Top 10 Crowdfunding Sites
Crowdfunding is a method where people can fund your personal or business project by donating their own money. Before the JOBS act was signed into law, companies weren't allowed to give equity to anyone who offered donations for their business. Now with equity being offered, crowdfunding has become the hot new way for average people to make investments without actually being accredited investors.
Crowdfunding is also good for small tech entrepreneurs who are looking to make their mark. The Crowdfunding Industry Report has shown that the overall crowdfunding industry has raised $2.7 billion in 2012, and in 2013 the industry is projected to grow to $5.1 billion
Here are the top 10 crowdfunding sites to watch out for.
Kickstarter is a site for creative projects led by artists, journalists, inventors, and filmmakers. It's one of the earliest crowdfunding sites, which has experienced many break-out campaigns in the last several years.
A special feature on Kickstarter is Black Reward, which allows users to create a small reward with a certain price point.
Fees: Kickstarter charges a 5% fee for every successful project. Amazon applies credit card processing fees (for Amazon Payment), which are 3-5% of the raised project fund. Owners of projects need to have Social Security numbers in the United States, which means the project creator can't be a non-U.S. Resident.
While Kickstarter caters to creative projects, Indiegogo approves donations for music, personal finance needs, and charities. They don't accept investments.
Indiegogo had an early start in the industry, and has already raised millions of dollars for over 30,000 campaigns across the world. They utilize a broad approach which makes it easy for anyone to start with them. Anyone, whether they are a U.S. resident or not, can receive funding using PayPal as a payment option. Another option is Flexible Funding, which ensures that any person can receive funding even if the project has failed to reach its funding goal.
Fees: Indiegogo receives 4% from every raised fund; 3% will be charged for credit card processing, plus $25 wire fee for non-U.S. campaigns. Indiegogo charges 9% of the fund if you apply for Flexible Funding, but you get to take the remaining funds away.
Crowdfunder is the site for businesses. It features a growing social network of investors, tech startups, small businesses, and social enterprises. It also features a blend of donation-based and investment corresponding from individual and angel investors.
Crowdfunder was a leading participant in the JOBS Act legislation. At of the end of May, nearly 2,000 companies had signed up with Crowdfunder, pledging $17 million in investments. They allow U.S. startups and small businesses to raise funds by selling equity, debt, and revenue-based securities, while also attracting angel investors and venture capital to people's companies.
RocketHub has gained a large following from media exposure. The site has a simple three-step process, which allows users to upload their projects, then track their progress and status.
The site features LaunchPad, a tool which offers members to work with top-notch brands, companies and marketers to help them raise public interest and seek more potential opportunities for their projects. Prizes range from photography exhibition venues to 4-week media outreach campaigns with top marketers.
Fees: RocketHub charges 4% of the fund for successful projects, and 8% for projects ended without reaching their financial goal. In addition, they charge 4% for credit card processing.
Appbackr is a site for people looking to get donations for the next mobile app that they're trying to develop. Basically, backers who are interested in supporting an app can donate the money and then get cash back with the sales price of the app once it's ready.
In other words, the more you put into your investment, the more you get out; if you buy an app during its developmental stages at $3 and it's sold for $6, you technically made $3. It's a win-win situation for investors and start-ups, and the best part is that Appbackr handles the whole trade process.
Fees: Appbackr doesn't offer a fixed percentage. The amount will depend on the app price, and it could also be based on several other factors. More about this process is listed on the website's FAQ.
6. Pledge Music
Music careers are expensive and require a great deal of funding and publicity. PledgeMusic is devoted to help bring new talent into the industry. Unlike most music sites which feature a hardcore user interface, PledgeMusic uses persuasion, much like its cousins Kickstarter and Indiegogo.
Like with Appbackr, the higher the pledge the more money you'll get in the long run. Even low pledges are still supporting digital downloads of the artist-produced albums.
Fees: PledgeMusic charges a heavy 15% fee, which means you probably have to weigh the intrinsic cost of the value before you go all in.
Founded in January 2010, WeFunder boasts a community of over 6,000 funders pledging more than $16.5 million in investments. The platform combines traditional startup funding with equity crowd funding in amounts as low as $100.
WeFunder only allows accredited investors to invest in startups, but that should change in early 2014. Those who purchase through WeFunder can hold interests in the fund for a very long time, but may not see returns any time soon.
Unaccredited investors' amounts will be capped by law at 5% or 10% of their incomes.
Crowdrise is more interested in real-world issues rather than fueling creativity. Their funds support projects for animal welfare, arts, cultures, disease, education, and religions. They help raise money for charity, and also help with personal causes, such as birthdays, weddings, and college projects (charity and personal fundraising are separated into 'Fundraiser' and 'Nonprofit' categories).
The more people donate to a certain fundraiser, the more CrowdRise points the fundraiser will get. This is a points system that allows members to know which fundraiser or organization has made more impact on the world, which helps in raising the popularity of the organization and improving their reputation.
Fees: There's a 4.95% charge for a profit fundraising event, and a transaction fee involved in extra charges. For non-profit organizations, you can choose from a range of account types, from free to a $199 monthly fee.
Created by a group of venture capitalists and investment bankers, RelayFund views crowdfunding for equity as “the next major catalyst in transforming the capital markets and connecting everyday Americans with private equity.”
The site's platform places a large emphasis on social networking. The platform page states, “RelayFund stands apart by combining crowdfunding with social networking to dramatically enhance the user experience in charitable, creative and for-profit endeavors.”
While the company looks promising, it's still very fresh. Follow developments as they arise on RelayFund.com.
AngelList is for tech startups with investors already signed on, who are looking for that grander Silicon Valley momentum. The site was not originally intended for crowdfunding, but they are now looking to get into that game.
Over 1500 startups have used AngelList to raise money. Startups that have raised money on AngelList have gone on to raise over $1.6 billion in subsequent rounds. Startups that have used AngelList to recruit have been introduced to over 10,000 candidates.
The Invest Online feature allows accredited investors to put small amounts of money into startups. However, startups still cannot publicly announce that they are raising money—only accredited investors can see which companies are raising money online.
While crowdfunding is still a new development for businesses, it is anticipated to gain momentum by the start of 2014 - when all of these websites will have finished incorporating it into their models. With all the money being raised for crowdfunding so far and in so many different areas, it is bound continue in one form or another. It will be exciting to see how new businesses and projects will flourish in the future, and if the voices (and wallets) of common people will be encouraged above the usual packs of investors.