.

Crowd-sourced funding is a viable option for start-ups and small businesses, but it's not the only way to raise funds. There are alternatives to crowdfunding, such as grants and loans, that can provide the necessary capital for a business to grow.

Business lines of credit and loans are also available, offering a revolving line of credit or a lump sum to give a business an instant boost in cash flow. Some lenders may require a few months in operation to qualify for a startup business loan.

If you're looking for alternative funding options, consider the following:

Crowdfunding is a great option for businesses because it doesn't use credit history. This is a big advantage, especially for startups or entrepreneurs with limited credit history.

You won't have to worry about your credit score affecting your ability to crowdfund. However, your business's reputation is on the line, so you'll want to make sure you can deliver on your promises.

Crowdfunding platforms won't check your credit history, but they will check your business's reputation. This is why it's essential to have a solid business plan and a clear vision for your project.

You'll want to reward your investors in a timely manner, especially if you're using rewards-based or equity crowdfunding. This means delivering on your promises and making sure your investors get what they're expecting.

Crowdfunding is one option to consider, but there are four common types of small business crowdfunding to choose from.

Grants are another funding option, offered through government agencies, private foundations, and small-business incubator programs. Business grants can be designed for specific groups, such as women or veterans.

Honeycomb Credit is a crowdfunding platform that connects local businesses with community investors, allowing individuals to invest with a minimum of $100.

Investing through Honeycomb Credit involves substantial risk, as small businesses face financial challenges and there's a risk of default.

Business lines of credit and loans are also available, often through traditional banks or online lenders, and can be used for instant cash flow.

Startup business loans can be dispersed in one lump sum, and some lenders only require a few months in operation to qualify.

Here are some popular crowdfunding platforms for businesses:

Keep in mind that crowdfunding may not be the best solution for long-term business financing, and other options like business lines of credit, loans, and grants should be considered.

Personal loans are a viable option for funding your business, especially if your business history is too short to qualify for a bank loan.

Personal loan amounts may be smaller than those available with business loans, but rates can be lower for well-qualified borrowers, in some cases.

You can consider a personal loan to get the funds you need to get your business off the ground.

Crowd financing offers several benefits for businesses and individuals looking to raise funds. It provides tools to track your investment and stay updated on the company's progress, and investment minimums often start at $100.

One of the main advantages of crowd financing is its ability to provide access to a larger and more diverse group of investors or supporters. This can be a great way to interact with potential consumers and gauge public opinion on your product.

However, there are also some potential drawbacks to consider. Evaluating the potential of early-stage companies can be difficult, and returns may not be realized for several years, if at all. Paying with a credit card is also expensive.

Some potential disadvantages of crowd financing include the possible damage to your or your company's reputation from using crowdfunding, and the risk that if you don't reach your funding goal, the pledged funds will be returned to investors, leaving you with nothing.

Here are some key cons to keep in mind:

The CSF legislation in Australia provides a framework for crowd-sourced funding, reducing regulatory requirements for public fundraising while maintaining investor protection measures.

The Corporations Amendment (Crowd-sourced Funding) Act 2017 received Royal Assent on 28 March 2017 and took effect on 29 September 2017.

To provide crowd-funding services, intermediaries must hold an Australian financial services (AFS) licence with authorisation to provide CSF services.

The AFS licence obligations under the Corporations Act apply to intermediaries, including having adequate arrangements to manage conflicts of interest and maintaining the competence to provide the financial services.

Intermediaries must also have adequate risk management systems and compensation arrangements, as well as an internal and external dispute resolution system.

Here are the key changes made by the Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Act 2018:

Crowdfunding has proven to be a successful way to fund innovative products and businesses. Many Kickstarter campaigns have exceeded their initial funding goals, with Oculus VR raising $2.4 million in 2012.

Oculus VR's campaign was a game-changer, as it helped launch the company's virtual reality headsets designed for video gaming. The company's founder, Palmer Luckey, was able to raise 10 times the original goal of $250,000.

Critical Role, a live-streamed tabletop roleplaying game, raised an impressive $4.7 million in just 24 hours for its animated special "The Legend of Vox Machina." This is a remarkable achievement, especially considering it surpassed the entire 30- to 60-day raising period of other Kickstarter campaigns in 2019.

The GPD WIN 4, a handheld gaming PC, became Indiegogo's highest-funded product in 2023, raising nearly $4 million. This shows the growing interest and investment in portable gaming solutions.

Sharing your story is a crucial part of a successful crowdfunding project. A strong narrative can compel possible investors to support your cause.

The most successful crowdfunding projects have a clear and compelling story behind them. This narrative should include background information, foundational research, and appealing multimedia content.

To share your story effectively, enlist the help of talented storytellers throughout your campaign. This could include hiring a professional writer or videographer to help craft your message.

A strong narrative can help you reach your fundraising goals by making your project more relatable and engaging to potential investors.

Oculus VR, a company specializing in virtual reality hardware and software products, was funded through Kickstarter and later acquired by Meta for $2.3 billion in 2014.

The company's founder, Palmer Luckey, launched a Kickstarter campaign in 2012 to raise money to make virtual reality headsets available to developers, and the campaign successfully crowdfunded $2.4 million, 10 times the original goal of $250,000.

M3D, a company founded by two friends, manufactured small 3D printers and raised $3.4 million on Kickstarter in 2014 for their Micro 3D printer, which is now available at various retailers.

Critical Role, a weekly live-streamed tabletop roleplaying game, raised $4.7 million in just 24 hours for its latest animated special "The Legend of Vox Machina" in 2019, setting a record for the most funds raised in a single day.

The GPD WIN 4, a handheld gaming PC, raised nearly $4 million on Indiegogo in 2023, becoming the platform's highest-funded product, showcasing the growing interest in portable gaming solutions.

You may not need to repay the money donated to your business through certain types of crowdfunding, such as donation, reward, or equity crowdfunding. This can give you a positive cash flow without the burden of monthly loan payments.

However, debt crowdfunding works like a business loan and does need to be repaid. Business credit cards also offer a revolving line of credit, but if you don't carry a monthly balance, you won't be charged interest.

Some crowdfunding platforms charge fees, like Kickstarter, which takes a 5 percent fee for all donated funds, and a payment processing fee of 3 to 5 percent each time a person donates.

You may not have to pay back money donated to your business through certain types of crowdfunding, such as donation, reward, or equity crowdfunding. This can provide a positive cash flow without the burden of monthly loan payments.

Debt crowdfunding, on the other hand, works like a business loan and does need to be repaid.

Business credit cards can offer a revolving line of credit with introductory interest rates or rewards, but if you don't carry a monthly balance, you won't be charged interest.

You may pay fees to the crowdfunding platform, which can be a significant cost. Kickstarter, for example, charges a 5 percent fee for all donated funds.

You'll also pay a payment processing fee of 3 to 5 percent each time a person donates to your campaign, adding up quickly.

Some platforms charge these fees to cover their own expenses, while others use them to incentivize successful campaigns.

Crowdfunding allows companies and individuals to raise capital from a large group of investors, with contributions starting as low as $10.

The average fully funded crowdfunding campaign generates $213,769 with 341 investors.

There are different types of crowdfunding, including donation, reward, debt, and equity crowdfunding.

You can use crowdfunding to fundraise money through individual investors interested in your project, and you may or may not have to pay back the funds, or you may give rewards to investors based on how much they invested with you.

Crowdfunding sites generate revenue from a percentage of the funds raised.

About 24 percent of projects are fully funded.

Here are some popular crowdfunding platforms:

The SEC regulates equity-based crowdfunding ventures in the United States.