The digital age has made fundraising for business ideas, charitable causes, or personal needs easier with the introduction of online crowdfunding platforms. According to Statista, $4.97 billion was raised globally through equity-based crowdfunding in 2021, and the size of the global crowdfunding market will reach $39.8 billion in 2026. As the demand for crowdfunding platforms is on the rise, let’s discuss the topic in detail – crowdfunding software development, key players, business models, features, as well as the difference between custom fundraising solutions and off-the-shelf ones.
Crowdfunding Software Core Players
As the demand for crowdfunding platforms is increasing, we decided to discuss the topic in detail – crowdfunding development, key players, business models, features, as well as the difference between custom fundraising solutions and off-the-shelf ones.
• Kickstarter
Kickstarter was founded in 2009 and has helped 500,000 projects gain funding. It’s geared more toward creative projects like a new album or book and inventions like a personal one-wheeled vehicle. Categories include art, comics & illustration, film, food & crafts, games, music, publishing, and design & tech. The platform isn’t suitable for purchasing equipment or supporting non-profit organisations, and you can only keep your money if you raised the pre-set sum. Otherwise, the funds will go back to donors.
• Indiegogo
This crowdfunding website has helped fund over 800,000 ideas around the world since 2008. Today, more than 15 million people visit the Indiegogo website, where about 19,000 campaigns are launched every month. The platform is great for entrepreneurs and investors, allows integration with other platforms, including Facebook and Google, and is open to worldwide operations. However, there’s a 5% platform fee plus a third-party payment processing fee.
• Mightycause
Founded in 2006, Mightycause is one of the most cost-effective platforms, which makes it a preferred tool for nonprofits. Mightycause has helped more than 150,000 organisations raise the funds they need to achieve their goals.
Mightycause is compatible with CRM systems, has media integrations, and the demo version can be requested for free. However, a number of features (such as CRM integration and event fundraising) are available only in the advanced plan, which is more expensive.
• StartEngine
Founded in 2011, the platform celebrated 500,000 users in 2021, has helped 375 companies and has already raised $350 million. StartEngine is a great option for anyone who wants to get funding, invest, and get their share in the companies they like. StartEngine allows ordinary people to invest their money directly in companies and startups they admire, and in return receive an equity stake, starting at just $100, depending on the share value specified for each company.
• SeedInvest Technology
This crowdfunding platform aims to provide investors with the opportunity to support early-stage startups. Since its inception in 2012, the platform has funded more than 500 companies and is a good choice for startups in need of seed capital. The website has a calculator that you can use to estimate how much it might cost you to raise money through the platform. If your fundraising is unsuccessful, you won’t have to pay any fees.
Crowdfunding Company: Business Models
With so many crowdfunding sites using different business models, it’s easy to lose track. We want to help you get things straight. There are four main business models that differ in how they deliver value to customers and monetize that value.
Peer-to-peer (P2P) Lending
When lenders get their money back with interest.
This is the most popular business model because it offers the ability to borrow and lend money without having to turn to traditional banks. Borrowers no longer have to go to a bank to get a loan, nor do they have to go through many financial checks. Lenders, in turn, have more investment options.
The platform typically performs a credit risk assessment, determines creditworthiness, and adds an interest rate to a borrower’s profile. Loans are also repaid through the platform, which can be integrated with a third-party service to process transactions. The borrower pays an upfront origination fee (between 1% and 5%), which is used to process and issue the loan. This is where the P2P lending platform derives its revenue.
Donation-Based
When a campaigner receives donations for no consideration.
This is a growing model, especially among crowdfunding platforms for charity and nonprofit crowdfunding platforms. Donors give because they want to support the person’s idea or cause. Donations work well for startups, small businesses, personal goals, social and educational campaigns. They suit certain industries as well. A real estate crowdfunding business model, for example, is unlikely to be based on donations or rewards.
You could also allow donors to cover the fees you charge the advertiser. However, there are obvious pros and cons.
On the plus side, campaigners no longer have to cover the fees, which will naturally attract more crowdfunding campaigns to your platform. Also, there is usually no set minimum or maximum amount that a donor should put into your project. On the other hand, you run the risk of alienating donors.
Equity-Based
When entrepreneurs are able to raise money for their business by selling part of their business to outside investors in exchange for capital.
Companies that are not publicly traded receive the money from a number of people who believe in the early idea of a product or service, and those people become shareholders in the company.
This model is especially popular with companies that have been around the corner for some time. They launch a campaign to scale their business and are willing to give away a significant amount of the shares to the public.
Royalty-Based
When funders receive a percentage of the revenue generated by the project or venture they support as it generates capital.
For example, funders may support an app before it’s fully developed and then share in the revenue once the app is launched.
However, this does not make the backers shareholders in the project. They are participants in the funding and are only entitled to the royalties they receive from sales.
Reward-Based
A funder donates to a project or business with the expectation of receiving a non-financial reward in return.
In this type of business model, funders who support the project or idea receive various types of rewards, such as goods or services, as tokens of appreciation.
A typical scenario for an entrepreneur would be to develop a minimum viable product and offer it to certain types of crowdfunding investors (also called supporters ) to test and see if a full-fledged offering would be useful in the long run.
Custom-Made vs. Off-the-Shelf Crowdfunding Software
Off-the-shelf solutions abound on the market. Yet many companies opt for crowdfunding app development. And here is why:
• A custom crowdfunding website enables a hybrid model where users can choose the type of engagement. Most ready-made platforms restrict users to a specific business model.
• The platform includes all the necessary features and allows you to customize it to your needs. Off-the-shelf solutions have a limited number of features.
• They are easier to upgrade. You should consider flexibility in possible integrations with your existing programs and databases. With off-the-shelf solutions, this is a challenge due to the lack of required features.
• You own the software. This means that you are not dependent on third-party decisions when making changes. If you use a ready-made platform, be prepared to pay extra money for the subscription or additional features.
Must-Have Features for Crowdfunding Software
We have rendered our expertise in crowdfunding platform development & crowdfunding website development to select the most essential features that every platform should have.
✔️ Smooth Onboarding & Application Processes
The entire interaction happens on the website, so offering a seamless user experience right from the sign up and sign in steps will give you a competitive edge. Your clients (fundraisers and investors) should not get puzzled when they come to your platform for the first time.
✔️ KYC Verification
A crowdfunding platform should provide reliable and effective means to verify the identities of potential donors and remain KYC compliant. This ensures that documents can be matched to the individual, reducing the risk of money laundering and identity theft.
There are many scalable identity verification solutions on the market to combat money laundering attempts. Such safeguards are necessary to detect potential fraud and terrorist financing to which these platforms may be exposed.
✔️ Data Security
Developing an online platform that involves personal data and financial information is challenging in many ways. While interaction with the platform must be flawless for customers, their private information must remain secure, so crowdfunding platforms should take additional security measures to protect customers:
- Employ viable security technologies (AI/ML, cryptography, etc.).
- Comply with data privacy regulations (such as GDPR and CCPA).
- Partner with vetted third-party vendors.
- Invest in security issue detection (advanced identity, automated policy management, access management).
✔️ Intuitive Design
Clean and unique design, intuitive navigation and transparency are the most important aspects that make a good crowdfunding platform. This ensures a lasting relationship with the audience. We also believe that crowdfunding tips for campaigners and investors explaining the application process and funding will be a valued feature of the website.
✔️ Effective Account Management
Account management should be smooth and straightforward so that neither of the parties racks their brain on what’s happening with the campaign, who donated, and how much money was raised. The section should include an investment chart, progress bar, transaction records, top-ups, withdrawals in the account management area, reports and dashboards.
You will have to handle dozens of inputs coming from individuals and organizations that choose the platform to showcase their startup ideas. That’s why it’s important that your crowdfunding portal is equipped with numerous features to meet these business needs.
✔️ Transactions Management
Your crowdfunding website should allow centralized management of all payments. Users should be able to receive and secure funds from many countries and automatically reconcile their payment flows.
The concept of crowdfunding thrives on payments and donations, so you need to provide a well-established payment gateway suitable for your business model.
It’s also important to configure your crowdfunding software to accept multiple currencies, which gives you a competitive advantage over projects that do not. In addition, by accepting a wide range of currencies, you can attract more people willing to donate.
✔️ Tax Reporting
Investors will likely be required to pay sales and income tax on their crowdfunding campaign. This is especially true if your campaign is based in the US. Platforms can report investment income to the appropriate tax authorities, helping investors save time and ensure they report their income accurately and on time.
✔️ Support and FAQ
It can be difficult to understand all of a crowdfunding platform’s capabilities at once. That’s why a professionally designed and managed knowledge base helps users understand the platform’s features.
✔️ Backend Project Management
It can be difficult to understand all of a crowdfunding platform’s capabilities at once. That’s why a professionally designed and managed knowledge base helps users understand the platform’s features.
Summary
Developing a custom crowdfunding platform gives you a competitive edge over other platforms by offering a unique set of features that solve your or your users’ problems in the best possible way. Need a reliable software partner to develop a secure and feature-rich crowdfunding platform? Contact us to discuss your idea and find out how Itexus can help you achieve your business goals.
