Today crowdfunding of startups has become serious business. Any business that has billion of dollars riding on it ought to be taken seriously. And according to reports from market research the total investments into startups in the US alone is over $2 billion dollars. And it is hardly surprising. After all crowdfunding is empowering for all the parties concerned. The entrepreneurs who can compete with the biggest and well established names as they have the backing of their potential customers. The end users who back only those ventures that they themselves like. Above all crowdfunding ensures that there is a level playing field for all comers thus making business robust, dynamic and user centric. With real estate & equity crowdfunding adding more to the kitty, experts are anticipating that it is only a matter of time before this type of fund raising overtakes venture capital (and Angel investors) Here are the best platforms for startup funding:
It has been less than a decade since this American crowdfunding portal came into being and it is estimated that it has already helped raise upto a massive two billion dollars involving over 2,50,000 projects since it’s inception. That the people behind Kickstarter liken it to the NEA (National Endowment Agency) affirms it’s commitment (largely) to those projects that are creatively inclined. Though it is fairly easy to launch a campaign for a startup venture on Kickstarter it is also important to follow the guidelines specified by Kickstarter to ensure that everything goes smoothly. For instance Kickstarter insists that creators divulge as many details of their campaign as possible (including a prototype) which is consistent with the vision at Kickstarter that it is a forum where people back creative projects. What it is not is a place where you place an order for a product. Charity based fund raisers and those promising equity are a strict no-no.
According to available statistics it is estimated that upto every four out of ten projects that are headlined on Kickstarter end up reaching their goal. Which is a very impressive success rate. A creator must also be aware that Kickstarter charges successful campaigns 5% of the total funds raised. This is apart from the processing fees (about 3%) that is paid to the payment gateway. In case the projects fails to take off no funds are collected nor is there any processing fee to be paid to Kickstarter. Those backing projects on Kickstarter would do well to know that it does not claim any ownership over them. So it would be better for backers to take informed decisions for even Kickstarter has some free loaders trying to make a fast buck. At the same time backers can take a legal recourse in cases where they feel that the creators have reneged on the promises made initially.
An year before Indiegogo made it’s foray into crowdfunding in San Francisco making it a pioneer of sorts when it comes to this industry. Though Indiegogo does not share the actual numbers of the campaigns that are run on this portal as openly as Kickstarter it is estimated that since the year 2008 there have been totally about 1,75,000 fundraisers on Indiegogo that have raised close to a billion dollars in funding. Indiegogo is a more creator friendly platform and there is good reason why. Firstly Indiegogo is not particular about the type of campaigns that are run on the portal. So you can raise funds even for charitable causes on Indiegogo. Then there is Indiegogo Life that was started three years ago in order to aid those who need personal funds for important life events and emergencies (like expensive medical treatment for terminal illnesses) For all such fund raisers that come under the category of Indiegogo Life there is no processing fee to be paid to Indiegogo.
The best part about Indiegogo campaigns is the option to collect funds received regardless of whether the goal is reached or not. Unlike on Kickstarter where a creator only receives the funds if the threshold for required funds is reached. If you choose this flexible funding option you have to pay the processing fee to Indiegogo regardless of the outcome. That happens to be 5% along with whatever has to be paid to the payment gateway. Indiegogo also does not mandate creators to come up with a prototype or furnish all details of their campaign making their screening process far more lenient when compared with Kickstarter which is the reason why sometimes quality does take a hit. So even if your campaign is still in the ideation phase you can share it with potential backers on Indiegogo. Starting last year Indiegogo has given the go ahead to equity based campaigns. Which only means more options.
It has been five years since Fundable backed by Angel investors and venture capitalists started a portal to help companies raise capital. Fundable is one of the first platforms to offer equity based crowdfunding. That it was a group of entrepreneurs who came together to start Fundable works to it’s advantage. In addition the advisory board at Fundable is made up of several noted business figures and venture capitalists who guide creators (read startup companies) in the whole process of raising funds. What make this it so credible is that Fundable only works with accredited investors who receive equity in return for the monies that they invest in startups. The screening process for these startups is stringent and interested applicants have to pay a monthly fee of $179. Even though it is possible that the advisors at Fundable might reject your application.
The payment structure at Fundable is decidedly investor friendly which means that unless campaign goals are reached the creators will not receive anything. As regards to offering rewards versus equity Fundable suggests that a creator/startup company offer rewards for consumer related campaigns that are usually not capital intensive. As compared to raising substantial amount of capital in which case they feel offering equity is a better option. In the first year that it came into being itself Fundable was able to raise over $80 million through it’s campaigns and so far has raised over $320 million dollars in five years since. For those startups who are clear about their goals and preferably have a clear business plan of action Fundable is the right avenue.
Started about three years ago, this crowdfunding platform is the result of Harvard University’s I-lab and their acclaimed VIP (Venture Incubation Program) that encourages student entrepreneurs of the University. Impact Guru is a versatile platform in the sense that they are open to showcasing all types of fundraisers. Be it a creative one, a business venture or for a charitable purpose all are welcome on the Impact Guru portal. Where the processing fee is 4.5% for individual fundraisers it is hiked upto 5.5% for business groups. You only pay this if and when your campaign reaches it’s goal. Thus far Impact Guru has helped various projects raise over 329 crores in over 15 countries.
Wishberry (Special Mention)
Here is a crowdfunding portal that began as a ‘wedding gift registry’ site before moving to raising funds for social causes. After 3 years Wishberry moved into crowdfunding of creative projects. Modelled after Kickstarter all campaigns here are expected to show seriousness of intent by showcasing some prototype. And though they charge 10% as fees no payments are made unless set goals are made. Not to Wishberry nor to the creators. A one time fee of 13,000 INR has to be paid once a project goes live. With a surprisingly high success ratio of 70% (three films funded via Wishberry won National Awards) this portal has thus far completed over 400 projects and helped raise over 11 crore INR.
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