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Crowdfunding might sound easy, but successful crowdfunding generally doesn’t happen by accident.
Startups that are most successful at crowdfunding usually have a lot of things going for them, according to Scott Steinberg, a crowdfunding expert and author of the newly released "The Crowdfunding Bible," a free downloadable book.
For example, Steinberg said, successfully crowdfunded projects usually start with a solid idea and sellable vision for the product or service. Raising money involves careful planning and preparation, a strong presentation and a reward structure that appeals to the project's audience, he said.
Steinberg gives us the lowdown on 10 crowdfunding sites:
The biggest of the crowdfunding sites, Kickstarter raised approximately $100 million in funding in 2011, on-track to raise upwards of $300 million or more in 2012. Kickstarter is open to any kind of project, anywhere in the world – but although anyone can be a funder, to create a campaign, you must have a U.S. presence and, theoretically, tax ID. Approval is required to launch a campaign. Kickstarter provides many levels of support from the time you begin developing your campaign until after it is completed. The site offers smooth integration into social media and individual websites, great online help, an analytics dashboard that helps you track your project progress and see where your pledges are coming from, and a post-campaign survey tool.
Fees: 5 percent if you meet goal. None if you don’t. Processing fees from 3-5 percent via Amazon.
Goals: Meet goal or get nothing. You can keep anything over your goal, though fees still apply.
Open to any kind of project, anywhere in the world, IndieGogo offers a lot of tools and support to track your project. It’s also helpful in that it offers the opportunity to keep money raised from campaigns that do not reach their goal. Smooth integration into social media and individual websites and a robust set of analytics tools to track your progress round out its benefits.
Fees: IndieGogo features two funding plans
- Flexible. 4 percent if you meet goal, 9 percent if you don't, but you keep your money in either case
- Fixed. 4 percent if you meet goal, no fees if you don’t and you get nothing in the latter case – donations are returned to contributors.
Goals: Flexible or fixed plan. In flexible, you get whatever you earn. Fixed, meet goal or nothing, but you can keep anything you earn past the goal.
Open to any kind of project. Includes more social concepts beyond funding (fueling) projects, including options to vote for projects and also to earn badges on the site. Creators can apply for RocketHub’s “LaunchPad Opportunities” separately from their projects. LaunchPad Opportunties are awarded to certain project builders based on their creations’ popularity and the evaluation of expert judges, and can be quite valuable. Examples include the services of a publicist to help promote your project, or the opportunity for five winning photographers to exhibit their work in a prestigious New York gallery.
Fees: There appear to be no fees for projects. LaunchPad Opportunities are free to people who have run a successful project, $5 for anyone else who wants to enter.
Goals: You keep any money raised.
European/international focus, default funding in Euros, but supports other currency options. Also focused on projects that are “for the betterment of society.” People can additionally "like" projects and the number of likes is displayed with the project listing. Approval required to launch a project.
Fees: 5 percent on funded projects plus 3.4 percent commission to PayPal and $0.25 per transaction. No charges for projects that are not fully funded.
Goals: Meet goal or get nothing. You can earn an unlimited amount past the initial goal.
This crowdfunding service differs in several ways from other crowdfunding sites. Its primary strength comes in the form of profit sharing: In exchange for donations, backers are promised a percentage of profits for a set amount of time. This is especially relevant to entrepreneurs starting new ventures who are willing to share profits with backers, who are betting on the project’s success and end up with a strong stake in the outcome. The focus is on business startups as opposed to other sites, which tend to be more project-oriented.
Fees: 5 percent plus transaction fees.
Goals: All or nothing. Can earn more than goal.
A "community powered reporting" project that lets people present a "story" for which they seek funding, bringing together citizens, journalists and news organizations. Focus is on "local" reporting. Stories begin as "tips," short descriptions of the issue. A journalist can then take the tip and write a pitch, including the funding needed. All stories are available under the Creative Commons license, although news organizations can donate 50 percent or more to the project to gain a temporary copyright. Topics include Government + Politics, Local Science & Business, Race & Demographics, Consumer Protection and many more. Under current plans, 90% of money earned goes to the journalist and 10 percent to another journalist who serves as the editor. The upshot is that it gives journalists work and helps citizens identify stories that need to be covered.
Goals: All or nothing
Based in the United Kingdom, serves as a platform for small investments in UK businesses and startups. Each project runs for 90 days. Equity in the company is given in exchange for donations. Incentive rewards are also recommended. Must be 18 or older and be legally able to create a UK based limited company to utilize.
Fees: £250 (currently waived) plus 5% of realized goal. Also £1750 in legal fees. No charges if the project fails to meet its goal.
Goals: Minimum £10,000 goal. No maximum. All or nothing.
- Note: Donations in exchange for equity are legal in the UK, but not, at the time of this writing, in the U.S. That may soon change as President Obama recently passed the Jumpstart Our Business Startups (a.k.a. JOBS) Act (sometimes referred to in part as the CROWDFUND Act), which will allow entrepreneurs on sites like Kickstarter to offer equity in exchange for investment. However, as of press time, laws and regulations governing these investments have yet to be put into effect.
Founded in 2011, Peerbackers facilitates project fundraising for “entrepreneurs, innovators and trailblazers” and their ideas (rather than serving as a platform specifically to promote creative projects). Peerbackers reviews submissions for legitimacy and the applicants’ understanding of how to be successful in crowdfunding. Like other sites, rewards are provided to backers in return for their participation. However, these rewards may not include the actual products under development (if the venture even has a consumer product associated it).
Fees: 5 percent plus Paypal charge (2.9 percent).
Goals: Three possible outcomes – 1) Project is fully or over-funded, and you keep what you make; 2) Project fails but you can still fulfill rewards – you keep what you’ve made; 3) Project fails and you cannot fulfill rewards – you make nothing and backers are refunded.
A project crowdfunding site based in Seattle that targets commercial (though largely geeky) science- and tech-related projects. Bills itself as “a new way to fund innovative research,” helping pair backers with researchers looking to fund scientific studies, insights into global warming and other unique ventures. Features a strong emphasis on academic works and projects that expand the scientific and professional world’s collective knowledge base and general frame of reference.
Fees: 10 percent of raised capital only on successful projects (includes a 3 percent transaction fee)
Goals: All or nothing
Based in Hong Kong, with offices in the UK, US and Finland, Grow VC is a more complex site that allows startups to receive equity investments up to $1 million per year. In addition to monetary investment, the site includes an “Experts” system in which someone with special abilities or knowledge can offer their “work investment” to a startup on the site. There are a lot more tools on this site for assessing the value and reputation of a startup. Also present is a “micro investment” model where investors can dedicate a monthly budget as low as $20 and Grow VC helps them by providing tools and profiles of startups, including their history.
Fees: 2.5 percent of raised capital only on successful projects
Goals: No information about how goals are handled.