I’m currently helping a friend launch her family’s business, Haven Mask. One of the things we’ve been talking about is the effectiveness of crowdfunding for startups as a combined funding and marketing strategy. Depending on where Haven Mask goes with crowdfunding, I may do a deeper dive into the crowdfunding process. But for now, I’m sharing what I’ve learned and publishing a list of crowdfunding sites for consumer businesses.
(As always, we’ll keep this list up-to-date. 8/25/2020 is the original publication date; the current publication date reflects the last edit.)
Types of Crowdfunding for Startups
There are three types of crowdfunding. Early stage businesses will likely want to focus on rewards-based campaigns in order to raise capital for inventory and launch. We’re covering all three types of crowdfunding here.
Some sites enable individuals to raise donations. GoFundMe is the most well known donation fundraising platform. That said, and in most cases, a donation-based fundraising won’t be right for businesses. But perhaps it’s worth considering as an option.
The Jobs Act paved the path towards equity-based crowdfunding. It was passed into law in 2012. Sites like WeFunder and CircleUp enable investors to purchase small shares of equity in businesses in exchange for capital.
Kickstarter and Indiegogo popularized rewards-based crowdfunding after they launched in 2009 and 2007, respectively. Backers choose a rewards tier (for instance, 1 of your widgets; 5 of your widgets; or 5 of your widgets plus a t-shirt) in exchange for dollar amount. Backers receive their goods once your campaign is closed — and your widgets and t-shirts have been produced.
List of Crowdfunding Sites for Consumer Businesses
Kickstarter is one of the best known and most popular sites for crowdfunding. It’s free to create a project on Kickstarter.
Note that that you need to reach your fundraising goal within your allotted amount of time, otherwise you won’t receive any funds at all. If your project is successfully funded, Kickstarter keeps 5%. You should also also expect a payment processing fee between 3-5%.
Startups can choose between fixed and flexible funding, mean that you’re not subject to the same all-or-nothing fundraising hurdle as Kickstarter. Indigogo charges a 5% platform fee for all crowdfunding projects. (You’ll pay extra if your project isn’t fully funded but you choose to collect funds anyway. But it’s great to know that this is an option!)
Focused on funding women entrepreneurs, iFundWomen has a similar model of 5% plus processing fees. They also offer mentorship and coaching for companies crowdfunding through their site.
Founders can choose between equity and rewards financing. Rather than keeping a percentage of your raise, Fundable charges a flat $169/mo fee. Like the others, expect a processing fee related to your payout — 3.5% plus $0.30 per transaction.
What are we missing? Did you run a successful crowdfunding campaign? Share in the comments, or get in touch.