Picking the right crowdfunding platform
With so many different crowdfunding models and platforms available, picking the right crowdfunding platform for your project may feel quite confusing… Here’s a beginner’s guide to the different types of crowdfunding platforms, which one you should pick for your project and why.
What is the right crowdfunding platform for my project?
- What is the right crowdfunding platform for my project?
- Example 1: One-off costs
- Example 2: Regular Support
- Example 3: Making a new ‘thing’
- What else should I consider when choosing my crowdfunding platform?
- All Or Nothing
- Flexible Funding
- Matched crowdfunding – what is it & how can I access it?
- Best crowdfunding models for beginners
- Crowdfunding models beginners should avoid
- Alternatives to crowdfunding – other platforms you can use to gather money from backers
Example 1: One-off costs
I need to raise a lump sum to pay for something essential to my project
Perhaps you need to buy new equipment, hire a venue for an exhibition or event, or pay to have your tour bus repaired? For this type of project, you want to raise money to pay for one-off costs associated with a project or starting something new.
What is the right crowdfunding platform for this project?
- A donation-based crowdfunding platforms like JustGiving, GoFundMe
- or, A rewards-based crowdfunding platform like Kickstarter, IndieGoGo, Crowdfunder
Why?
By using a rewards-based crowdfunding platform or a donation-based crowdfunding platform to raise money, you can gather together lots of small payments from your crowd to reach a specific target before a specific deadline. You are likely to be able to attract larger contributions by using a rewards-based crowdfunding platform as opposed to a donation-based crowdfunding platform.
- You’ll need to communicate to your backers why you need to make this one-off purchase and how it will improve your life, their life and the lives of people they care about.
Example 2: Regular Support
I run a regular event or produce regular content for people to enjoy
Perhaps you produce things like podcasts, community events, online videos or other things that you don’t charge money for? For this type of project, you want to raise money to pay for on-going costs associated with keeping different activities going.
What is the right crowdfunding platform for this project?
- A subscription-based crowdfunding platform like Patreon, Drip, Steady, Tipee or Open Collective
Why?
By using a subscription-based crowdfunding platform to raise money, you can gather together lots of small payments from your crowd each month to provide a regular income for your project. This is a way to set up a regular ‘tip jar’ for people who like (or benefit from) what you do to show their appreciation, with lots of small contributions adding up over time.
- You’ll need to communicate to your backers how their contributions support you to keep your project going, and what value it brings to their life and the lives of people they care about.
Example 3: Making a new ‘thing’
My project will result in a ‘product’ that people want to own or take part in
Perhaps you are planning to publish a new book / album / game etc., devise & show a new theatre piece, or produce a series of artists multiples? For this type of project, you want to raise money to pay for the up-front costs associated with publishing, production or manufacturing.
What is the right crowdfunding platform for this project?
- A rewards-based crowdfunding platform like Kickstarter, IndieGoGo, Crowdfunder
Why?
By using a rewards-based crowdfunding platform to raise money, you’ll be able to raise the money for all the up-front costs ahead of the project (through lots of small payments from your crowd) and at the same time have a way to distribute your products (as rewards) to people who want them.
- You’ll need to communicate to your backers that your campaign is their opportunity to support your new project by ‘pre-ordering’ (ie making an up-front payment for a reward they will receive later. You’ll also need to communicate how their contributions make a massive difference at this stage of the project (ie allow the project to happen at all!) and what value the finished product will bring to their life and the lives of people they care about.
What else should I consider when choosing my crowdfunding platform?
There are a few other special things to note when deciding on which crowdfunding platform to use.
Do I go for “all-or-nothing” or “flexible funding”?
Here’s a quick overview of the differences between All Or Nothing and Flexible Funding models in crowdfunding, with examples of the platforms that use each model.
All Or Nothing | Flexible Funding |
| You only receive your pledges if you hit your target. | You keep all your pledges, whether your projects hits the target or not. |
| This option is avilable on the majority of rewards-based crowdfunding platforms like Kickstarter, IndieGoGo, Crowdfunder. | This is usually the default option for donation-based crowdfunding platforms like JustGiving and GoFundMe and is available on some of the rewards-based crowdfunding platforms like Crowdfunder and IndieGoGo. |
| For example: | For example: |
| If you set your crowdfunding target at £10,000 and have only raised £9,000 by the end of your 30 day campaign, in an all-or-nothing campaign you will not receive any funds and no money will be taken from your backers cards. | If you set your crowdfunding target at £10,000 and have only raised £4,000 by the end of your 30 day campaign, in an flexible funding campaign you will receive all of the funds you have raised. |
| All Or Nothing campaigns are best for: | Flexible Funding campaigns are best for: |
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Is my project eligible for match-funding?
Depending on where you live, or the type of project you are fundraising for, you may be eligible for matched crowdfunding. Matched funding is the potential to attract extra funds into your campaign from organisations like local authorities, grant-giving bodies or charitable foundations.
I have moved this section to its own post, which you’ll find at the link below:
This type of match-funding for crowdfunded projects is only available on a small number of crowdfunding platforms, and the types of funds available change all the time. You’ll find some examples at:
If you are eligible for matched crowdfunding, this may effect which is the right crowdfunding platform for you, how you set your funding target, the type of information your include in your project pitch and whether you run an All Or Nothing or Flexible Funding campaign.
Read more about this in my Matched Crowdfunding post…
Best crowdfunding models for beginners
Rewards-based crowdfunding | Donation-based crowdfunding | Subscription-based crowdfunding |
| Project creators offer rewards, “perks” or other incentives to potential backers based on how much money they contribute to the project. | Project creators ask backers to make one-off cash donations to support the project. | Project creators ask backers to make small regular, on-going cash donations to support the project. |
| Backers receive the selected reward once the project is realised. | Backers don’t receive any rewards from their donations. | Backers may receive access to subscriber-only feeds, products or information. |
| Example platforms | Example platforms | Example platforms |
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Crowdfunding models beginners should avoid
Equity crowdfunding | Donation-based crowdfunding |
| Project creators offer a small financial stake (or micro-investment) in the project based on how much money a backer contributes to the project. | Project creators acquire a loan, financed by backers who lend a small amount of money to the project creator (via a peer lending platform). |
| Backers receive a financial return on their donations, once the project they have invested in makes an ‘exit’ in the future (eg the company is sold, or shares in the company are launched on the stock market). | Backers receive both their original stake and a fixed rate of interest at an agreed later date (like a fixed-term savings account). However, these returns are not guaranteed in the same way as traditional savings and this is a high-risk investment for backers. |
| This is a type of ‘share offer’, and is an alternative way for start-up businesses to raise money through selling shares in the future success of their projects. | This is a type of peer-to-peer lending, sometimes refered to as mini-bonds, and is an alternative to getting a bank loan to fund a project (usually with a lower rate of interest to the project creator / borrower). |
| Extra regulations & work involved | Extra regulations & work involved |
| Project creators need to prepare & publish a clear business plan, income projections and other documents for potential backers to examine. | Project creators need to demonstrate their ability to repay the loan in the time required and projects must be approved by the lending platform. |
| Example platforms | Example platforms |
Alternatives to crowdfunding – other platforms you can use to gather money from backers
If you want to set up a ‘tip-jar’ for one-off donations, or simple regular subscriptions:
- Use Libreapay – low-cost recurrent donations platform (only takes donations in € and $, but can be used by UK users)
- Use Open Collective – collect recurring contributions from supporters, reimbursing expenses & manage group accounts (publicly, in a transparent way) – potentially useful for meetups, open source projects, small membership organisations, clubs and associations etc.
- Use a payment processor (like Paypal or Stripe) to set up a “Donate” payment button or recurring payment options to include in mailshots or on your website.
If you want to set up a way for people to make Pre-Order Payments & Delayed Payments, Installments and Split Payments, or embedding these things in your own website:
- Check out Celery – a custom pre-order payments platform
If you want to sell memberships, online courses, and digital downloads to your audience:
- Try Podia (although the up-front costs are quite high)
For advanced users: If you’re interested in setting up your own Custom Donation Forms, Donation Pages, Peer-to-Peer Fundraising or Recurring Donations, or embedding these things in your own website:
- Check out Donately – especially useful for setting up hybrid projects (combine reward-based campaigns with one-off donations, or regular subscription payments)
Read the Original Articles here
Kajola is dedicated to creating solutions for international hospitality and food start-ups. We’re devoted to making the hospitality and food scenes richer, more diverse and more rewarding for food lovers and experience seekers everywhere.
