If you’re on social media, you’ve likely stumbled across a crowdfunding campaign. Crowdfunding has become a new and increasingly popular way for entrepreneurs, small business owners, and nonprofits to raise the funds they need.
Instead of applying for a small business loan through the bank, crowdfunding allows you to collect small donations from multiple people. With enough time and marketing, you can raise the funds you need to start your business or advance your cause.
But there are so many crowdfunding sites available. What are their differences, and which is the right choice for you? Below, we’re listing the best crowdfunding sites and their fees, differences, and strengths.
Let’s get started.
On our list of best crowdfunding sites, Kickstarter ranks best overall. This platform has helped bring many startup ideas to fruition, including wireless headphones, video games, 3D printers, and smartwatches. According to its website, Kickstarter has helped raise over $5 billion and has successfully funded nearly 200,000 projects since its launch in 2009.
Kickstarter follows an all-or-nothing model in which the campaigner doesn’t collect money unless they reach their funding goal. This minimizes risk for entrepreneurs and investors alike. Contributors don’t feel like they invested in a lost cause, and it encourages creators to be realistic about their funding goal.
Creating a Kickstarter account is free. If your project is successfully funded, Kickstarter collects 5% of your funding total and an additional 3-5% in payment processing fees.
Indiegogo is one of the best crowdfunding sites, empowering entrepreneurs and small businesses to solve problems through wit and innovation. Since 2008, Indiegogo has contributed to over 800,000 business ideas and has backers in over 200 countries.
Indiegogo is similar to Kickstarter as a crowdfunding site and collects similar fees. Unlike Kickstarter, however, Indiegogo allows you to choose between fixed and flexible funding. Fixed funding follows Kickstarter’s all-or-nothing model—contributions are returned to the donors if you do not reach your funding goal. In contrast, flexible funding allows you to keep the funds you raise, even if you do not reach your funding goal.
Indiegogo collects a 5% platform fee on the funds you raise (including any amount exceeding your funding goal). Moreover, Indiegogo charges a processing fee based on your location and currency. You can review Indiegogo’s fee breakdown table on their website. [2]
Patreon is one of the best crowdfunding sites for content creators, artists, and musicians to monetize their craft and content. In fact, Jack Conte, a YouTube musician, co-founded Patreon to make money from his music. According to their website, Patreon hosts over 200,000 creators with more than 6 million patrons. Many of today’s YouTube creators now supplement their income on Patreon by offering rewards like exclusive content, live interactions, and prizes.
Patreon collects a percentage of the monthly income you earn, depending on the plan you select. For example, their Lite plan collects 5% of your monthly income, and their Pro plan collects 8%. Patreon also charges a payment processing fee that depends on your location—U.S. transactions are subject to 3.9% plus $0.30 for transactions above $3. Finally, Patreon charges a transfer fee when moving your Patreon funds to your personal account—$0.25 for payout via direct deposit for U.S. creators.
Among the best crowdfunding sites listed, GoFundMe is an excellent choice for individuals and nonprofit groups raising awareness and funds for a worthy and compassionate cause. GoFundMe’s website notes how they’ve become one of the largest and free social fundraising platforms, collecting over $9 billion from 120 million donations since 2010.
The range of campaigns you could start is vast. For example, the Help Fill Madi’s Treasure Box campaign raised over $40,000 to donate multicultural crayons and books to schools. Also, one couple started a GoFundMe campaign to pay for chemo for their golden retriever and raised nearly $15,000.
GoFundMe no longer charges a platform fee, making fundraising free and accessible for more people. Instead, GoFundMe employs a tipping model—people can choose to donate to GoFundMe when contributing to a campaign. GoFundMe still charges a payment processing fee of 2.9% plus $0.30. Payment processing fees are inevitable, as a third-party payment processor must verify the transaction.
On our list of best crowdfunding sites, LendingClub is most similar to securing a business loan. This platform is helping tons of individuals and small business owners gain the capital they need through peer-to-peer lending. Peer-to-peer lending allows people to invest in LendingClub and essentially lenders to people seeking a loan. Their website claims they’ve lent over $50 billion and served over 3 million customers.
Through LendingClub, you can secure a loan with a 3-year or 5-year term. To qualify for a small business loan through LendingClub, you will need to meet the following requirements:
LendingClub does not charge any application or broker fees. However, you will incur an origination fee of 2-6% of the loan amount, if approved.
Teespring is a crowdfunding site and ecommerce platform for selling tee-shirts, hoodies, phone cases, home decor, hats, and more. The unique part about using Teespring is that it handles order fulfillment. You are responsible for designing the product and marketing your store. This creates a convenient and hands-off approach for entrepreneurs—similar to Amazon’s Fulfilled by Amazon (FBA) model.
There are no upfront costs when using Teespring. Instead, Teespring charges a flat fee per item sold. This “base cost” will depend on the price of your product. For example, Teespring charges a base cost of $27.50 for leggings sold at $39.99. Obviously, this is a hefty base cost, but Teespring does handle the tedious and stressful process of fulfilling customer orders.
As Shopify is one of the most popular online store builders, its Crowdfunder app earns a shoutout on our list of best crowdfunding sites. If you’re already selling products through your Shopify store and think of a new product idea, you can crowdfund the capital you need through their app. This eliminates the need to juggle between two platforms—one for your existing store and another for your crowdfunding campaign.
Crowfunder has helped Keysmart, a quiet and seamless storage solution for your noisy and clunky keys, raise over $5,000. FCTRY, a Brooklyn-based product design company, has also used Crowdfunder to raise nearly $200,000.
Crowdfunder’s fees are straightforward: $24 per month. However, please note that this monthly subscription is on top of your existing Shopify plan.
The U.S. Securities and Exchange Commission defines crowdfunding as “a financing method in which money is raised through soliciting relatively small individual investments or contributions from a large number of people.”
Crowdfunding is a new, yet increasingly popular, financing solution for individuals, small business owners, and nonprofit causes.
There are several types of crowdfunding that affect how you raise funds and what the investor gains:
Regardless of which crowdfunding site you choose, your funding campaign will typically follow the same process:
Fulfill your orders: After reaching your funding goal, it’s time to complete your orders and deliver them to your eager customers.
Crowdfunding has created an innovative way to raise the capital you need to start your business without resorting to a traditional bank loan. If you can craft a compelling story and employ an effective marketing plan, you can create a crowdfunding campaign and meet your funding goal. Just be mindful of the crowdfunding sites and their various fees—they can add up!
We hope this list of the best crowdfunding sites has helped you determine which one is right for you—or whether crowdfunding is the right financing solution for your business. Good luck!