Home / Blog / How to Start a Crowdfunding Platform from Scratch
March 31, 2023

How to Start a Crowdfunding Platform from Scratch

March 31, 2023
Read 17 min

Crowdfunding platforms have become increasingly popular in recent years due to the need for alternative funding methods. They allow individuals or organizations to diversify their funding sources and become less dependent on a specific one. They also provide access to funding that isn’t available through traditional financing options such as bank loans or venture capital.

Through crowdfunding platforms, projects can reach a larger audience and receive sufficient financial support for implementation. They’re also often used to validate a product or idea, as large support on a crowdfunding platform can be a sign of strong demand to potential investors and other stakeholders.

Want to start your own crowdfunding platform? Read on to learn all about the different types of crowdfunding, monetization options, key features of a good crowdfunding solution, how to create a crowdfunding platform in 6 steps, and more.

how to start a crowdfunding platform from scratch

Types of Crowdfunding

There are different types of crowdfunding, each with its own characteristics and purposes. Here are some of the most common types:

• Reward-based crowdfunding provides supporters with a reward or incentive for their contribution. These rewards can range from a thank you or early access to a product to larger rewards like a limited edition product or a VIP experience.
In equity crowdfunding, backers invest in a company and receive equity or shares in the company in return. Startups and early-stage companies often use this type of crowdfunding to raise money.
In debt crowdfunding, backers lend money to a company or individual and receive interest on their investment.
• Donation-based crowdfunding raises money for a charity or nonprofit organization. Donors make a donation without expecting anything in return.
• Real estate crowdfunding allows investors to pool their money to invest in real estate projects, such as buying and renovating properties.
Artists, musicians, and filmmakers often use crowdfunding for creative projects to finance their ventures. Supporters contribute to the project and receive rewards in return, such as early access to the finished product or exclusive fan merchandise.
• Crowdfunding for social causes is used to raise money for such causes as disaster relief or environmental initiatives.
• Cryptocurrency crowdfunding raises funds using cryptocurrencies as payment.

Crowdfunding Market Overview

According to a report by Grand View Research, the global crowdfunding market was estimated at $13.9 billion in 2020 and is expected to grow at a CAGR of 16.7% from 2023 to 2030. The United States is the largest crowdfunding market, followed by Europe and Asia-Pacific. California and New York are the top crowdfunding markets in the United States.

Crowdfunding is used in various industries, including technology, healthcare, real estate, and entertainment. Recently, crowdfunding has also been increasingly used for social causes and sustainability projects. There are hundreds of crowdfunding platforms worldwide, ranging from large, established platforms such as Kickstarter and Indiegogo to niche platforms for specific industries or regions.

crowdfunding market overview
Source: technavio

Overall, the crowdfunding market continues to grow, driven by increasing demand for alternative forms of financing and the growth of online platforms. As the market continues to evolve, new types of crowdfunding are expected to emerge and new legal frameworks for crowdfunding activities will be created.

How to Monetize a Crowdfunding Platform – 7 Options

Crowdfunding platforms typically generate revenue by charging fees for their services, such as a percentage of funds raised or transaction fees. Here are some of the common monetization options for crowdfunding platforms:

  1. Platform fees – you can charge a percentage of the funds raised by the campaign, typically ranging from 5% to 10% of the total amount raised.
  2. Transaction fees – you can also charge transaction fees for processing payments, typically ranging from 2-3% of the transaction value.
  3. Subscription fees – some platforms charge a monthly or annual subscription fee for access to premium features or services, such as advanced analytics or additional marketing support.
  4. Listing fees – you can charge a fee for listing a campaign on their platform, regardless of whether it meets its funding goal.
  5. Equity-based fees – with equity-based crowdfunding, platforms may take a percentage of the capital raised or charge a commission for selling shares in the future.
  6. Sponsorship fees – you can generate revenue through sponsorships or partnerships with brands or companies.
  7. Advertising fees – you can also generate revenue through advertising on their platform, such as banner ads or sponsored content.

The specific monetization options may vary depending on your platform’s business model and target market. The best option is to combine a few of these monetization options to generate revenue. You can also create a white label crowdfunding platform and sell it to other companies.

How to Build a Crowdfunding Platform from Scratch: Step-by-Step Guide

Crowdfunding platform development requires a comprehensive approach like any other serious project. Read the full guide on how to start a crowdfunding platform in six basic steps.

Step 1: Find your niche

Crowdfunding platforms are highly specialized and serve specific niches. Identify a gap in the market or a need that is not yet being met by existing platforms. Research the industry, identify trends, and gather insights to develop a unique selling proposition for your platform.

Understand your target audience and their needs by gathering user insights. Conduct market research, focus groups, surveys, and interviews to understand what motivates your audience to support crowdfunding campaigns and what features and rewards they value most in a platform.

The discovery phase is critical to developing a successful crowdfunding platform. By taking the time to understand your niche, your competition, and your audience, you will understand how to create a crowdfunding platform that meets the needs of both campaign creators and supporters.

Step 2: Decide on the type of platform (reward, equity, donation, etc.) and the monetization model

As mentioned earlier, there are different types of crowdfunding platforms, e.g. donation-based, reward-based, equity-based, debt-based, etc. The type of platform you choose depends entirely on your goals, interests, and aspirations – however, you must make sure that the project you are launching not only inspires your passion but is also needed by the market.

You should also consider how you will monetize your platform, including fees, commissions, and other revenue streams. The monetization model depends on your niche and business goals. It is also advisable to make sure that the monetization option you choose fits your target audience.

Step 3: Find a reliable tech partner

Look for companies experienced in crowdfunding platform development that have a strong portfolio of successful projects. Check the company’s reputation by reading reviews and testimonials from previous clients. Make sure the technical partner has the technical expertise needed for your platform. Ask about the portfolio and case studies that prove the company’s track record in developing similar solutions.

A reliable technical partner should have established project delivery processes in place. Look for a vendor that can provide a detailed project plan, timeline, and budget, and that can efficiently manage the development process.

Once the platform is deployed, ongoing maintenance and support will be required. So, ask if the selected company offers post-launch support services and can provide regular updates and maintenance of your solution.

Step 4: Develop an MVP

When developing a crowdfunding platform MVP (Minimum Viable Product), it’s important to focus on the key features that allow campaign creators to launch and manage their campaigns and supporters to browse and support the campaigns.

Here are some steps you can take when developing an MVP for a crowdfunding platform:

  1. Identify the core features. Determine the essential features needed to launch and manage crowdfunding campaigns. This may include features such as campaign creation, rewards management, payment processing, and analytics.
  2. Build a prototype. Create a prototype of your platform that includes the scope defined in the previous step. This will allow you to test the functionality and usability of the platform before investing in full-scale development.
  3. Test with a small group. Test the prototype with a small group of users to get feedback on the features and user experience. Based on this feedback, you can refine the MVP and identify additional features that may be needed.
  4. Build the MVP. Using the feedback from testing, create the crowdfunding platform MVP. Focus on the core features and ensure that the platform is scalable and can accommodate future features and enhancements.
  5. Launch the MVP. Once the MVP is completed and tested, you can launch the platform and start accepting campaign submissions. Monitor the platform’s performance and gather user feedback to identify opportunities for improvement.
  6. Iterate and improve. Use the feedback collected from users to develop and improve the platform. Focus on adding new features to improve the user experience and make it easier for campaign creators to launch successful campaigns.

Even if the MVP is the first version of the product, it’ll influence its further life and operation. You should take the right development approach from the beginning to avoid later redesigns and rebuilds and a number of pitfalls.

The most common development approaches include CMS-based, white-label and custom development. They generally differ in terms of desired scalability, control, and cost. In the following table, we have compiled the advantages and disadvantages of each approach.

Development approachProsCons
CMS-based development• Faster development due to the availability of templates
• Lower development and support costs
• Sometimes no code is needed
• Customization
• Less flexibility and scalability
• Limited customization
• Constant updates are required to avoid security gaps
• No control over where the platform is heading
White-label development• Cost-effective
• No project management is needed
• Instantly available
• No in-house support needed
• Limited customization
• Hard to differentiate a brand
• No ownership over the source code
Custom development• Typically higher Return on Investment
• Fully customizable, flexible, and scalable
• Higher security
• No license costs
• Complete ownership
• Longer development time
• The initial investment is high
• Requires the entire in-house team’s engagement
• More expensive support

By focusing on the core features needed to launch and manage crowdfunding campaigns, you can develop a scalable MVP that can accommodate future features and enhancements. By gathering user feedback and iterating on the platform, you can develop a successful crowdfunding platform that meets the needs of both campaign creators and backers.

Step 5: Conduct user testing & adjust the platform according to its results

Before you run user tests, you should define your user personas. This will help you identify the types of users you want to test and ensure that you get feedback from a representative sample.

By conducting user tests, you can gather valuable feedback on the features and usability of your crowdfunding platform. This feedback will help you identify areas for improvement and make the necessary changes to create a successful platform that meets the needs of both campaign creators and backers.

Step 6: Build a full-size product

Building a full-fledged crowdfunding platform requires careful planning, development, and testing. Follow these steps to successfully complete the task:

  1. Define your goals. Determine your goals for the crowdfunding platform, such as the types of campaigns you want to support, the features you want to include, and the audience you want to reach.
  2. Choose a tech stack. Decide on a tech stack that supports the features you want to include in your platform. Consider factors such as scalability, security, and ease of use when deciding on technologies.
  3. Develop the platform. Develop the platform using an agile development methodology. This involves breaking down the development process into smaller, manageable tasks that can be completed in sprints.
  4. Test the platform. Test the platform extensively to ensure it meets the needs of campaign creators and funders. Conduct user testing to get feedback on the platform’s features and usability.
  5. Launch the platform. Once the solution is developed and tested, you can launch the platform and start accepting campaigns. Promote the platform to your target audience through social media, email marketing, and other digital marketing channels.
  6. Monitor and improve the platform. Monitor the performance of the platform and collect feedback from users to identify opportunities for improvement. Use this feedback to iterate on the solution and make necessary changes to improve the user experience.
  7. Scale. As the platform grows, you’ll need to scale it to accommodate increasing traffic and demand. This may mean adding new functions, optimizing the platform for search engines, and improving the user experience.

By following these steps, you can create a crowdfunding platform. It’s important that you focus on the usability and functionality of the solution to make sure it’s easy to use and meets the needs of your target audience.

Core Features of a Crowdfunding Platform

Although each product is unique, there are always a number of basic features that users expect to find on a typical crowdfunding platform.

Welcome page

The welcome page of a crowdfunding platform should be designed properly to make a great first impression and encourage visitors to explore the platform further. It should feature clear branding that reflects the values and mission of the crowdfunding platform.

Provide a brief overview of the platform and its features, highlighting what makes it unique and different from other crowdfunding platforms. Include a clear call to action encouraging visitors to sign up, create a campaign, or explore the platform further.

It’s also a common practice to include trust signals such as testimonials, awards, and media mentions to build credibility and trust with visitors. Feature social proof, such as the number of campaigns launched, the amount of funding raised, and the number of backers, to showcase the success and popularity of the platform.

Sign-in / Sign-up

A well-designed crowdfunding platform’s sign-in/sign-up page is when it comes to the user experience. It’s important to make registration and onboarding process as easy and straightforward as possible to encourage visitors to create an account and use the platform. The sign-up form should be prominently displayed on the page and should include fields for basic information such as name, email address, and password.

Offer the option for users to sign up using their social media accounts, such as Facebook or Google, to make the process faster and more convenient.

User account

The user account should include a dashboard that overviews the user’s campaigns, donations, and other key metrics. Users should be able to create, edit, and manage their campaigns from their accounts. This includes adding and updating campaign information, setting funding goals, and tracking progress.

Users should be able to view their donation history, including the campaigns they’ve supported and the amount they’ve donated.

Campaign launch

A campaign on a crowdfunding platform is essentially a pitch for a project or idea that is seeking funding. Encourage including these key elements in a crowdfunding campaign on your platform:

Clear and concise description. The campaign should clearly and concisely describe the project or idea, including its importance and how it will benefit backers.
Funding goal. The campaign should have a clear, achievable, realistic funding goal based on the project’s scope and scale.
Rewards. The campaign should offer backers rewards at different support levels. These rewards should be creative and meaningful and should provide backers with a sense of value and appreciation for their support.
Video pitch. A video pitch effectively conveys the project or idea visually and engagingly. The video should be well-produced and showcase the project’s key features and benefits.
Campaign timeline. The campaign should have a clear funding, production, and delivery timeline, so backers know when to expect to receive their rewards.
Social proof. To build trust and credibility with potential backers, the campaign should provide social proof, such as endorsements or testimonials from previous backers.
Regular updates. The campaign should provide regular updates on the project’s progress, including milestones reached and new developments. This helps to keep backers engaged and excited about the project.

Including these key elements in a crowdfunding campaign can increase the likelihood of attracting backers and achieving your funding goal. It’s important to create a well-crafted campaign that communicates the value and impact of your project or idea while also providing backers with meaningful rewards and a clear timeline for delivery.

Categories of campaigns

Crowdfunding platforms typically feature various campaign categories to cater to various interests and needs. Some common categories of campaigns on a crowdfunding platform include Arts & Culture, Charity & Nonprofit, Business, Community & Social Causes, Education, Environment & Sustainability, Health & Wellness, and Sports.

By categorizing campaigns, you can make it easier for backers to discover and support projects that align with their interests and values. This also helps campaigners to reach a targeted audience and increase the chances of attracting support for their projects.

Online payments

Online payments is the core feature that enables backers to securely and conveniently contribute to campaigns. The platform must integrate with a payment gateway that supports multiple payment options and currencies. Popular payment gateways include PayPal, Stripe, and Plaid.

The platform must implement strong security measures to protect user data and prevent fraud. This includes using SSL encryption, implementing two-factor authentication, and adhering to PCI-DSS standards.

The platform must accurately track and report all donations, including the amount, date, and payment method. The payment system should integrate seamlessly with the crowdfunding platform so backers can easily make donations without leaving the platform.

Trends to Watch in the Crowdfunding Industry

The crowdfunding industry has rapidly evolved over the past few years, driven by technological advances, changes in consumer behavior, and new funding models. Here are some trends to watch in the crowdfunding industry.

💡 Increased focus on sustainability

Crowdfunding platforms increasingly feature sustainability and environmental protection campaigns. As more consumers become aware of the impact of their purchasing decisions on the planet, campaigns that promote eco-friendly products, renewable energy projects, and waste reduction initiatives are likely to gain traction.

💡 Social media crowdfunding

Social media crowdfunding uses social media platforms to raise funds for a particular cause or project. This type of crowdfunding typically involves using online platforms such as GoFundMe, Kickstarter, or IndieGoGo, which allow individuals and organizations to create campaigns and share them on social media platforms like Facebook, Twitter, or Instagram.

💡 Rise of equity crowdfunding

Equity crowdfunding allows backers to invest in early-stage companies in exchange for equity. This model is gaining popularity as it provides an alternative to traditional venture capital funding and enables startups to raise capital from a wider pool of investors.

💡 Crowdfunding in real estate programs through financial securities

It involves the use of online platforms to raise capital from a large number of investors for real estate projects. This type of crowdfunding allows investors to invest in real estate projects by purchasing financial securities, such as equity or debt securities, rather than directly investing in the property.

💡 The continued growth of crowdfunding in emerging markets

Crowdfunding is becoming increasingly popular in emerging markets, where traditional funding sources may be limited. Platforms focusing on these markets will likely grow significantly in the coming years.

💡 Integration with blockchain technology & crowdfunding for crypto projects

Blockchain technology is being used to create decentralized crowdfunding platforms that enable peer-to-peer funding without intermediaries. This model can potentially reduce transaction fees and increase transparency and security.

As for crowdfunding for cryptocurrency projects, it has become a popular way for individuals and businesses to raise funds for their cryptocurrency-related ventures. The process typically involves using blockchain technology to create a token or coin that investors can buy in exchange for a certain amount of cryptocurrency, such as Bitcoin or Ethereum.

💡 Micro-donation

Micro-donation refers to the practice of donating small amounts of money to a cause or organization. The concept of micro-donation is based on the idea that small contributions can significantly impact a particular cause when aggregated.

With the rise of digital payment platforms and online fundraising tools, micro-donations have become an increasingly popular way for individuals to support their favorite charities and causes. Platforms such as GoFundMe, Kickstarter, and Patreon have made it easy for people to make small donations to various causes.

💡 Expansion of reward-based crowdfunding

Reward-based crowdfunding remains the most popular crowdfunding model, where backers receive a reward or perk in exchange for their contribution. As more businesses and individuals turn to crowdfunding to launch new products or services, reward-based crowdfunding is likely to continue to grow.

💡 Use of AI and Machine Learning

Crowdfunding platforms are beginning to use AI and machine learning algorithms to analyze user behavior and personalize the user experience. This can help platforms to identify and promote campaigns that are most relevant to each user, increasing the chances of success for both campaigners and backers.

By staying up-to-date with these trends, crowdfunding platforms can position themselves for success in a rapidly changing industry.

Summary

Crowdfunding can be a more cost-effective way of raising funds than traditional financing options, as it eliminates the need for intermediaries such as banks or investment firms. Crowdfunding platforms work by connecting project creators or entrepreneurs with a large number of potential backers or investors.

If you are unsure how to start a crowdfunding platform, feel free to contact us and discover the best type and monetization option for your project!

Recent Articles

Visit Blog

Cost to Develop an App Like Ally

How cloud call centers help Financial Firms?

Revolutionizing Fintech: Unleashing Success Through Seamless UX/UI Design

Back to top