Starting and growing a small business takes time, ingenuity, and, most importantly, capital. But while small business loans are a great option for many small business owners, not everybody meets the approval criteria for them. Whether your credit is less than stellar or you already have existing debt, banks turn down loan applications for a wide variety of reasons.
Fortunately, the bank isn’t your only option. Over the past few years, crowdfunding has emerged as a viable solution for small businesses to get the startup funding they need to open their doors, launch a new product, and more. You’ve put all the hard work into getting your business where it is—you don’t have to let traditional lenders and their models prevent you from obtaining the capital you need to succeed.
Crowdfunding can be an effective way to quickly and easily raise money for just about any purpose, particularly when starting a business. But it’s important to know what kind of crowdfunding is right for your business and its present needs. These are the most common types of business crowdfunding sites:
- Equity crowdfunding: The most traditional type of funding is when you sell a piece of your business to an investor or group of investors in exchange for the capital you need.
- Donation crowdfunding: This form of funding is simply when you ask for donations to your business, with nothing in exchange.
- Debt crowdfunding: Debt crowdfunding is when business owners borrow money from other individuals rather than a bank and structure unique repayment terms back to those individuals down the road.
- Rewards crowdfunding: This is the type of crowdfunding made popular by sites like Kickstarter and Indiegogo, in which funders are offered products, services, or other rewards in exchange for their monetary support.
Now that we know the most common types of crowdfunding, here are the best crowdfunding sites for startups and small businesses.
Topping the list is the indisputably most well-known crowdfunding site: Kickstarter helps artists and filmmakers get projects off the ground, small businesses launch new products, and startups get the initial capital they need. Kickstarter projects have a lifetime success rate of 37.86%, a number that is particularly impressive when you consider that nearly 500,000 projects have launched on the platform. The catch with Kickstarter is that if you don’t meet your funding goal in the allotted time, you don’t get any of the money.
Cost: Creating a project on Kickstarter is free. If it’s successfully funded, Kickstarter applies a 5% fee to collected funds and charges processing fees between 3% to 5%.
Likely the most popular crowdfunding alternative to Kickstarter, Indiegogo is somewhat friendlier to entrepreneurs, priding themselves on their community of “early adopters” and innovative creators. On Indiegogo, you don’t have to stop raising money at a specific time and they let you apply for equity. They also offer securities and revenue sharing and even allow funding through cryptocurrency.
Cost: Indiegogo charges a 5% platform fee for all projects.
Indiegogo’s sister platform is an internationally recognized platform that helps people put their money toward charities and causes that matter to them. While it’s not right for every startup, GoFundMe can be particularly useful if your business is dedicated to giving back. If you make an eco-friendly or crucial medical product or run a business that’s devoted to helping people or animals, for example, this platform may be perfect. GoFundMe’s most significant upsides are zero funding fees for personal causes based in the U.S. a lack of processing fees. On the flip side, GoFundMe has a lower success rate than other platforms, so it can take some extra work to get investment.
Cost: Listing on GoFundMe is free and you get to keep all of the funds you raise from a successful campaign.
If the name didn’t make it clear, iFundWomen is a platform designed to support women-led startups and small businesses. Women-owned businesses often face unique and significant challenges to getting the capital they need. iFundWomen aims to provide at least some of those women with a solution. It also goes a step further by providing coaching, marketing, and other services for startup owners, and pumps 20% of all funding fees back into supporting campaigns and services for women-owned businesses. On the downside, access is limited to campaigners in just 23 countries.
Cost: iFundWomen charges a 5% funding fee while letting you keep the rest of the funds. They also charge a 2.9% + $0.30 processing fee per transaction.
5. Crowd Supply
The mission of Crowd Supply is to “bring original, useful, respectful hardware to life.” The platform focuses mostly on funding cutting-edge hardware and electronics projects and has a shocking success rate of 80%, which is more than twice as successful as Kickstarter.
Cost: Crowd Supply offers a variety of plans depending on your business needs. The Standard plan charges 5% of gross campaign sales, not including payment processing fees. The Custom plan charges 6% to 15%. Features included in more custom plans include campaign management, media asset creation, and PR.
Think of Crowdfunder as the Shark Tank of crowdfunding sites. This community of 200,000 entrepreneurs and investors allows entrepreneurs to sell equity in their company to accredited investors. The network includes 12,000 VCs and angel investors who have funded startups at all levels, from Pre-Seed to Series A.
Cost: Crowdfunder’s plans are Free, Starter ($299 per month), and Premium ($499 per month). Each plan offers a variety of services from storage to personalized support.
Primarily used by artists, musicians, writers, and other creatives to get paid for their work, Patreon users create membership plans, allowing fans—called patrons—to pay them a subscription in exchange for exclusive experiences and content. For instance, a popular cartoonist may offer personalized panels to their highest-level subscribers. Patrons typically pay a monthly fee that’s less than Spotify or Netflix, which can create a meaningful recurring revenue stream for individuals or small businesses. Unfortunately, Patreon hits creators with many fees.
Cost: Patreon takes 5% of successfully processed payments. They also charge a payment processing fee each time a payment is processed and charge additional fees for moving funds to your bank or PayPal account.
Fundable allows small businesses to have a bit more control over their fundraising efforts. When you create a profile, you can choose to raise funds by selling products, taking pre-orders for upcoming products, selling merchandise, or by appealing directly to accredited investors. Whether you’re looking to raise $10,000 or $10 million, Fundable has unique options tailored to the size of your business and your capital needs.
Cost: Creating a company profile is free, but it’s $179 per month to start fundraising. There are no success fees but rewards-based raises come with a processing fee of 3.5% + $0.30 per transaction.
WeFunder is a community of 150,000 investors aimed at supporting higher-value equity investments. While people can invest as little as $100 in the causes they support, most companies are looking to raise between $50,000 and $50 million. Most campaigns take a few months to reach their goals but whether you’re starting a restaurant or building a tech startup, WeFunder may have a place for you.
Cost: Creating a WeFunder profile is free and there are no management or transaction fees. Instead, administrative fees are charged to investors.
SeedInvest works with high-growth potential, early-stage companies to raise either preferred equity or convertible note funding. Because they are selective of the companies they accept onto the platform, you’ll need to apply and make it through the screening committee to join SeedInvest. Applications take a minimum of 60 days to complete. Once on the platform, however, you’ll have access to a community of 300,000 investors that have provided more than $200 million in funding to just over 200 startups.
Cost: SeedInvest charges a 7.5% placement fee on the total amount raised after the successful completion of your campaign, as well as a 5% equity fee.
StartSomeGood is a cause-driven crowdfunding site. You can be a nonprofit, for-profit, unincorporated group, or any other status just so long as your organization aims to have a positive social impact. It’s a great way to get funding for an uplifting project or to launch a company dedicated to improving the community.
Cost: Submitting your project on StartSomeGood is free and you’ll only pay the 5% service fee if your project reaches its funding goal. There are payment processing fees, however.
Chuffed is another crowdfunding platform that supports social causes aimed at helping animals, your community, or the environment. It’s exclusively for not-for-profit and cause-based organizations, so it’s not right for every business.
Cost: Donors pay your 3% processing fees so every $100 donation would incur a $3 fee from the donor. Donors are also encouraged to donate to Chuffed itself.
Crowdcube is an equity crowdfunding platform designed to turn your friends, family, customers, and everyone else in your network into investors. Crowdcube’s experts help you set realistic targets, a sensible valuation, an effective pitch, and a well-executed communication plan to attract investors. When your Crowdcube pitch reaches 20% of its goal (i.e. from the support of your existing network), it will launch publicly on the platform. From there, the average pitch reaches full funding in just 22 days. At 75% funding, Crowdcube’s legal team will help you complete your round. Crowdcube’s concierge experience makes it great for companies with existing customers or fanbases that need a little boost to reach their next stage.
Cost: Listing your business on Crowdcube is free but you’ll be charged a success fee of 7%. There are also payment processing fees.
Finally, if you’re a consumer company trying to get a new product on the market, CircleUp is a great option. This equity crowdfunding platform is purely focused on early-stage consumer products, giving you a platform to connect with accredited investors, insights from machine learning technology, and access to special lines of credit. In exchange for a stake in your product launches, investors on CircleUp could give you the financial boost you need to make it to market. They are, however, highly selective of companies that launch on the platform and work on an all-or-nothing funding model.
Cost: There are no funding or processing fees on CircleUp.
The Bottom Line
Crowdfunding is a suitable alternative for small businesses looking for capital to launch or scale. With so many platforms to choose from, it’s easier than ever for businesses and startups to bypass banks to get that capital. Whether you’re looking for a few thousand dollars or a few million, one of the above best crowdfunding platforms can be the right fit for your business.