- Crowdfunding is a great way to raise money if you don’t qualify for loans or you lack investor connections.
- You should consider each platform’s crowdfunding types, be transparent and detailed in your campaign materials, and prepare for potential liability.
- You should avoid the common mistake of not doing additional marketing and promotional work after posting your campaign. You also shouldn’t act as though reaching your funding goal is guaranteed, and you should consider the potential costs of crowdfunding.
- This article is for small businesses owners interested in crowdfunding through platforms other than Kickstarter.
Although Kickstarter is one of the most popular crowdfunding platforms, success there isn’t always guaranteed: For every project that meets its goal, there are dozens that just didn’t pick up enough steam to get funded. So where else can you turn? Whether you’re looking for a small investment to jump-start your company or a large round of capital to grow it to the next stage, here are 10 sites that can help you raise the money you need.
Why is crowdfunding a viable business funding option?
Obtaining financing is one of the biggest hurdles for most entrepreneurs. If a bank loan won’t cover what you need and you don’t have any connections to investors, it can be tough to know where to begin. Online crowdfunding – raising smaller amounts of money from multiple backers – has become an increasingly common solution to this dilemma because it allows startups to reach out to a large number of potential investors at once.
[Read related article: What Is Crowdfunding?]
Kickstarter alternatives for crowdfunding
Here are some non-Kickstarter sites you can use to obtain startup funding through a large crowd of investors.
Crowdfunder is a U.K.-based equity crowdfunding platform that makes it easy for businesses to raise capital from its network of 1 million investors. The site allows startups to raise money through equity. There is a 5 percent standard project platform fee and a transaction fee of 2.4 percent + $0.25 + value-added tax.
Startups interested in equity investors can sign up for EquityNet, a business crowdfunding platform that allows entrepreneurs to share their profiles and business plans with a network of more than 20,000 angel investors, venture capitalists and business supporters. EquityNet’s patented business plan and analysis software helps you optimize your planning and reach the investors who would be most interested in your project.
Created by a team of startup founders who understand the challenges of raising capital, Fundable allows entrepreneurs to raise money from investors, customers and friends. Companies seeking funds can create a profile on the site, set their goals and rewards, and promote their campaign.
Fundable offers companies the opportunity to provide reward-based fundraising and equity fundraising. Reward fundraising allows companies to offer rewards if the company is seeking less than $50,000. Equity fundraising, on the other hand, is for companies looking to raise a larger amount of money, and it requires a minimum commitment of $1,000 from backers.
Equity fundraising is a great way to build partnerships with investors whom you can lean on to grow your business. However, you’ll have to closely vet your investors given how much control over your company you could be giving them.
Of all the potential Kickstarter alternatives out there, Indiegogo is perhaps the best known. Over time, the platform has raised over $1 billion across all its crowdfunding campaigns, with more than 11 million individual contributions to date.
You can work with expert companies that Indiegogo has vetted to oversee your campaign launch and, after that, product rollout. Additionally, Indiegogo has been known to greenlight crowdfunding campaigns Kickstarter has allegedly blocked.
Since 2009, MicroVentures has been helping companies – including Facebook – access capital from both accredited and nonaccredited investors. The site focuses primarily on businesses in the software, mobile and green-tech industries that want to raise $150,000 to $1 million. MicroVentures reviews an applicant’s idea, team, traction, market size and other factors before selecting the startup to be featured on its site. From there, the funding process typically takes six weeks, according to the company’s website.
[Read related article: What Is a Business Microloan?]
You can use Patreon to fund your projects through per-creation models. Through this model, interested parties will fund you for a certain project. This option is basically crowdfunding, though Patreon describes itself as a membership platform, not a crowdfunding site.
As such, you can use Patreon to fund your operation through consumer payments if you regularly release content. You’ll get monthly subscriber payments for your content, and your customers will get exclusive access to your content. They’ll feel like they have a special relationship with you, and you’ll have a built-in base of loyal, recurring customers – not to mention more funding.
You can run a regulation crowdfunding campaign through StartEngine, which Shark Tank investor Kevin “Mr. Wonderful” O’Leary advises. Through this platform, you can crowdfund up to $5 million per year. Your campaign launch will cost little to no money and take four to six weeks. StartEngine also offers trade opportunities you can pursue after your campaign ends.
Crowdfunding dos and don’ts
Here are some dos and don’ts to keep in mind as you launch and manage your crowdfunding campaign.
- Do carefully consider each platform. Would you rather base your campaign on equity funding or reward-based funding? Your answer to this question, among others, will eliminate certain crowdfunding platforms from consideration. Carefully consider what each platform offers before choosing the right one for your campaign.
- Do prioritize transparency and share lots of information. Some people might find meaning in contributing to crowdfunding campaigns but have limited budgets. This is a big reason to be fully transparent in your crowdfunding campaign and share plenty of persuasive information about your offerings. The more forthright you are in all your materials, the more people will feel an emotional connection and invest in your opportunity over others.
- Do prepare for potential liability. You should speak with an attorney and obtain business and general liability insurance before you launch your campaign. Business liability insurance can protect your personal assets if a campaign contributor sues you. General liability insurance can offer additional protection if your crowdfunding campaign leads to property damage or personal or advertising injuries. These are great backups if your product launch goes awry.
- Don’t plan for a fully funded campaign. More often than not, you won’t get all the money you’re hoping for from your crowdfunding campaign. Even if you do, though, that money might cover just one project or business phase. Future initiatives or growth periods might require more money than possible from one campaign. You can always run another crowdfunding campaign when these moments arise.
- Don’t overlook expenses and taxes. Typically, the income you raise from your crowdfunding campaign counts as business income. This makes it taxable in exactly the same way as all your other revenue. On top of this expense, you’ll likely have to pay a fee to use whichever platform you decide is the best fit. Sure, the money you bring in will likely cover these costs, but you might also want to increase your fundraising goal.
- Don’t just post your campaign and walk away. Just as with any other content you create, you’ll need to promote and market your crowdfunding campaign. For better marketing outcomes, your crowdfunding campaign should tell a story rather than just stating why you’re seeking money. From there, you should leverage your social media presence, email marketing efforts and other channels to spread your campaign wide and far.
You can look at our picks for the best email marketing services to find the right platform for your needs. Or you can just start with our Constant Contact review since this platform is our top pick for small businesses.
With crowdfunding, you have options
While Kickstarter might be the go-to platform for all things crowdfunding, you certainly have other choices. To find the right fit for your business, you should consider what types of crowdfunding are available on each platform. From there, making the most of a crowdfunding campaign involves mostly the same steps as you would normally take to promote and market your business. And while success isn’t guaranteed, diligence and care can certainly make it more likely.
Max Freedman also contributed to this article.