Crowdfunding is a way to raise money for a specific cause or project by asking people to donate money within a particular period of time. Crowdfunding has been in our culture for a while now: some date it back to 1997 when a British rock band funded their reunion tour by turning to their fans and asking them to make donations online.
The keyword here is, of course, online. Crowdfunding platforms emerged after this event, culminating with the appearance of Kickstarter in 2009 ― the most popular crowdfunding platform that managed to raise millions for all kinds of causes and projects, from highly technological ones to the popular board game called Exploding Kittens.
Crowdfunding revenue tripled from $530 million in 2009 to $1.5 billion in 2011 and continued its growth up to this year. Today, according to Statista, the crowdfunding segment in the world is projected to grow by 2.71% (2022-2027) resulting in a market volume of US$1.29bn in 2027. Multiple crowdfunding platforms exist, and the market is in no way monopolised. Some of the best-known crowdfunding platforms are GoFundMe, Kiva, Kickstarter, and Indiegogo, but thousands of other sites exist and work in different countries serving different causes.
In this article, we’ll look at what to consider if you’ve decided to build a crowdfunding platform.
How do you start a crowdfunding platform?
Starting a new project, whatever it is, can be puzzling. Where do you begin? How do you make sure you are better than your competitors? How do you find your target audience? All these questions don’t just apply to a new tool or a new game. A crowdfunding platform has to stand out, serve a specific purpose, and solve a specific problem just like any other app. Here’s where you should start:
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Find your niche
Building the next Kickstarter or GoFundMe is like building the next Amazon – some might say it is impossible. We are not going to argue with them. Instead of making the next all-encompassing crowdfunding platform, most developers focus on building niche crowdfunding platforms. Such platforms focus on raising funds for one particular kind of service or product category. For example, Crowdrise and Fundly focus on getting money for non-profits, charitable causes, and social activists. Patreon does crowdfunding for artists and other creatives. Experiment and TechnoFunding work in the field of science and technology.
Other popular niches for crowdfunding include media, green technology, transportation, and healthcare. Finding your niche in crowdfunding allows you to stand out from your competitors, attract the attention of your target audience, and, ultimately, provide more value to society. All you have to do is either choose a niche that is not extremely busy yet or provide better conditions than your competitors.
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Outline your goals
As with any other project or startup, you must decide on your business goals in advance. You’ll need:
- A release date
- A list of essential features
- Funds backed on the platform in the first few months
- The support of backers or creators
and you’re good to go to the next step!
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Choose the type of crowdfunding
There are different types of crowdfunding. Reward-based crowdfunding is the most popular type of crowdfunding. People like to support the artists, inventions, and ideas they believe in. The rules of reciprocity, however, imply that one should get something in return, even if it doesn’t have the same value. This could be something as simple as a thank-you note, but often, more generous backers get something more than that.
It’s hard for creators to come up with a reward that is both worthwhile and affordable. It makes sense to choose something related to a project that’s gathering the funds. The most popular option is pre-order. In this case, backers support the project in exchange for a product that they’ll get once the funds are gathered. Naturally, this works best if the creator is gathering the funds for physical books: e.g., devices, games, books, etc. The other two types of crowdfunding are donation-based and equity-based. In the first case, the creator expects people to donate their money simply for the cause, without getting anything in return. That’s when creators need a platform that’s very well-designed more than ever. They also need a compelling story. In the second case, backers invest money in exchange for equity. This means that they become partial owners and, if the project makes a profit, they’ll be entitled to part of these profits. This type is popular with startups.
Deciding which type of crowdfunding your platform will be most tailored for will make it easier for you to decide on design and marketing.
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Build essential features
Crowdfunding platforms are essentially two-fold marketplaces, which means their features should serve both creators and backers.
Here are the essential features for each user group:
For investors:
To make sure you don’t scare off the people who genuinely want to give money to fundraisers, your platform needs to have an easy-to-use profile, convenient search, and frictionless payment options.
So the main features to develop are:
- User profile
Make sure anyone can easily create a profile by signing up via email or social media account.
- Search page
Finding a project to support should be an easy and intuitive task. This feature often includes project category and project timing. Your search page should show the campaign’s duration and the current amount raised, a short description, as well as a photo or a video presenting the idea.
- Project details
Once clicked on, the project should contain more details: the creator’s profile, rewards, number of investors, full presentation or the product’s business plan.
- Analytics
Often investors support more than one campaign, so it’s convenient if they can see regular updates for campaigns they fund. This is what the analytics dashboard is for: it shows ongoing project reports and any other data you might want to show the investors.
- Backing options
Backers can invest any amount of money. The goal of a crowdfunding platform is to make financing options for sponsors clear, showing them backing options and what they’ll get as a reward.
- Payment methods
Probably the most critical feature (anywhere) is payment methods. The platform should have as many as possible integrated payment methods. This allows people from other countries to support the project.
When the sponsor’s money is received, it goes straight to an escrow account of the platform and stays there until the end of the campaign or until the goal is reached, depending on the platform’s policy.
For fundraiser’s
Creator’s profiles have different functionality and require different features, although some, of course, stay the same.
- User profile
Just like the sponsors, creators should be able to easily create a profile using email or a social media account. They need a space to fill in all necessary data, including personal information and payment details.
- Campaign management
Creating and managing a campaign should be an intuitive task for an average user. The interface should allow for various kinds of information, such as:
- Primary data about owners, project category, description, presentation, location, and campaign duration.
- Minimum fundraising goal.
- Rewards for sponsors
- Identity confirmation.
- Sharing on social media
The easiest way for fundraisers to market their projects is through social media. Adding the possibility to share the campaign on social media networks is a very helpful feature.
- Payment types
There are two standard payment types in crowdfunding platforms: all-or-nothing and partial payment. All-or-nothing implies that the fundraiser gets payment only in case of successfully gathering the aimed amount of money. Partial payment means that creators get the money for the project even if the initial financial goal is not met. As expected, investors prefer the first type, as it is less risky, while fundraisers prefer the second type, as they at least get some funding in case they failed to reach their goal.
- Analytics
Your creators also want to see the analytics. A dashboard helps them observe how the project evolves, predict whether it will reach the goal and when, and suggests what works best in terms of motivating the audience. It shows statistics, dynamics, funding sources, grants balance, reward popularity, and average deposit payment.
Over to you…
Building a crowdfunding platform usually takes between four and six months. If you’ve decided to enter this industry and use outsourcing software development services, make sure to choose an experienced team of experts, like the ones we have at Elinext, to create a crowdfunding platform that will answer all of your needs and requirements.
