Why Use Crowdfunding?
Crowdfunding can be used by individuals to raise funds towards personal goals (such as emergency relief funds), to go towards charitable causes or initiatives, or to develop and launch a product or service.
Startups, charities, or nonprofit organizations can also utilize crowdfunding to raise funds to cover the cost of launching new products and services, or cover funding gaps for specific projects or initiatives. Companies can also use equity-based crowdfunding platforms to offer revenue sharing or future equity in a developing company.
Recommended Platforms
| Platforms by Creator Type | GoFundMe | Kickstarter | Indiegogo | WeFunder | StartEngine | Republic |
|---|---|---|---|---|---|---|
| Individuals | ✓ | ✓ | ✓ | ✗ | ✗ | ✗ |
| Startups | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| Charities | ✓ | ✗ | ✗ | ✗ | ✓ | ✗ |
| Nonprofits | ✓ | ✓ | ✓ | ✗ | ✗ | ✓ |
Benefits and Risks of Crowdfunding
Crowdfunding can be rewarding for your project, but there are also risks to keep in mind. Companies and individuals should weigh the risks and benefits to decide whether or not crowdfunding is a good fit for them.
Benefits
- Access to a large ‘crowd’ of investors and supporters
- Allows start-ups to fundraise without giving up control to investors
- Provides the opportunity to gauge public interest
- Campaigns can be funded quickly with no up-front fees
- Social media and press attention are easily gained with popular campaigns
- Investors can track your progress towards your goal and become more engaged with supporting your campaign
- Ideas that might not appeal to traditional investors often get funding more easily through crowdfunding platforms
- Serves as an alternative funding option if it is difficult to obtain loans or traditional funding
Risks
- Campaigns that contain material that is not copyrighted or patented risks another party taking and marketing your idea for themself
- If your rewards or returns are valued incorrectly, you may give too much of your raised funding away to supporters
- If you do not budget them into your goal, platform and payment processor fees will cut into your raised funds
- If your goal is not fully-funded, you may lose all of the pledged financial support from your supporters
- Not all campaigns get accepted to the major crowdfunding platforms
- Possible damage to your startup’s reputation if your campaign fails