Nowadays, crowdfunding platforms are all over the internet, helping startups, as well as social causes, raise the investment they require. Even though raising money is the basic mission of crowdfunding platforms, that doesn’t reflect their entire function.
In this article, we’ll discuss the functions of crowdfunding platforms and we’ll also discover how you can benefit from them. If you want to know more about crowdfunding platforms, we’re certain that you’ll be benefitted greatly from this platform.
The function of Crowdfunding Platforms
What is a crowdfunding platform?
Essentially, it’s a platform that allows businesses, organizations, or individuals to raise money for a certain cause. There are tons of crowdfunding platforms on the internet, and you’ll find a lot of successful ones out there. Other than the top platforms that are generating a ton of revenues, you’ll find some smaller businesses that are generating a considerable amount also.
So, how do all these platforms generate revenues? Why don’t people stick to one or two platforms? It’s also natural to question why people are opting for the lesser-known platforms where they can go for the top ones.
Well, a common answer to these would be, perhaps the lesser-known platforms have some special value proposition that the big players are failing to offer. Even though that may be the case for some, the main reason behind this is, there are different types of crowdfunding platforms, and all of them function differently.
Crowdfunding platforms can be divided into five types. These are:
This is one of the most popular types of crowdfunding, which is best for raising community-based or personal crowdfunding. It’s easier to share the fundraiser with social media accounts in case of these, so raising money becomes much easier.
This type is common too. The reward-based crowdfunding platforms offer rewards on a particular amount of donation. This incentivizes the users to donate more and makes the platform more effective than donation-based platforms.
Private equity is great for small and medium-sized companies for raising the money required for launching the company. In this type of crowdfunding, the donators are offered a share based on the amount they’re donating to the business.
As the name suggests, debt-based crowdfunding allows a business or an individual to gather money fast, as the receiver promises to pay the money back in a determined amount of time.
Finally, we have the real-estate model of crowdfunding, which is growing recently, because it allows investors to put their money in real estate without having to resort to a traditional loan. This type of crowdfunding business allows investors to donate a specific amount of money to own a share of the property they’re investing on, and they’ll receive their share after each quarter.
As you can see, there are different types of crowdfunding platforms, and each type allows you to work with a specific set of niches. This is why a single platform can’t grab all sorts of investors or recipients.
A Brief Introduction to The Best Crowdfunding Platforms
In this section, we’ll take a look at some of the best crowdfunding platforms right now.
Kickstarter is perhaps the most famous crowdfunding platform right now. This platform was created to help tech and creative entrepreneurs, and it’s serving its purpose well for the last few years. Since 2009, it has raised more than 5.6 billion USD.
Indiegogo serves a purpose similar to Kickstarter, and it’s also one of the most trusted crowdfunding platforms right now. What makes Indiegogo famous is its user experience. You can choose one of two funding options which are fixed and flexible funding.
In case of fixed funding, the fundraisers are asked to set a threshold which, if not met, the collected funds are returned to the investors. On the other hand, the flexible funding allows the fundraisers to collect whatever donations they have acquired. This system was a game-changer and it helped Indiegogo reach the top of this industry.
Patreon is one of the most famous crowdfunding platforms right now, and it undertook a unique policy. Patreon is more like a paid platform for content creators, where the content creators can sell their content for a price. It not only allows creative minds to make a living out of their work, but it also helps entertain and educate the users with well-crafted content.
Gofundme is another big player in this industry, and it offers a flexible funding system from Indiegogo. Gofundme charges 30 cents for each donation and a 2.9% processing fee. However, it allows the fundraisers to keep whatever donation they’ve received, irrespective of whether they succeed to meet the goal or not.
For everyone asking what are crowdfunding platforms, knowing the platforms listed above are crucial, as these are the best crowdfunding platforms as of now.
How You Can Benefit from Them
Most people who are asking “What is a crowdfunding platform” want to know how they can benefit from them. So, we’ll list some key benefits that you can expect from crowdfunding platforms.
Crowdfunding platforms are much more efficient than traditional crowdfunding as you can reach millions of people both home and abroad, and with a fraction of effort and investment.
Helps You Improve Your Idea
Crowdfunding platforms not only help you raise funds, but they also help you brainstorm your ideas with the investors and benefactors. This makes these platforms a great place for refining your idea.
Great Way of Increasing Media Exposure
You’ll find media covering news on different incentives when they raise a high amount of funding. This is a great way of increasing media exposure.
Hopefully, this brief discussion answers your question “What is a crowdfunding platform?” However, it only scratches the surface, and we highly encourage you to put more time into researching how crowdfunding platforms work.