How to Create a Crowdfunding Website [A Detailed Guide]
Crowdfunding has become a well-known method of raising capital among startups and businesses for the development & launch of new products/services. Over the years, many new platforms have come into existence with the support of crowdfunding.
Kickstarter was the first crowdfunding website launched worldwide that became heavily successful. After this, various new crowdfunding websites have been coming into existence.
In 2020, the covid-19 pandemic caused a lot of losses in various businesses worldwide. However, it hasn’t affected crowdfunding platforms. They have grown exponentially even during the tough times. Let’s quickly skim through the latest crowdfunding statistics:
As per Statista, $17.2 billion is generated every year via crowdfunding in North America.
On average, 22.4% of crowdfunding campaigns become successful.
As per Statista, the global crowdfunding market size is anticipated to reach $25.8 billion by 2027.
If you have decided to create crowdfunding website, you have reached the right place. Moreover, you might also have questions like how to start a crowdfunding website? How to start a crowdfunding platform? How to make a website like Kickstarter?
To get answers to all of your questions, be with us till the end. Here, we will provide a step-by-step process to create crowdfunding website.
Before we get ahead with the process, let us go through some basics.
What is a Crowdfunding Website & How Does it Work?
Crowdfunding means raising a specific amount of money from a lot of people to finance a project, cause, or business. A crowdfunding website helps people raise sufficient funds based on the business concept or the end purpose of the project.
After understanding the basic definition, let us move on to how it works.
It is a two-sided marketplace. Fundraisers or the creators are present on one side. Donors or backers are there on another side.
Any person possessing a business concept, charity, or personal need can initiate a campaign on the website by uploading project details, the business plan, and images of the upcoming product on the platform.
Donors then invest in the project if they think it is valuable.
How To Start A Crowdfunding Website: A Step-by-Step Process
There are a lot of things involved in making a crowdfunding website. Here we have given a streamlined process to create crowdfunding website.
So, let us start:
Step 1. Define Your Niche
First and foremost, you need to choose a proper crowdfunding niche. Why? If you do not choose a niche and start a crowdfunding website targeting all the businesses, you will face stiff competition among leading sites worldwide.
Moreover, you need to invest a lot of money to create crowdfunding website and later market it.
Therefore, it is better to go for a specific niche. Several leading crowdfunding websites worldwide started small and then expanded their horizon. The Kickstarter website is one such example. It began by supporting small P2P projects. Another example is Pateron, which started by supporting YouTube channels.
Apart from this, it is good to choose a niche that has low competition. The reason is that it increases your chances of becoming successful in the crowdfunding industry fastly.
There are various niches available in the market for the crowdfunding industry, you can choose one according to your goals and requirements. Many crowdfunding platforms are popular based on the region. Hence, you can also select a niche based on your location.
Let’s look at some popular crowdfunding niches with several well-known platforms for your inspiration.
Business & Startups: SeedInvest and Fundable
Agriculture: AgFunder and HarvestReturns
Real Estate: Fundrise and CrowdStreet
Social Causes: CauseVox
Musicians and Artists: Patreon
Step 2. Choose the Right Business Model
Besides choosing a suitable niche, the next most crucial thing is choosing a business model. Here, you need to go with a model that helps you gain campaign creators and donors.
Apart from this, selecting a business model will directly impact the cost of a crowdfunding website as the specific model requires particular interfaces and functionality. Therefore, you need to choose a business model wisely.
In general, there are four popular types of crowdfunding business models. Let’s have a look at all of them in detail:
It is the simplest business model that involves donating to specific ideas or causes without wanting anything back. In other words, the donation-based model is the method of sourcing a massive amount of money for a project by asking various contributors to donate a small amount.
Initially, this model was widely used in charity and politics. However, the trend has changed, and now it is used by everyone in the online world.
To start a donor-based crowdfunding website, you require a quick & simple payment solution.
Hence, users can donate to the project account, and funds are calculated in real-time. Some popular crowdfunding websites following this business model are GlobalGiving, GoFundMe.
This business model is opted by new startups or organizations to boost funds for their product or service.
In this model, donors can get rewards for supporting a particular idea. The rewards depend on the amount contributed by a supporter and are generally decided by the campaign owner. For example, an artist raising funds to initiate a new gallery can provide artwork, prints, etc., to the investors.
Some of the popular crowdfunding sites following the reward-based business model include Kickstarter, Indiegogo, etc.
It is also known as crowd-investing. In this business model, small to medium-size businesses raise funds to launch a new business or grow their existing business.
All the people who invest in the companies become co-owners or the shareholders of the business. Further, the people have an option to sell their shares to other investors.
Several well-known equity-based crowdfunding platforms are FundersClub and Seedrs.
This business model is one of the fastest and the most effective methods of generating funds for individuals and businesses for a project.
Here, the campaign owner raises funds with the promise to return funds with interest to the donors after a specific time. The debt-based model is popular among businesses that want to gain capital and pay funds back without giving any equity.
There are several kinds of debt-based fundraisings, such as peer-to-peer, peer-to-business, or business-to-business.
Some of the most popular debt-based crowdfunding platforms are Lending Club and Kiva Microfunds.
Step 3. Decide Monetization Model
It is the most well-known type of crowdfunding revenue model among fundraisers. You provide complete software and support to a fundraiser for the success of the campaign. Here, you only take a commission from the fundraiser if the project becomes successful.
For instance, Indiegogo takes 5% for every crowdfunding campaign that becomes a success. However, they don’t charge a fee for a campaign involved in charity.
It is not a well-known revenue generation model like commission-based. However, a specific segment of people prefers a crowdfunding site with a membership fee.
In this model, a crowdfunding website charges a monthly fee to start any campaign. This model is highly suitable for all people who have different projects or are running a massive campaign.
A simple example of this model is Fundable which charges $179 per month for any business to list their project and raise capital for it. Also, when a campaign achieves the goal, the platform charges 0% for any future profits.
If your crowdfunding website works according to the peer-to-peer lending model, you should choose a loan-based processing fee monetization model.
Here, your aim should be to reduce the bridge between the lenders and borrowers to get better revenue.
Based on this revenue model, the crowdfunding website charges a fee from the borrower and lender to finalize the deal.
There is also an exception where a crowdfunding site charges a specific amount from borrowers and nothing from lenders.
For instance, a well-known buy-to-let mortgage lender called Landbay charges only 1.5 to 2% for every new loan and 0.5-1% of the annual loan balance.
Many crowdfunding campaigns will last on a website for an extended time. Due to this, their listing will go down, and they might not achieve their goal on time.
Hence, you can provide them an option to get featured on your crowdfunding site at a specific place for a fee. Besides this, you can also offer them a consultation for a nominal charge to make their campaign successful.
One of the most simple yet effective ways to generate money through your crowdfunding website is advertising.
Here, you provide space on your crowdfunding website to companies who want to advertise their products or services. You charge them a specific amount for placing the ads and thus earn money.
Step 4. Decide Key Features to Include in Your Website
Based on the rules of a crowdfunding website, the fundraiser gets money on closing a project or when it reaches a specific amount. Initially, whenever a backer contributes to a project, it goes into the escrow bank account and remains there till the project ends. Moreover, investors are holders of the money they invested until the project ends.
By adding different payment gateways that accept money in multiple currencies, you have the opportunity to get investors across the world.
- Primary Information (Title, desc, location, images, videos, duration)
- Story (Risks & Challenges involved in the project)
- Project owner complete details
- ID verification by including payment and other proof of documents
After initiating a campaign, the fundraiser faces the challenge of finding a crowd supporting the campaign. The best way to support campaigns is by offering social media sharing options to investors.
The features allow investors to share the campaign details on various popular social media platforms like Facebook, Twitter, Whatsapp, etc. Due to this feature, more people will know about a campaign and support it. Ultimately, the campaign will reach its goal effectively.
Generally, two payment types are available on the crowdfunding website.
First is the All-or-Nothing Payment Method. In this payment type, the fundraiser gets the payment amount when it reaches the desired financial goal. The second is the Partial Payment Method. In this method, fundraisers get the money for the campaign despite not meeting the financial goal.
Investors like to invest in campaigns with all-or-nothing payment type as it ensures they are not investing money in failed projects. However, fundraisers would choose partial payment methods so that they can get money and initiate their project.
After creating a crowdfunding website, the admin should receive rewards for the work. Also, the admin should ensure that all things are working seamlessly.
It would help if the admin gave utmost importance to rewards, revenue generated, and a commission earned. Also, detailed report generation should be a crucial feature of your website.
- An intuitive dashboard showing the number of pending users, projects, and donors.
- Total users and the amount credited.
- Complete details about funds.
- Payment logs along with safe gateways.
Step 5. Select the Best Web Design & Development Agency
After deciding on features for your crowdfunding website, you should choose a suitable web design & development agency.
We recommend you hire a professional web design & development company. They have years of experience in developing websites for clients worldwide. They are also cost-effective.
The development agency will understand the project requirements at the initial stage and then define all the necessary things for your crowdfunding website. They will further create a crowdfunding website with which end-users easily get familiar.
Step 6. Create MVP Version
After choosing a web development company, it’s time to create a site for your crowdfunding platform. Here we suggest you create an MVP version. Why?
MVP stands for a minimum viable product, and it helps you test your website on users and get early feedback.
By this, you don’t need to invest a massive amount in one go. Hence, it saves a lot of your money. Besides this, you get an opportunity to test it among the audience.
Step 7. Test and Launch
The last step is to launch your site. But before that, you should test your website. The development agency you hire will test & resolve any bugs. In short, they will make it error-free before launching online.
You should launch your site in online communities and other popular places to get traffic. You will also obtain feedback from the audience and update your website accordingly.
Despite more competition, starting a crowdfunding site has become a trend among businesses & startups worldwide.
Various sites started small, and now they have become a go-to destination for getting funds for converting an idea into reality.
We hope that now you have understood how to start a crowdfunding website.
If you have queries like, how much does it cost to start a crowdfunding website? How to build a crowdfunding website? Then don’t hesitate to contact us.
WebyKing offers professional website development services to businesses and startups worldwide. Therefore, we can understand your business idea and provide a free quote.
Here is the list of challenges that you should consider building a crowdfunding platform.
- Finding a suitable niche
- Selecting a proper crowdfunding model
- Deciding an appropriate monetization model
- Establishing trust among the audience
- Deciding features of the MVP version
- Building an effective marketing campaign