Crowdfunding platforms are websites that allow individuals to solicit funds from large groups of people online. These funds can be used to start businesses, help pay off medical bills, support a creative endeavor, and a whole lot more.
In this article, we’ll give a brief guide to these crowdfunding platforms, and how different types of these platforms allow creators and borrowers to raise money in different ways. Then we’ll get into the 15 best crowdfunding sites online in 2020.
- A Brief Guide to Crowdfunding Platforms
- Different Kinds of Crowdfunding Sites
- The 15 Best Crowdfunding Sites
- Raising Money Through Crowdfunding Sites
A Brief Guide to Crowdfunding Platforms
The internet has allowed us to reach groups of people quicker and more efficiently than ever before. With social media, that ability to reach large groups of people has increased exponentially. With a simple post, we can get in touch with hundreds, if not thousands, of acquaintances — a process that would have taken much, much longer even just a few decades ago.
The most popular crowdfunding platforms allow people to harness those digital audiences to raise money for, well, anything. These crowdfunded proceeds can be used for charitable purposes, or investments in a business idea, or as recurring subscription fees to support creative work.
Different platforms work in different ways with differing business models. What’s true of all of them is that most of the money on these platforms will go directly to the crowdfunding campaign founders with the exception of payment processing fees and some platform fees to keep the sites online and, in some cases, profitable.
Different Kinds of Crowdfunding Sites
Crowdfunding is a catch-all term that describes a lot of different types of platforms, all for different purposes and with different goals. While all of the platforms described in this article are built to let large groups of people pool their money toward a common goal, that’s about where the similarities end. Let’s get to some different types of crowdfunding sites so you’ll better understand how our top 15 work.
Rewards-Based Crowdfunding Platforms
Rewards-based crowdfunding sites allow creators to offer perks, products, or recognition to people who pledge money to their cause. These causes can be an early-stage business idea, a creative endeavor, an athletic feat, or anything else.
The most famous of these types of sites is Kickstarter, in which the people raising money offers rewards for different tiers of giving or investment. For example, a new video game might offer donors a chance for early access to the game, or even to name a character in the game after someone who donated quite a bit of money.
Other sites in this category are subscription-based, like Patreon, where supporters contribute a monthly amount to support ongoing work. In this instance, someone might contribute five dollars a month to get access to a weekly newsletter from their favorite writer.
Charitable crowdfunding platforms are built to raise money for nonprofit organizations and charitable causes. Fundraisers on these platforms allow people to ask for funds to support anything from major charitable initiatives to smaller causes, like people asking for a little money to get back on their feet.
For people struggling with medical bills or unable to secure a personal loan, sites like GoFundMe and others can help them find their footing or stem off an emergency.
In equity crowdfunding, instead of rewards or paying back a loan, business owners offer groups of people a piece of ownership in exchange for early investment. In essence, the crowd acts as venture capitalists or angel investors for a new product or business idea.
Because equity is involved, these sites have to abide by SEC rules, which can make them a little more complicated. (Some sites only work with pre-accredited investors.) To learn more, read our article on equity crowdfunding.
With loans from crowdfunding, also known as peer-to-peer loans, groups of people online act more like a bank, giving a loan that will then be paid back by business owners on terms agreed to before the loan is made. For business owners, these loans can often be preferable to taking out credit card debt with high interest rates.
Crowdfunded loans can offer more flexible funding for small businesses, or allow a group of people to take a chance on creative projects that a more traditional bank may find too risky. They have the added bonus of getting backers emotionally — as well as financially — invested in the success of the business.
The 15 Best Crowdfunding Sites
We’ve covered what crowdfunding is, and the different types of crowdfunding sites. Let’s dive into our 15 favorite crowdfunding sites online in 2020.
Kickstarter is one of the most successful crowdfunding platforms out there, and operates with rewards for people who invest in successful campaigns that hit their funding goal. (No money is charged if a campaign doesn’t hit its goal.)
Kickstarter has launched video games, semi-pro sports teams, feature films, unique products, even scientific research. Supporters are rewarded by getting advanced access to a product or a different perks — for instance, a funded podcast may offer supporters of a certain tier access to additional content that’s not available in their standard episodes.
Indiegogo was one of the first crowdfunding sites, and operates much like Kickstarter does, allowing those raising funds to reward supporters for successful projects. They also work with charities.
GoFundMe is one of the most successful charitable fundraising platforms out there. People raising money for marathon runs or emergency room fees have all turned to GoFundMe to help them collect donations. GoFundMe also allows business to work on their platform, but they’re mostly known for their charitable work. The site accepts PayPal, but only for charitable projects. Otherwise, they take a small transaction fee.
Patreon is a platform that allows creators to run a subscription content service. Supporters, or “patrons,” pay a monthly fee to get access to exclusive content. The site is popular for podcasters, writers, videographers, and other creative types with a devoted following.
Drip is another subscription-based crowdfunding platform aimed at those in the creative field. While it doesn’t have the reach that Patreon does (yet), it does have a partnership with Kickstarter, allowing people to use their login and payment information from that platform to regularly support creators.
AngelList is at once a crowdfunding platform and a resource depository for everyone looking to get into the startup world. It helps businesses connect with investment, but also serves as a job board for people looking to work at exciting startups.
Crowdrise is another crowdfunding platform built for charitable donations. The company was acquired by GoFundMe in 2017 but still operates independently.
Fundly is another fundraising platform aimed at nonprofits and charities. They allow for lots of social media integration and email integration to help fundraisers reach all their networks, as well as new groups of donors.
LendingClub is a site that offers business loans via peer-to-peer lending. Groups of people can evaluate loan proposals that come with the promise of a return, plus interest, in a predetermined amount of time. LendingClub is the first crowdfunded lending platform to register its offerings with the SEC.
The peer-to-peer lending site Prosper was founded way back in 2005, but remains a favorite of both borrowers and investors looking to link up and support small businesses in their early stages.
Crowdfunder is an equity crowdfunding platform that has built a community of over 15,000 accredited investors, as well as a specialized group of lead investors. They have worked with over 200,000 entrepreneurs who have brought exciting new business ideas to the site.
Crowdcube is another equity crowdfunding site that is looking for “ambitious entrepreneurs who are on a mission to leave a mark on the world.” Investment opportunities are only available to members who join the site, but it does allow anyone who joins the chance to get in on early-stage companies with equity.
CircleUp is an equity crowdfunding site that has worked with huge brands, including Halo Top Creamery, which started as a niche low-calorie ice cream option and is now a behemoth in the space, available in grocery stores nationwide. CircleUp works only with accredited investors, who need to apply to join, but it’s open to anyone with a business idea.
Wefunder is an equity crowdfunding platform that allows unaccredited investors to get in on the fun. They’ve worked with a number of exciting startups that have gone on to do big things.
Fundable is linked with the startup university Startup.com, and works as an equity crowdfunding site for business ideas that come through the school. What’s nice about Fundable is that you know these business ideas have already gone through a rigorous process of refinement at the university and are more market-ready.
Raising Money Through Crowdfunding Sites
Crowdfunding sites take the excitement of fundraising and early-stage investing and democratize it, letting groups of people make calls on what products are exciting, what creators need supporting, and more. While they work in different ways and for different purposes, these sites give the power of investing to the people, and can be a great way to get a small business idea off the ground.