Raising funds for a startup was always an uphill battle for entrepreneurs in the past. Finding angel investors, venture capitalists or frequenting banks and NBFCs who follow a stringent process and provide funds to a very limited number of startups.
But it is not the same anymore now, crowdfunding is a concept which helped entrepreneurs materialize their dreams easily. It is a concept through which, you can easily raise funds worth millions online. It does not limit the reach of fund seeker and makes them reach every community and channel through which, funds could be generated.
If you are also thinking of starting your own business, then you should know about the basics of crowdfunding:
You can receive funding from anywhere in the world. You can become a trusted member for investors and show them how your project can bring changes in the concerned domain using whitepaper and the website.
You also need to know about the most reliable service providers before taking the big step. As crowdfunding has now the first choice of entrepreneurs, another business option has come up. You can make your own crowdfunding platform and offer it to business aspirants, a significant amount of commission can be earned by the platform owner.
There are a few crowdfunding platforms which have done an exemplary job in this field. Kickstarter is one such website which has garnered a total number of 101.1 million users across the globe with 100,000 projects. An interesting number of 3.1 million investors were repeaters which clearly shows the potential of this website.
Just like Kickstarter, there are many other crowdfunding platforms available and it is possible now for anyone to launch one. However, you need to design such a platform very carefully and make the business model highly conducive for fund-raising. These websites are specifically built to facilitate projects, they are equipped with unique features and elements.
Table of Contents
Guide to Build a Successful Crowdfunding Platform
Before you start working on your own platform, you need to think about basics and make its priorities clear for investors as well as project owners.
You can also remain dedicated to one domain which would help you get projects easily. For instance, Indiegogo is dedicated to the film industry and provides opportunities to new filmmakers. Every crowdfunding deals in some distinct categories and your project must fall in one of them. Indiegogo has 24 categories while Kickstarter has allowed only 15 but it lets any type of project to be launched through its platform.
There are also classifications now for crowdfunding. The most prominent ones of them are peer-to-peer (P2P) lending and crowd-investing. Most of the times, there is no minimum capping of the amount and it could be started with a very meager amount. No matter how little the amount is, the investor can expect returns with interest.
Patreon is a well-known crowdfunding platform among artists and content creators. The project propounders receive monthly donations on the basis of their content quality. It is recommended to ascertain the theme of your project and lists it under the category it falls under. Whichever category you choose, the project has to strike a chord with the audience.
Before you kickstart the business, it is essential to determine the business model. Then only, you can shape up the entire campaign. There are three main models under which the crowdfunding campaign could be classified.
Donation-Based: This particular model is used by charity-based campaigns. Donors make their contribution out of kindness without expecting any return. Most of the times, such campaigns are driven by communities and platform owners receive a meager price as a commission which is taken as administrative costs.
Rewards-Based: Diverting a little bit from the concept of donation-based model, this one includes some amount of reward that is to be received by the investors. The reward is not necessarily given as a legal tender, products or services are often distributed under this model. This model of funding is especially suited for small-time investors as they can make little investments and receive anything in return. For the most part, these campaigns are launched to promote some product or service. For those who host such campaigns, the fixed charge for the fee is 5%.
Equity-Based: It is the most traditional model for investment under which, investors put their money into a project and in return, they are offered an equity position or significant returns. It is considered as the best method for for-profits projects and therefore, used on a wider scale across the globe. As it is a vastly accepted model, there are also more legal implications for securing the interests of investors. Alongside the formal agreement templated, you also need to understand the basics of investment and tax law. Moreover, you may also need a business license for launching such a campaign depending on the regions you’re launching it from.
Different platforms take a different approach and it defines their style of working. For instance, Kickstarter does not fund a project unless it met its financial goal. On this platform, investments are ascertained with pledges and they are evaluated to ensure if the campaign has reached its goal. On the other hand, Indiegogo takes a flexible mold and makes partial fundings possible for the projects. It makes fund-raising easier by considering some easy things:
- Duration of the campaign
- Adherence to acts related to registration
- Third-party platforms used for hosting your own videos
- Standards of customer support provided to the users throughout the campaign
- Number of countries it will be eligible in
Choosing the right technology
If you wish to start your own crowdfunding platform like Kickstarter, you need to be through with the cutting-edge technology that maintains and enhances the performance of such websites.
- Web Servers
- Frameworks – Spring/Struts 2 and J2EE
- Content delivery networks- AJAX, API or JavaScript Libraries
- CSS Media Queries
- Mobile Optimization
- Analytics and Tracking
- Widgets
- Mobile Optimization
- Email Services
- SSL Certificates
- CDN Providers
- Language Translation Software
- Name Server Providers
- Hosting Providers
- Payment Providers
- Audio/Video Media
- Aggregation Functionality
- Document Information
When you develop and launch your own website, you need to make sure that it serves the users with the best technology. Your platform may not be able to muster a large crowd at the beginning like the big players, but it should be able to give 100% satisfaction to the existing users. You need to make every effort to deliver results that are flawless.
Features of Crowdfunding Platforms
Once you begin brooding over your own crowdfunding platforms, you should consider the following points:
- How interactive and engaging is your website?
- Dedicated segments to help out the project owners to make a selection before categorizing their projects.
- In-built chat systems to get in touch with you or your support team
- Dedicated section for reward funders which could showcase how investors and project owners have progressed using your website
- Enabling the project owners to communicate directly with their investors
- When it comes to features, there points that you need to give a thought about:
- Robust mechanism to enable you to update, manage, create, or edit the crowdfunding projects.
- Section for Q&A or comments where thoughts could be exchanged among users and creators.
- Dedicated section for only investors where could check the progress of their investment through updates shared by the creators themselves.
- For better content curation, integration of social media profile enabling the users to share updates on platforms like Facebook/Instagram/Twitter.
Website should be easy to navigate and should be equipped with features like advanced project search and, distinct categories. It should be intuitive and help every user find what he/she is looking for with conspicuous options and.
Should enable the creators with better project management reporting functionality. They must be able to get an updated report regarding backers, project owners, and investors etc. The admin panel should make real-time data easily available through reports generated on a regular basis. Other information such as funding period, project settings, management of rewards must also be elaborated in this section.
It is important that you choose a developer who could integrate all those features into the website efficiently.
Opting The Right Payment Gateway
All the inviting features and interface would go in vain if you cannot deliver security and trust in transactions. Therefore, it is essential that you choose the appropriate gateway for payment. In terms of crowdfunding, there are two major methods used for payment:
All-or-nothing: Under this mode, payment cannot proceed unless the project is entirely funded. It involves collecting pledge card which is a token of guarantee given by the investors. The actual money is not paid unless it is ascertained that the project has earned the faith of investors and it can collect the stipulated amount to go ahead with the strategy. Upon ensuring that the project will get a greenlight, pledge cards are redeemed. However, one problem with this mode is that the pledge card holder could be a turncoat and refuse to pay. Kickstarter uses this method on its platform.
Partial Payment: As opposed to its counterpart, this one makes the upfront payment possible and pumps up the project with whatever it can. Even if the goal is not met, the creator could use this money. Indiegogo utilizes this method and investors often are wary of using this particular mode as they fear to lose their money.
Third Party Online Payment Gateways
WePay: This particular gateway is quite well-known for its flexibility as it offers a combination of the two most prominent models. The users of this gateway can adjust the settings to meet the requirements of their projects. For example, the duration and escrow timings can be set accordingly. It is quite a go-to payment gateway for individuals who are operating without a team. The processing fee is the same as the other platforms but you can decide on whom it will be levied.
PayPal: Probably the most trusted gateway across the globe, it is preferred by most of the donors as well as recipients. PayPal also makes customizations possible in its API which is helpful in case of mass refunds and disbursement delays etc.
Geared up for your own platform?
Those who want to build their own platform must be passionate about the reason behind it. Your platform could be dedicated to a particular cause or industry and you must make it feasible for those who share the same spirit. When it comes to development, your approach should be overarching and you should consider every solution that could make the platform better. You need to be very careful about details and may have to think out of the box to suffice the needs of your audience.
Technoloader gives you the opportunity to come up with your own platform which could be the bid to establish yourself in the domain.
