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The 10 Best Crowdfunding Websites

This article will not just explore what crowdfunding is but will look into the best ten lending networks operating today, and how they can be used by startups in capital raising.

Crowdfunding is a way of raising capital to fund a business idea/venture by receiving small amounts of capital from a large number of people. These people are often connected through social networks and websites, and these networks and websites bring together both lenders and borrowers.

An advantage of crowdfunding websites is that they expand the pool of potential investors beyond the traditional professional startup investors, such as venture capitalists.

Regulation is usually in place to protect the unsophisticated investor (depending on the domicile). There are restrictions on who can invest in what and limits on how much can be invested in certain types of business. These regulations are designed to reduce the risk of investors losing all their money due to the high risk of certain types of businesses failing. startups are an inherently risky asset class.

Crowdfunding has provided a way of bringing together ordinary investors and entrepreneurs. These types of investors may be looking to diversify a portfolio or may just be looking to support a specific type of business that produces a product/service that they believe in. Investments can be made from as little as 10s of pounds, up to 000s of pounds.

What types of crowdfunding websites are there?

There are three general types of crowdfunding websites and each one has its own advantages and disadvantages.

Peer to peer or loan-based crowdfunding. These types of crowdfunding websites give lenders the chance to invest money, as loans, to businesses (or individuals) looking to raise capital. The loans are repaid over time with interest. Peer to peer websites can be attractive to individuals with savings and a risk appetite for returns greater than typical savings account interest rates.

Equity-based crowdfunding websites give investors the chance to invest money in a business in return for equity in the business. The equity share will be proportional to the size of the investment and the valuation of the business in question. These types of investment must be carefully considered as potential returns and the risk to capital can be difficult to understand.

Reward-based crowdfunding websites provide investors with a reward instead of equity or interest payments. The reward is generally linked to the size of the funding received, i.e., larger pledges receive rewards of greater value. The rewards are typically linked to the type of business being supported. For example, a startup raising cash to develop a new type of drone may offer the reward of money off the final product.

Crowdfunding websites provide a level of security to investors money. Money is usually held separately from business until the final funding target has been reached. This ensures that if the business doesn’t raise all the money it needs, investors have their money returned to them. Websites operate in different ways however and care should be taken to make sure the operation of a platform compliments your fundraising needs.

The best 10 crowdfunding websites for startups

Whatever your funding goals, crowdfunding may offer an imaginative solution to help you achieve them. We have reviewed the best ten websites available to help you pick the right one for your startup. In no particular order…

1. Indigogo

Indigogo is the place for entrepreneurs and startups to raise capital for their idea or project. You create a funding campaign that is hosted on the site. Financial backers are attracted by offering them a choice of “perks” based on the amount of money they give. The funding campaign is self-promoted, through social media, news media or word of mouth. In return, Indigogo takes a % of the money raised through a platform fee and transaction fee.

Crowdfunding type: Rewards-based.

How much can you raise: £500 minimum, no maximum.

Who it’s good for:

  • Tech startups.

Advantages:

  • Campaigns can be promoted to the existing Indigogo community (for a fee).
  • No maximum fundraising goal.
  • Choice of funding types.
  • Established community of backers.

The Indigogo “fixed funding” type means that the company returns investor money if you are not able to reach your funding target. There is another option, “flexible funding”, which means that as long as perks can be fulfilled, startups can retain cash even if targets aren’t met. Indigogo operates across the globe and has had notable successful campaigns, including a luggage company that raised $3m and a laptop USB hub device that received $1m.

An advantage of Indigogo is the large community following they have. There is an established network of individuals that are repeat backers of projects. This could be helpful when it comes to marketing your campaign, a natural consequence of using the platform is that a certain amount of traffic could find you even without active promotion.

2. Kickstarter

The Kickstarter platform has been around for a decade. It’s one of the best-known crowdfunding websites out there and “Kickstarter” has become synonymous with the crowdfunding genre. This site has restrictions, your business must “create something to share” and fall into a designated category, such as Technology, Games and Fashion.

Crowdfunding type: Rewards-based.

How much can you raise: No maximum.

What it’s good for:

  • Targeting a large audience of potential backers.

Advantages:

  • Existing funder base.
  • Operates in 6 countries.

Kickstarter operates an all or nothing funding model. Meaning that if you don’t reach your target, you won’t have access to any cash. There’s also a tricker to navigate the acceptance process and roughly 2 out of 3 projects don’t end up receiving their funding. However, over 200k projects have been successfully funded with over $6bn dollars in capital. The benefit of the established backer community is a real positive aspect of Kickstarter. They have a network of over 15m people, which makes marketing your campaign easier to complete successfully. As with other reward-based crowdfunding websites, you will need to offer rewards to your backers, typically ranging from an acknowledgement on your website to a version of your final product. The cost of using Kickstarter for a campaign is typically between 8% to 10%, through a combination of their platform fee and transaction processing fee.

3. Wefunder

Wefunder calls itself “Kickstarter for investing”. Unlike Kickstarter, on Wefunder investors are not rewarded for backing a business, instead, the transaction is more like typical investing, with individuals seeking a return on their capital. Investors pick businesses they think will succeed and fund them from as little as $100, if the business fails, all capital is lost. This crowdfunding website aims to fund companies in the time between brand new startups and the third round (Series C) of capital raising.

Crowdfunding type: Equity-based.

How much can you raise: $20k to $5m per year.

Who it’s good for:

  • startups looking to achieve growth.

Advantages:

  • High success rate (75%).
  • Investor resources for startups.
  • Legal library.
  • Investors typically have financial knowledge.

Wefunder performs due diligence on startups and businesses are required to provide financial information for review and legal processes. The cost of using Wefunder is 7.5%, which is deducted from the final amount of money raised. This should be allowed for in your investment goal during planning. For this fee, you not only get a platform but good access to resources and support for your campaign. This includes assisting you with investor relations and annual reports up to providing access to a legal library to ensure the documents you need (think SEC/FCA) are high quality and comprehensive.

4. Patreon

Patreon offers entrepreneurs and creators a platform to receive memberships. This sort of funding is community-based and allows fans of your product/content/service to fund you so that you can carry on proving that product/content/service.

Crowdfunding type: Rewards-based.

How much can you raise: This depends on the size of the community you attract.

Who it’s good for:

  • startups that have a large following.

Advantages:

  • Recurring funding stream.
  • No minimum fundraising goal.

On Patreon, the financial rewards are directly proportional to the size of the community you have. If your startup makes things that people want to see, interact with or enjoy, this website might be a viable option. It’s attractive to some entrepreneurs as it can supply a steady funding stream, in return you make your work available to your following.

There are a variety of business models that work on Patreon, such as:

Gated Content: Allow your patrons access to premium content related to your startup.

Pay What You Can: This model is based on offering your community something of value, and in return, you ask the community to pay what they can.

Community-Based: You create funding through building a community around your startup. The community make financial contributions based on the content and offer within the community. This can be anything from making key people available to talk about your startup, Q&A within the community and making specific content for them.

5. Crowdcube

Crowdcube has so far transacted over $1bn in investments. startups and established companies are hosted on the website and the investment community using Crowdcube ranges from beginners to professionals. Users can invest anything from £10 and in return receive an equity stake. This equity is then held and profit is made by selling the share when the company grows to the point it goes public or buys back shares. There is no guaranteed secondary market on Crowdcube and equity stakes may have to be held for a considerable time until a return is made. Dividend payments can also be made to investors, although again these aren’t guaranteed.

Crowdfunding type: Equity-based.

How much can you raise: Minimum £150k

Who it’s good for:

  • startups and established businesses.

Advantages:

  • FCA regulated.
  • Transparent fees.
  • The broad spectrum of investors.

Crowdcube charges a 7% fee on the funds raised for your business, paid if your fundraising goal is achieved. On top of this, that a processing fee of between 0.75 to 1.25% is levied. There have been some noticeable success stories from Crowdcube, including Monzo (raised £20m) and GoHenry (raised £6m). BrewDog has raised capital multiple times using Crowdcube with a combined total of over £42m this shows the capital raising power of Crowdcube to connect investors and businesses. startups may not attract that level of investor appetite, however, there is a strong community of individuals who understand where the value is in early-stage startups and more importantly, they’re willing to part with cash in return for a long term investment.

6. Syndicate Room

Not your typical crowdfunding website.

Syndicate Room is a venture capital fund that uses data and diversification to generate returns for investors. The fund co-invests with high performing angel investors in the UK. These angel investors have been identified by Syndicate Room as being among the top-performing in the UK.

Syndicate Room operates very differently from other equity-based crowdfunding websites.

Entertainers create a campaign and this campaign is then ‘bundled’ up with other projects looking for funding. Investors then select these ‘bundles’ (which have been diversified) based on the projected returns and their risk appetite.

Syndicate Room operates a data and research-based model, aiming to group projects together to fully capture the potential for growth (and large returns) in the UK startup market.

Crowdfunding type: Equity-based.

How much can you raise: Syndicate Rooms will co-invest in funding rounds between £400k and £5m.

Who it’s good for:

  • startups.
  • UK based and EIS eligible.

Advantages:

  • Low fee.
  • Quick decision.

Syndicate Room charges a one-off 2% fee based on the final level of its investment in your startup. They promise to review your financial documents and make an investment decision within 10 days of you making them available. Investment is only open to UK based startups and those that are EIS eligible. This allows investors to get a tax advantage on their investment and Syndicate Room stand out from the crowd. The added benefit of following high performing angel investors (they call them super angels) makes this website an attractive proposition to both founders and investors.

7. Crowdfunder

Crowdfunder projects range from charitable to for-profit, and everything in-between. The platform has raised over £200m in total for projects they’ve hosted. The typical reward-based model is followed on Crowdfunder, businesses create a project or campaign, outline the rewards available, and then market their project to raise as much funding as possible. This platform utilises several guides and ‘added value’ coaching to differentiate itself from the bigger (more established) platforms.

Crowdfunding type: Rewards-based.

How much can you raise: £500 to £100k+.

Who it’s good for:

  • startups.

Advantages:

  • Lower fees than US peer platforms.
  • Fundraising ‘coaches’ support fundraising.
  • “Extra Funding” feature.

Crowdfunder has secured investment from some large backers to “match investment” in causes or projects that these backers would find beneficial.

For example: If you run a startup that wants to raise £80k to develop an innovative green technology, ABCD Bank Plc may want to match that funding and provide an additional £80k. If you’re eligible, this could be a valuable boon for your startup.

Crowdfunder also has low fees, currently 3% plus a transaction fee, undercutting Kickstarter and Indigogo.

8. Seedrs

Seedrs crowdfunding follows a fixed fundraising campaign, if your target amount isn’t reached, the money is returned to investors. Investors can purchase equity from as little as £10, up to a maximum of £150k. There is a 7.5% fee to startups once the funding goal is met. Seedrs also takes a 7.5% share of any profits that investors make if the equity is sold for a profit in the future.

Crowdfunding type: Equity-based.

How much can you raise: £50k up to £7.4m

Who it’s good for:

  • startups.

Advantages:

  • Offers marketing promotion.
  • Investors can participate from as little as £10.

Seedrs has raised a total amount of £1.4bn across 1,445 successfully funded deals. Seedrs offers startups the chance to purchase promotion of campaigns to its network. This provides an advantage to startups as it reduces the need to self-promote and find investors yourself.

9. Funding Circle

Funding Circle is a peer to peer crowdfunding website. The platform connects lenders and borrowers and facilitates the origination of business loans between them. Businesses then make fixed monthly repayments which are distributed back to lenders.

Crowdfunding type: Peer to peer.

How much can you raise: £10k up to £500k.

Who it’s good for:

  • startups with revenue and established businesses.

Advantages:

  • Quick decision (as little as 1 hour).
  • Fixed repayments.
  • No prepayment fees.

This type of fundraising is straightforward. Businesses submit an application form, supported by financial information, and Funding Circle makes a decision. The lending rates are between 2.9% and 12.1% based on risk. The advantage of this site is the decision to lend is made quickly and the repayments are fixed, and therefore predictable. Funding circles do not charge prepayment fees which means you can repay early without incurring a penalty. The platform makes it straightforward to change terms once borrowing is in place. After a minimum number of payments (without arrears) borrowing can be increased without much hassle. Terms of lending are very transparent and Funding Circle has online calculators and other tools to ensure that borrowers and lenders have all the information they need to make informed choices.

10. Fundable

Fundable offers a choice between reward or equity-based fundraising. Companies make this decision when constructing their campaign and set the terms of potential investments. Once set, these terms are offered to investors and startups market themselves both on and off the platform. Similar to other crowdfunding websites, additional promotion of a campaign can be purchased to help boost investment.

Crowdfunding type: Reward or equity-based.

How much can you raise: Equity $50k up to $10m. Rewards < $50k (typically).

Who it’s good for:

  • startups of all kinds.

Advantages:

  • Promotion packages available.
  • No success fees.

Fundable charges a flat rate to businesses looking to fundraise, $179 per month. There are no fees to businesses once funding goals are met, all money invested goes to the business, although a transaction fee may apply. Unlike the reward-based offer, when using equity-based fundraising, investing is only open to accredited investors.

In closing, there are plenty of crowdfunding options out there. To narrow the field, decide what type of fundraising suits your startup and long term goals. Is your business like to engage a community based on its intrinsic value (think green tech), or are you more likely to attract sophisticated investors based on future returns?

Borrowing goals should be based on realistic assumptions platform fees should always be factored in. Rewards-based funding should offer meaningful rewards while ensuring there is capital available to achieve your business goals alongside issuing these rewards.

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