The Best Crowdfunding Websites for Startups in 2022
According to the definition of the European Commission, crowdfunding is a way of raising money to finance projects and businesses. It enables collecting from numerous people via online platforms.
When you receive investments from angel investors or venture capital firms, you resort to traditional financing models. Money comes from a single source or a very few ones. But crowdfunding is about small sums of money collected with the help of many people — from two to hundreds.
Types of Crowdfunding Platforms
The most usual model for crowdfunding platforms is all-or-nothing — you get the money only if you've reached your target. And if you haven't, your investors get their money back with no loss or hard feelings. The risks for them are zero.
1. Donation-Based Type
Donation-based crowdfunding means raising money from investors who get nothing in return. It's used mainly by charities or for social purposes.
Such campaigns usually require a quick collection of the needed amount and last from 1 to 3 months. You can rarely see any limits on the contribution amount since providers get nothing in return and perform a good deed. The average amount of such projects stands at $10,000.
2. Rewards-Based Crowdfunding
Rewards-based crowdfunding is the most widespread and most start-up-oriented model. According to its concept, backers receive a benefit, which correlates with their contribution.
For example, if someone contributes $50, they get the product after release. But with a $5,000 contribution, investors can be mentioned among co-founders' besides getting the product, and so on. Rewards-based platforms usually offer three levels of contributions and rewards, but you can manage this number as a project owner.
This model is the best for businesses with an MVP: when you need to enhance or supplement an existing product. Why so? First, you already have something to demonstrate, which advocates your professionalism. Second, the existing users might be interested and willing to help you improve. They already love your product and are interested in making it better.
These campaigns usually last from one to three months and aim to collect about $100,000.
3. Equity-Based Crowdfunding
Equity-based crowdfunding is rapidly growing in popularity. This model stands out among others as it is the only case when the owner shares their company with investors.
The business owner can establish the minimum and maximum contribution amount, which correlates with the size of the share. To be sure their money is safe, investors can require business documentation, and the owner, in turn, decides whether to provide this to the specific person or not.
The duration of such campaigns — 2-4 months. Since you will provide equity in exchange for capital, you can seek from $50,000 to over $100,000.
4. Debt-Based Crowdfunding
Debt-based crowdfunding is another excellent way to raise relatively big money for your business without the need to share it. Primarily, these campaigns aim to collect hundreds and thousands of dollars and are initiated by large companies that want to acquire smaller ones. Or by smaller businesses that intend to scale.
Simply put, the sides sign an agreement according to which one lends money to another one, obliged to repay it within a certain period.
The downside of this model is that you need to make an effort to attract investors so that they'd be ready to believe in your startup and make you such a kind of loan.
These crowdfunding platforms are very startup-oriented: you typically pay back not right when the product is launched or the company's acquired, but when they become profitable.
A debt-based crowdfunding campaign rarely lasts for more than 5 weeks.
5. Royalty-Based Crowdfunding
Royalty-based crowdfunding is a little less common form of crowdfunding, but it does take place and deserves to be listed. As the title implies, the investor claims a small share of profits from the product or company they support. For example, the company is developing a mobile app and can't deliver it due to unaccounted risks during the cost estimate.
Each investor gets a royalty reward when the sum is raised and the company becomes profitable. The reward amount depends on the investment size.
An important point: investors profit only from the product or idea they have invested in, not from the project as a whole. For example, suppose the US company raises money intending to go to the European market. In that case, investors will get a royalty from the income of the European branch, not the entire company.
Depending on the campaign, you can ask for amounts from $5,000 to $250,000. The duration is typically between 30 and 60 days.
Best Rising Crowdfunding Platforms for Startups
While Kickstarter is the talk of the town and known as the primary crowdfunding platform for startups, there are more than 600 platforms worldwide that you could consider. Each platform has its distinct advantages and opens the door to turning your startup into a prosperous business.
Indiegogo, Inc. was founded in 2008. Today, more than 15 million people visit it every month, and about 19 thousand campaigns are launched monthly. Indiegogo is available in more than 235 countries.
You have total freedom to run a crowdfunding campaign for any idea you have or any product you want to launch; it's incredibly loyal and user-oriented. Campaigns can last for up to 60 days.
Numerous tools make it possible and easy to integrate with other platforms, including Meta and Google. The positive impact is manifest in numerous promotional options.
- 53% of email shares of crowdfunding campaigns convert into donations
- 12% of Facebook shares convert to donations
- 3% of Twitter shares convert to donations
Once you've raised the necessary amount of money, you expect the payment within 15 business days. As another option, you can invest in one of the thousands of ideas and products and become a backer.
You can keep raising funds and building your backer community even after your campaign ends, and you have successfully reached your crowdfunding goal. Indiegogo InDemand makes it possible.
Indiegogo projects have raised an average of $41,634 each — the highest average amount of any platform.
2. SeedInvest Technology
SeedInvest Technology allows backers to get a cut of early-stage startups. The platform has more than 235 established companies in its track record.
As a founder, you need to sign up for an account, fill out an application form, and go through a screening process. The last includes a due diligence check.
If you've been invited to fundraise on SeedInvest, you create a profile, and this is it. After every closed round, SeedInvest takes a cut of your earnings: 7.5% of placement fee and 5% of equity fee. You can use the calculator on the website and get exact numbers.
The duration of a campaign depends on your business type and usually is from 45 days up to six months.
Mighty cause was designed as a platform for nonprofits and individuals. It has helped attract contributions and attention to over 150,000 causes and helped them meet their aims.
The platform has different campaign options to choose the one that suits you better. It charges an average processing fee of 1.2% of the raised money plus 29 cents per transaction. It also offers a free plan for starters, which is a great advantage.
You can upgrade to the high-level paid plan, including more branding, marketing, and donor management features. If it doesn't meet your expectations, you cancel at any time.
Nonprofits can raise funds themselves, or concerned individuals can set up a fundraising campaign for organizations they support.
Founded in 2011, StartEngine is a platform that makes it possible for everyone to invest in early-stage startups in very different areas.
You can explore the list on the website, pick the company of a few, and start investing — from biotech pioneers to travel startups and mobile apps. Each company's profile includes valuation, price per share, number of investors, and other data that can impact the investors' decisions.
When you're ready to invest, click the right button, fill out a personal information form, and add a payment method. As for writing, the platform has helped more than 370 startups, and its network is more extensive than 300,000 investors.
Patreon was founded in 2013 by YouTube musicians Jack Conte and Sam Yam. As for the writing, the platform has attracted over 200,000 creators and helped them bring in $2 billion in funds. It is justly considered to be the best crowdfunding platform for creative startups.
Patreon is explicitly designed to help creative people thrive by raising funds from friends, family, supporters, admirers, and all willing to make an impact. It's free to get started; however, there is a monthly fee depending on the plan you choose.
- Lite — 5%
- Pro — 8% cut
- Premium — 12% fee from the money generated.
Besides, the company charges a processing fee of 2.9% and $0.30 per payment.
The Lite plan is for starting creators willing to tell the world about their talents. Pro is meant to help creators establish and scale their businesses. Premium is for established creators or businesses that generate at least $2,500 per month on the platform and have a minimum of 100,000 social media followers.
No matter what plan you choose, you have a mobile app and numerous business tools at your disposal.
You can switch between the Lite and Pro plans at any time, while Premium requires at least a three-month commitment.
Crowdfunding was a breakthrough for startups and charity organizations that had struggled to attract the attention of investors. Today, anyone can support any project, become a contributor to a good deed, or invest in a promising young business. Crowdfunding platforms streamlined this movement.
Although a market is crowded with fundraising solutions, some regions and niches still need attention. In the US and Europe, the competition is more rigid. Still, you can start your crowdfunding site without hesitation if you can provide unique features, cater to a narrow niche, and provide an excellent user experience.