Crowdfunding is the process by which a large number of people provide small amounts of funds to raise money for a project, idea or venture. When it comes to crowdfunding, there is a whole world of websites to choose from, but which one is the best?
Probably one of the most well-known sites for crowdfunding is Kickstarter. Founded in 2009 by Yancey Strickler, Perry Chen, and Charles Adler, Kickstarter is an all-or-nothing funding platform. This means that creators only receive funds if their project reaches its goal and is fully supported by the backers. Ranging from music to technology, Kickstarter is a great all around public-benefit corporation inclusive of many different types of creative projects. There is no equity available for backers but backers do receive rewards for their contribution. This can range from the product itself or merchandise of the product or a free book etc. depending on the amount contributed by the backer.
Compared to other crowdfunding platforms, Kickstarter tends to have higher fees for creators. For a successful project, Kickstarter asks for 5% of total funds raised in addition to the payment processing fees of 3% + 0.20 per pledge. On the other hand, however, if a project does not reach its goal, they are not asked to pay. This encourages creators to take risks without worrying about the cost of an unsuccessful project. Furthermore, being the most popular crowdfunding site, creators have a higher opportunity to get their projects funded because website traffic tends to be highest in comparison to other sites.
Though backers can be from all over the globe, creators on Kickstarter have to be located in one of the following countries: Australia, Austria, Belgium, Canada, Denmark, France, Germany, Hong Kong, Ireland, Italy, Japan, Luxemburg, Mexico, Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, United Kingdom, and the United States.
Another popular crowdfunding website similar to Kickstarter is Indiegogo. Founded by Slava Rubin, Danae Ringelmann and Eric Schell, Indiegogo is a great substitute for Kickstarter and offers a wide range of project options categorized under Tech and Innovation, Creative Works, and Community Projects. Unlike Kickstarter, Indiegogo offers not only fixed funding, creators receive money only if their goal is met, but also flexible funding, which means that creators can choose to receive money whether or not their goal is reached. This is ideal for those creators who don’t necessarily need to reach a certain threshold and can start their project even if their goal is not fully met. Similar to Kickstarter, Indiegogo also provides creators with the option of offering rewards but in addition, with their collaboration with Micro Ventures, they also offer backers the option of equity.
Indiegogo, is probably the most expensive platform when it comes to crowdfunding. For a successful project, Indiegogo charges 5% of total funds raised in addition to 3% + $0.30 per pledge for third party processing fees. Unlike Kickstarter, which does not have fees for an unsuccessful project, in Indiegogo, 9% fees + credit card fees are required if the project fails. Furthermore, for a non-US campaign, $25 wire fee is required.
Indiegogo is accessible for creators in a total of 223 countries, a much wider range than Kickstarter. Overall, Indiegogo is a good option for those creators either in favor of flexible funding or looking for investors in their business.
Pozible is an Australian based crowdfunding website which offers only all-or-nothing funding, much like Kickstarter. Founded by Rick Chen and Alan Crabbe, Pozible focuses more on fundraising for creative projects and ideas. Similar to Indiegogo, Pozible offers both rewards as well as equity with their sister platform, Birchal. In addition, the platform has the support of the Australian government which helps increase traffic to the website.
Pozible offers multiple plans for creators but under its basic plan, for a successful project, 3-5% of total funds raised are platform fees in addition to 1.75% -2.4% + 23c for the transaction cost. For an unsuccessful project, there are no charges. Accessibility for Pozible is quite large, inclusive of everyone who can send and receive money using PayPal. Though not as popular as Indiegogo and Kickstarter, Pozible is a good option for those who have creative projects but don’t want to pay the expensive fees of other platforms.
Ulule is a European crowdfunding website that focuses on creative projects as well as technological and entrepreneurial ventures. Founded by Alexandre Boucherot and Thomas Grange, this platform follows the all-or-nothing funding business model much like it’s American and Australian counterparts Kickstarter and Pozible respectively. It is also similar to Kickstarter in the sense that no equity is available. Backers do however receive rewards or can choose to donate without receiving anything in return.
For successful projects, 6.67% of total amount raised is charged for credit card payments or 4.17 for check or PayPal payments. Both these prices are exclusive of VAT and once VAT is added, the price for Ulule tends to become more expensive. Creators on Ulule have to be from a country using one of these currencies: £, $ (US, CAD etc.) €.
Created by Will Schroter and Eric Corl, Fundable is an Ohio based company that, unlike most crowdfunding websites, focuses mainly on business ventures. As such, it has both rewards-based and equity-based crowdfunding available. In fact, it was one of the first equity-crowdfunding platforms in the US in 2012.
Unlike other crowdfunding platforms, Fundable charges applicants a flat rate of $179 per month. For rewards-based crowdfunding, there is an additional cost of 3.5% + 30c per transaction. Thus flat fees can be both expensive or relatively insignificant depending on how much money is raised. If a venture raises a lot of money, then the monthly fee will be insignificant. On the contrary, if not much is raised, then the monthly fee might prove to be extremely expensive. Thus Fundable discourages risk taking as failing would turn out to be quite costly.
Disclaimer: The information provided in this article is compiled with a variety of public sources. It is dated May 2018. The information is provided only for reference and is not intended to create a bias of basis of any decision by the reader.
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Author – Ms. Subah Sehgal, Student, University of British Columbia, Vancouver, Canada