Every few months, it seems like a new product seeking funding on Kickstarter goes viral, or an outlandish GoFundMe campaign is making headlines.
These fundraising websites (also known as crowdfunding platforms) aren’t going away anytime soon.
According to Forbes, crowdfunding is by definition, ‘the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.’
This video by David Khorram explains the process in detail:
Though it may not be immediately obvious, these fundraising websites are a viable source for both new startups and established businesses to generate working capital – and more companies than ever are cashing in big time.
Not only is crowdfunding a way to get cash flowing but by virtue of the way the campaign grows, it’s also a brilliant marketing strategy and a way to get feedback from the marketplace before a product is even made.
If you achieve (or exceed) your fundraising goal, you can bet that your brand awareness has increased exponentially as well.
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The Rise of Fundraising Websites
In 2016, equity raised from fundraising websites like Kickstarter surpassed venture capital funding for the first time ever.
That’s an impressive leap from 2010, when online crowdfunding was only $880 million, to a whopping $16 billion in 2014.
The venture capital industry, meanwhile, only invests about $30 billion each year.
By 2025, the World Bank Report estimates that the current record in global investment through fundraising websites will reach $93 billion.
Though it’s one of the oldest forms of generating capital in the world, crowdfunding is just now being recognized as an actual industry.
This means we’re seeing:
An Increase in Niche Platforms
In addition to raising funds for a particular product or endeavor, one of the great boons of fundraising websites is for entrepreneurs to test the desirability of that which they’re creating.
Accordingly, campaigners have begun to move further and further away from mass-market platforms to focus on niche sites that draw a specific crowd—niches like non-profits or charity, fashion, gaming, education, music and more.
RealtyMogul, which offers real estate investment opportunities for everyone, and Crowdfund Campus, a platform designed specifically to back the projects and businesses that were incubated in universities, are two such examples.
With so many fundraising websites out there, there’s also a growing number of investors getting ripped off by campaigners who just made a video full of empty promises.
As a result, investors are becoming savvier about what’s actually worthwhile to give their money to.
There are even platforms like Shareholder Academy that have sprung up to help investors make better choices.
When the “Veronica Mars” movie raised several million dollars in a crowdfunding campaign in just a few days, the landscape of fundraising websites changed forever.
Crowdfunding is becoming a crucial research and validation method for companies that make their decisions based on numbers and hard data.
“For us, crowdfunding is as much about raising capital to finance our rapidly growing business as it is about building a veritable marketing army of customer-investors who are, literally, invested in our success,” says Steven Sashen, CEO of Xero Shoes.
“It’s about creating brand loyalty and connection.”
Fundraising Websites – What To Look For
Not all fundraising sites are created equally.
The costs and fees associated with running a campaign vary across different fundraising websites.
Whether a site is free, charges a monthly membership fee or takes a percentage of the money raised, crowdfunding sites also often have a credit card transaction fee that will be deducted from each donation.
No matter what site you’re using for a crowdfunding campaign, it’s going to require a lot of legwork and hustle on your part (or the part of the marketing firm you hire for support.)
Some sites have built-in tools that can make promotion much easier, which can have an impact on how much your overall marketing strategy costs.
Depending on your budget and your target audience, look to platforms that have a good number of built-in promotion tools, but don’t prioritize this over tapping into an established and relevant audience.
Some of the tools that make promotion easier on certain platforms include:
- Fully customizable fundraising page design/layouts.
- Vanity URLs.
- Unlimited photo and video posting.
- Social media share buttons.
- A social media channel that could actively promote your campaign for you.
Reports & Analytics
Being able to track who, how much and where people are donating from are some of the most crucial data points to collect from a crowdfunding campaign.
Make sure whatever fundraising platform you’re using is set up with some of these basic features or at least connects you to third-party services such as Google Analytics.
Running a crowdfunding campaign can be hard, but it doesn’t have to be lonely.
Many platforms, at the very least, will offer comprehensive guides and tips for getting started and taking your campaign to the next level.
Others still will have forums where users can share their experiences and strategies for going viral and reaching their fundraising goals.
And that’s not to mention the customer support services that can be easily reachable by phone, email or the site’s contact form.
Some of the Best Fundraising Websites in 2020
Unless you’ve been living under a rock, you’ve heard of at least some of these fundraising websites.
They each run fundraisers a little differently, so you may want to brush up on the different types of small business funding first.
Here’s a look at over twenty of the most powerful portals for raising capital on the web, including debt and equity fundraising websites:
Currently, Indiegogo enjoys its status as the world’s largest fundraising website, boasting impressive campaigns for everything from products in tech, innovative designs, film, travel and even green or eco-friendly solutions.
Indiegogo has proven to be a great choice for female business owners – over 47 % of the site’s successful campaigns are for companies run by women.
Though best known for reward crowdfunding, it does offer equity options as well.
Indiegogo Fees: 5% of what you raise plus 3-5 % credit card processing fees.
Kickstarter is arguably the best-known of all fundraising websites platforms—almost like Kleenex is to facial tissues.
For businesses that plan to try and secure more traditional capital in the future, Kickstarter is a great source to raise initial capital and parlay that success for a well-padded loan application or pitch deck for VCs.
Kickstarter Fees: 5% of successful campaigns plus 3-5 % payment processing fees.
Focusing entirely on restaurant financing (one of the most underfunded industries in the US), this platform is 100% dedicated to connecting aspiring restaurateurs and the foodies who love them so they can get a concept off the ground.
inKind Fees: Not available
Fundable takes an unusually hands-on approach with its users to guide them through the capital raise process.
However, this premium service comes at a premium cost.
Instead of taking a percentage of your donations, they charge a monthly fee of $179.
Fundable offers both reward crowdfunding and equity crowdfunding.
Fundable Fees: $179 per month, and 3.5 % plus 30 cents credit card processing fee.
Focusing entirely on artists and creators, Patreon boasts a massive, global creative community.
Patrons (aka backers) can elect to fund campaigns with a set amount of money each month or on a per-project basis.
Patreon Fees: 5% of funds plus 2-5% credit processing fee.
Welcome to the world’s biggest fundraising website focusing exclusively on female entrepreneurs.
Only a small percentage of money from a traditional investment and venture capital ever makes it to women-owned businesses, so Plum Alley is stepping in to bridge that gap.
Plum Alley Fees: 5% of a successfully funded campaign plus 2.9% credit processing fee.
Best known for raising money for personal or charitable causes, GoFundMe is a robust platform for capital-seeking business ventures as well.
This is ideal for small projects with specific, quantifiable goals.
GoFundMe Fees: 5% of funds and 2.9% plus 30 cents payment processing fee.
RocketHub’s (now CrowdFunder) success school sets it apart as one of the most helpful crowdfunding platforms, walking new users through the ins and outs of launching a successful campaign.
This site is ideal for social good projects and personal causes alike.
RocketHub Fees: 4% of successfully funded campaigns and 8% from campaigns that don’t meet their goal. 4% credit card processing fee.
Since 2010, FundRazr has raised over $86 million in funding for personal and business projects.
Sharing your campaign on social media is made super efficient with their built-in promotion dashboard.
FundRazr Fees: 5 % of funds.
Public funding for research in the areas of health, medicine, and science has been drying up.
Fortunately, scientists and innovators passionate about progress in these fields can turn to a dedicated community of investors.
Backers get the unique reward of having the results of a campaigner’s research shared with them.
Experiment Fees: 5% of funds and 3% payment processing fee.
Some of the Best Debt Fundraising Sites
Debt crowdfunding, also known as peer-to-peer lending, changes the entire model by turning investors’ donations into a loan.
Unlike Kickstarter and IndieGoGo, when you give to a campaign on these sites, you can expect a return on your investment.
So many businesses have successfully launched thanks to Kickstarter, but how do they keep getting funding after the initial campaign?
That’s where Kickfurther comes in, focusing entirely on inventory financing.
Kickfurther Cost: Average APR 20-30%.
1.5% withdrawal fee.
Lending Club is replacing bank loans with crowdfunding.
All of the money it lends to borrowers comes from their network of crowd funders, and whether you’re applying for a personal loan up to $40,000 or business loan up to $300,000, all of them can be used for commercial purposes.
You just need a credit score of at least 650, and for business loans: be in operation for over two years and have at least $75,000 in annual revenue.
Check out our full Lending Club review for a closer look.
Lending Club Cost: Average APR ranges 5 – 30%.
Using the same model as Lending Club, Prosper grants personal loans of up to $35,000, and once the process is underway, you can usually get funds within a week of the application if you’re approved.
Prosper Cost: Average APR ranges 5 – 30%.
When you need MAJOR capital (up to $500,000 in loans), Funding Circle is a place to go.
To qualify, you need a credit score of 620+ and over $150,000 in annual revenue.
Funding Circle Cost: Average APR range is 13 – 18%.
A little more expensive than Funding Circle, Bolstr (now KeyBank) can also be a great source for large loans.
Rather than looking at credit score, they focus on your business’s historical revenue and profits to determine creditworthiness.
Bolstr Cost: Average APR range is 8 – 25%.
Focusing entirely on servicing entrepreneurs in emerging economies, Kiva provides 0% interest, no-fee loans to business owners all over the world.
To date, over two million entrepreneurs have received $850 million in funding from Kiva’s dedicated backers.
Kiva Cost: 0% interest and no fees!
House flippers rejoice – now there is a crowdfunding platform specifically to raise capital for their fixer-upper projects.
Think hard before you commit though; you must borrow at least $500,000.
RealtyShares Cost: Average APR is 8 -12%.
Patch of Land
This site is similar to RealtyShares but geared more toward smaller projects with just a minimum of $100,000 for borrowing.
However, these loans may take a little longer to close: Typically one to two weeks.
Patch of Land Cost: Average APR is 8 – 12%.
Some of the Best Equity Fundraising Sites
When you raise money through equity crowdfunding you are also giving away a portion of your ownership in the final product.
CircleUp has generated over $260 million in equity crowdfunding for startups, making them one of the largest marketplaces of its type in the world.
The most successful companies on the platform are all about innovation.
CircleUp Cost: 5% of funds raised.
AngelList is one of the oldest equity fundraising websites around, and you can thank this site for the existence of major companies like Uber, Postmates, and Thumbtack.
In addition to its stellar reputation, AngelList lets entrepreneurs use the site at no charge – it’s merely an effective portal for connecting with prospective investors.
AngelList Cost: $0
“We get you into the deal at the same terms as leading VCs” is one of Crowdfunder’s mottos.
Entrepreneurs using the platform can help attract exactly the right investors by categorizing their companies based on stage (seed funding, Series A, etc.), industry and location.
Crowdfunder Cost: Tiered monthly payment plans starting at $199.
SeedInvest’s goal is to help entrepreneurs spend less time fundraising and more time running their businesses – so they connect startups to big-name investors like Sequoia Capital and Andreessen Horowitz.
If you’re working with SeedInvest, you’re working with large funding rounds usually between $500,000 and $5 million.
SeedInvest Cost: 5 – 7.5% of capital raised. Up to $4,000 for escrow, due diligence, marketing, and legal costs.
EquityNet really prides itself on being there for entrepreneurs.
When funding needs aren’t always gigantic, you can use the platform to raise as little as $10,000 or as much as $10 million.
Paid subscribers to the platform will also benefit from the site’s patented business plan and analysis programs.
EquityNet Cost: $600 for 3 months.
How to Use Fundraising Websites to Start a Business
Once you’ve picked the right platform, you have to actively work with on promoting your venture through social media, email, and your personal network.
Learn from your mistakes.
After an initial launch of Kickstarter, Habit Nest founder Ari Banayan wasn’t completely pleased with the results and started examining what could have been done better.
“Kickstarter is a pretty amazing platform and if you can catch some great press, it can catch like wildfire,” explains Banayan.
However, he realized, ”We didn’t build the right relationships, which was a big reason why we didn’t get any press.
We tried to just cold email a bunch of journalists a few weeks before our launch.
We made a great video but it didn’t have any viral characteristics.
There really wasn’t anything super shareable about it.”
Tweak your methods and try again.
After the initial Kickstarter, Banayan got his company active on social media, and the results were something he could actually brag about.
“A few weeks before Christmas we got into contact with someone who runs the Snapchat Discovery Channel.” says Banayan.
“She loved the [Habit Nest journal] and wanted to feature it on the channel. Boom! We sold about another $12,000 within about a week.”
Study your peers.
Christine Quigless, Founder of grâce à toi dress, attributes her success on Kickstarter to following the entrepreneurs she wanted to emulate.
“Firstly, I reached out to other successful Kickstarter people like the founder of Fellow Coffee Makers who used my website as a jumping-off point for how to craft my Kickstarter,” she explains.
“Secondly, I looked at other campaigns within my category to figure out what works and what doesn’t.
Fashion is a really tough category in Kickstarter because the biggest draw for businesses is in the tech field.”
Don’t underestimate the branding power.
Regardless of the success of your campaign, however, it’s important to recognize fundraising websites as a vehicle for expanding the reach of your product.
“I reached a larger nationwide audience that extended beyond my friend network and connected with people, through Kickstarter, who continue to buy my apparel at retail prices,” says Quigless.
Did we miss any must-mention fundraising websites?
Let us know in the comments so we can keep this list current and useful for aspiring entrepreneurs.