How To Create Your Own Crowdfunding Website
By: Svetlana Cherednichenko
Tags: Business, Startup, Web Development, Website Development, Crowdfunding

A crowdfunding site is simply a website dedicated to fundraising for a specific project. In this post, we share ideas about and our experience with creating a crowdfunding website. But why would you want to build a crowdfunding site to begin with, and what are the benefits? Find out more below.

Best examples of crowdfunding platforms

To launch a successful crowdfunding platform, you need to know who your direct competitors are. Let’s take a look at the most successful crowdfunding platforms.

Kickstarter

Kickstarter is the most popular platform on the crowdfunding market. The average success rate for Kickstarter campaigns is 37.92%. This platform helps entrepreneurs raise the funds they need to launch their creative projects across 15 categories. The most popular categories on Kickstarter are film & video (75,140 projects launched), music (82,894 projects launched) and games (54,269 projects launched).

Kickstarter offers an all-or-nothing funding system. A project creator sets a goal and fundraising deadline. As soon as the goal is achieved, pledges are collected from those who promised to support the project. If the project fails to achieve its goal, no funds are collected and the project’s creator does not receive funding.

Indiegogo

Similar to Kickstarter, Indiegogo allows startups, charities, and people with creative ideas to receive financial support to launch their projects. However, unlike Kickstarter, Indiegogo allows for flexible campaigns, so creators can keep as much money as they can raise even if they fail to reach their goal.

Fixed campaigns (equivalent to Kickstarter’s all-or-nothing campaigns) are also available on Indiegogo. The average success rate for all Indiegogo campaigns is 9.8%, and the average success rate for Indiegogo campaigns with fixed funding is 17.1%.

GoFundMe

GoFundMe is a platform that allows charities, companies, and individuals to raise funds for any occasion. Since 2010, the platform has helped users raise $9 billion from over 120 million donations. People often use GoFundMe to raise money for medical treatments, college tuition, and even graduation dresses.

Unlike the platforms mentioned above, there are no deadlines for achieving GoFundMe campaign goals. Moreover, a campaign does not stop when the goal is achieved. Thus, campaign creators can get more money than planned.

Patreon

Patreon is a platform that allows artists and content creators to get paid for what they create. This platform follows the patronage principle. Patrons (sponsors) pay a monthly fee for early access to an artist’s content, additional artwork, or unspoken additions. Artists, in turn, are regularly paid for their work. Since its launch in 2013, Patreon has helped more than 150,000 artists earn over $1 billion.

Crowdfunder

The Crowdfunder platform allows entrepreneurs to raise funds for their projects in exchange for a stake in their companies. Unlike all other platforms mentioned above, Crowdfunder has a minimum amount of investment, which sometimes may reach tens of thousands of dollars.

Crowdfunder is a network of over 130,000 entrepreneurs and investors that has helped its users close more than 100 deals, worth an average of $1.8 million.

How to Create Your Own Crowdfunding Website

1. Learn how crowdfunding works

Many ideas will remain ideas without the necessary funding. However, attracting investors who will transfer money to a stranger based on a product prototype is not easy. Crowdfunding has opened up great opportunities for startups and innovators to get funding.

Crowdfunding is a way for entrepreneurs to raise capital by requesting small amounts of money from many people rather than large amounts from a few. Usually, crowdfunding campaigns are run through specialized online platforms.

At its core, a crowdfunding platform is a two-way marketplace, with fundraisers or creators on the one hand and donors or sponsors on the other. The platform provides a virtual space for these sides to interact.

Anyone with a business idea, charity, or personal need can start a crowdfunding campaign by posting a project description, business plan, and photos on a crowdfunding platform. Sponsors decide to invest in projects they deem worthy.

2. Decide what type of crowdfunding platform is right for you

The first step for a startup looking to build a crowdfunding site is deciding what type of crowdfunding platform they want. There are four main types:

Donation crowdfunding

Unlike other crowdfunding schemes, crowdfunding based on donations means people donate money to a cause without expecting anything in return. Some donation-based crowdfunding platforms may offer products, perks, or rewards as a thank you for donations, but there is no real return on investment associated with this type of fundraising.

Reward crowdfunding

Reward crowdfunding is a system in which people invest in projects in order to get compensation or rewards for their support. In reward-based fundraising, a group of people support a venture proposed by a project creator. Unlike with an equity crowdfunding system, with a reward crowdfunding system, the project owner retains 100% of venture capital funding through crowdfunding on the basis of remuneration.

Equity crowdfunding

Equity crowdfunding is a technique that’s gradually being introduced in the startup industry. It involves a group of investors funding a startup or small business in exchange for equity. It’s like any other type of investment in a company, only it can be done online without much hassle.

If a company makes a profit, the value of its shares rises, helping investors make a profit on their investments. Equity crowdfunding is also commonly known as investment crowdfunding.

Real estate crowdfunding

Since the inception of crowdfunding schemes, there have been many programs that people have joined to help foundations for specific reasons such as donations, equity, rewards, and lending. Recently, however, the real estate industry has also been trying to get help with online crowdfunding. Although the minimum investment is slightly higher than in other spheres, real estate crowdfunding is ideal for those looking to invest money in order to get returns in the long run.

3. Choose the revenue model for your crowdfunding platform

Like many other marketplaces, crowdfunding sites often get paid for their services. But this is not the only way to monetize your crowdfunding site. Before launching a crowdfunding platform, you must decide how it will generate revenue. There are four main ways:

Commission for the amount raised

Most crowdfunding platforms use this method of generating revenue. Fundraisers pay nothing until the desired amount of money is collected. This way, platforms only get paid when a campaign is successful. For example, Kickstarter takes 5% of capital raised for any successful campaign. In the entire history of Kickstarter, only 37% of projects have reached their goal.

From 2009 (when the company was formed) until 2020, Kickstarter projects have raised $5 billion, of which $4.7 billion has come from successful campaigns. For this revenue model to be profitable, a platform must receive a steady stream of new projects and investors.

Paid services and website features

Creators can pay a platform to help with things like marketing, campaign management, branding, prototyping, and video ads.

Advertisement

You can profit from running ads on your website.

Promoting campaigns

Because fundraising campaigns can last for months, old listings are overlooked in search results and can get lost in the crowd. You can let campaign creators pay for better visibility.

4. Find a crowdfunding niche

Each new crowdfunding platform is dedicated to a specific niche, meaning it runs crowdfunding campaigns for one specific purpose or one category of products.

There’s no point in trying to compete with the largest crowdfunding platforms on the market, because you are likely to lose. The popular crowdfunding sites you see today took years to build and attract a large stream of visitors, campaign creators, and sponsors. To accelerate the success of your own platform, you can choose a niche that has yet to emerge in the crowdfunding industry.

Choosing a niche helps differentiate your site from others and can benefit campaign creators and sponsors. Campaigns may have more success on a platform that attracts supporters of a particular category of products or causes than they would have on a larger, more universal crowdfunding platform. This is a great way to find good patrons.

5. Consider regulatory implications

Like any other business, crowdfunding platforms must comply with certain laws and regulations.

Crowdfunding business owners must plan and implement security measures to keep their platforms secure and comply with know your customer (KYC) and anti-money laundering (AML) laws.

KYC is a set of guidelines business owners must follow to verify the identities of their clients (especially investors and donors) to make sure they are who they say they are. These guidelines are aimed at identifying the client, assessing the risk of money laundering, and determining the legitimacy of the source(s) of a client’s funds. KYC is part of AML procedures and standards.

AML laws, regulations, and procedures are designed to prevent criminals from concealing illicit money. AML regulations require financial institutions to verify the origin of large sums of money and to track and report suspicious activities of their clients.

In addition to complying with the principles mentioned above, you need to ensure the security of sensitive data associated with your customers’ bank accounts and credit cards to prevent third parties from accessing them.

6. Defining features for the first release

To provide a marketplace for your crowdfunding platform, you first need to launch a minimum viable product (MVP). This will allow you to quickly and cost-effectively test your business idea.

An MVP is a version of a product that has enough features to engage users, satisfy them, and get feedback from them. To decide which features to implement in your MVP, you need to define a list of features for your platform, prioritize them, and implement only those that are needed.

A crowdfunding website is a dual marketplace with features for both fundraisers and sponsors. Let’s list the main features that each section should have:

FUNDRAISERS’ SECTION

1. Campaign creation

Fundraisers should be able to easily start a campaign. What information do you need to collect to create a campaign?

Basic information (project name, description, category, location, images, videos, campaign duration)

Budget (minimum target)

Donation reward

Project history (risks and problems)

Text about campaign owners

Payment details or documents for identity verification

If you want to continue learning about how to build a crowdfunding website, please visit the full article here.